UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the Quarterly Period Ended:
March 31, 1996; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from to .
--- -----
Commission File Number
0-23076
Sparta Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 56-1755527
- ------------------------------------ -------------------------------------
(State of incorporation) (IRS Employer Identification No.)
111 Rock Rd. Horsham, PA 19044
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(215) 442-1700
---------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
As of May 10, 1996, there were outstanding 8,190,931 shares of Common Stock,
$.001 par value per share.
1
<PAGE>
FORM 10-Q
QUARTERLY REPORT
----------------------------------
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets (Unaudited) as of March 31, 1996 and
December 31, 1995 3
Statements of Operations (Unaudited) for the
three-month periods ended March 31, 1996 and 1995
and for the period from June 12, 1990 (inception)
to March 31, 1996 4
Statements of Cash Flows (Unaudited) for the
three-month periods ended March 31, 1996 and
1995 and for the period from June 12, 1990
(inception) to March 31, 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 17
2
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
---------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,697,862 $734,296
Prepaid expenses and other assets 147,531 180,125
------- -------
Total current assets 2,845,393 914,421
Property, plant & equipment,net 580,025 21,102
Other assets:
License agreements, net of amortization
of $56,002 in 1996 and $50,345 in 1995 58,786 64,443
Restricted Cash 247,349 ----
------- ------------
Total assets $3,731,553 $999,966
========== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $393,433 $185,861
-------- --------
Total current liabilities 393,433 185,861
Shareholders' equity :
Series A Convertible preferred stock, $.001 par value;
authorized 330,000 shares; issued and outstanding 300 ---
300,000 shares in 1996 and 0 in 1995.
Series B Convertible Preferred Stock, $.001 par value;
authorized and unissued 1,000,000 shares --- ---
Series C Convertible Preferred Stock, $.001 par value;
authorized and unissued 125,000 shares --- ---
Preferred Stock, not designated, $.001 par value;
authorized and unissued 9,875,000 shares --- ---
Common Stock, $.001 par value; authorized 22,000,000
shares; issued and outstanding 8,185,931 shares in
1996 and 6,185,931 shares in 1995 8,186 6,186
Additional paid-in capital 17,200,604 10,825,375
Deficit accumulated during the development stage (13,667,017) (10,017,456)
Deferred compensation (203,953) ---
--------- -------------
Total shareholders' equity 3,338,120 814,105
--------- ---------
Total liabilities and shareholders' equity $3,731,553 $999,966
========== =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE>
SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31
--------------------------------------------------------- Period From
June 12, 1990
(Inception) to
1996 1995 March 31, 1996
---- ---- --------------
<S> <C> <C> <C>
Revenue:
Contract revenue $------- $14,180 $127,870
Interest Income 18,713 45,902 310,375
------ ------ -------
Total Revenue 18,713 60,082 438,245
------ ------ -------
Operating expenses:
Research and development 292,858 376,673 6,297,263
General and administrative 312,503 257,572 4,745,086
Charge for acquired research
& development (Note 4) 3,062,913 ---------- 3,062,913
--------- ---------
Net loss $(3,649,561) $ (574,163) $(13,667,017)
=========== =========== =============
Supplemental net loss
per share $ ---- $ ---- $(2.77)
=======
Historical net loss
per share $ (.56) $ (.09) $(3.91)
========== =========== =======
Supplemental average number
of shares outstanding
(Note 2) -------- --------- 4,929,544
=========
Historical weighted
average number of
shares outstanding (Note 2) 6,559,557 6,142,372 3,494,946
========= ============== =========
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE><CAPTION>
Three Months ended March 31 Period from June 12
----------------------------- 1990 (Inception) to
1996 1995 March 31, 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss . . . . . . . . . . . . . . . . . $(3,649,561) $ (574,163) $(13,667,017)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss on investments --- --- 3,316
Depreciation and amortization . . . . . 15,314 9,254 569,463
Writedown of license agreement . . . . 45,200
Acquired research &
development (Note 4) . . . . . . . 3,062,913 --- 3,062,913
Issuance of convertible notes for
services . . . . . . . . . . . . . . --- --- 220,474
Issuance of stock for services . . . . 19,026 157,751
Compensation expense related to stock
options granted . . . . . . . . . . . . 2,147 --- 202,147
Changes in operating assets and
liabilities:
Prepaid expenses and other assets . . 32,594 11,437 (147,531)
Accounts payable and accrued expenses 6,730 (132,648) 192,591
----------- ----------- -----------
Net cash used in operating activities . . . (529,863) (667,094) (9,360,693)
Investing activities:
Payment of acquisition related fees &
expenses (80,000) --- (80,000)
Purchases of available-for-sale securities (1,103,193)
Maturities of available for sale securities --- --- 1,099,877
Purchases of fixed assets . . . . . . . . . (54,866)
Acquisition of license agreements . . . . . (160,078)
----------- ----------- -----------
Net cash used in investing activities . . . (80,000) --- (298,260)
Financing activities:
Proceeds from issuance of convertible notes
and notes payable . . . . . . . . . . . . . 4,488,650
Repayment of notes payable . . . . . . . . (640,000)
Proceeds from issuance of Common Stock . . 2,000 4,914,031
Repurchase of common stock . . . . . . . . (45)
Proceeds from issuance of Preferred Stock . 2,571,429 4,064,129
Increase in debt issuance costs. . . . . . (469,950)
----------- ----------- ---------
Net cash provided by financing activities . 2,573,429 --- 12,356,815
Increase (Decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . 1,963,566 (667,094) 2,697,862
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . 734,296 2,348,522 -
----------- ----------- -----------
Cash and cash equivalents at end of period $2,697,862 $1,681,428 $2,697,862
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest . . --- --- $196,972
=========== =========== ===========
Supplemental disclosures of noncash
investing and financing activities:
Conversion of Convertible Notes and Series C
Convertible Preferred Stock into Common
Stock . . . . . . . . . . . . . . . . . . --- --- $4,086,624
=========== =========== ===========
Issuance of Series A Convertible Preferred
Stock for cancellation of notes payable --- --- $200,000
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
For the Three Months Ended March 31, 1996
(Unaudited)
1. Company Activities and Significant Accounting Policies
Sparta Pharmaceuticals, Inc. (formerly MediRx Pharmaceuticals, Inc.),
a development stage company incorporated in 1990, is engaged in the
business of acquiring rights to, and developing for commercialization,
technologies and drugs for the treatment of a number of life threatening
diseases, including cancer, cardiovascular disorders and acute
inflammation.
Basis of Presentation and Financing Activities
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has incurred total net losses of $13,667,017 since inception. The
Company's continuation as a going concern is dependent upon its ability to
obtain adequate financing. The Company will require substantial additional
funds to finance its business activities on an ongoing basis and will have
a continuing long-term need to obtain additional financing. The Company's
future capital requirements will depend on numerous factors, including, but
not limited to, continued progress in its research and development programs
including its preclinical and clinical trials. The Company plans to engage
in such ongoing financing efforts on a continuing basis.
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal recurring accruals,
considered necessary for a fair presentation, have been included in the
accompanying unaudited financial statements. For more complete financial
information, these financial statements should be read in conjunction with
the audited financial statements and notes thereto contained in the
Company's 10-K for the fiscal year ended December 31, 1995. Results for
the interim periods are not necessarily indicative of the results for any
other interim period or for the full fiscal year.
2. Net Loss Per Share of Common Stock
The historical net loss per share amounts are presented in accordance
with Accounting Principles Bulletin No. 15 ("APB 15") and Staff Accounting
Bulletin No. 83 ("SAB 83"). Under SAB 83, loss per share amounts for
periods presented in the Company's S-1 Registration Statement dated June
21, 1994 previously filed in connection with the Company's initial public
offering ("IPO") of its common stock are computed assuming that options,
warrants and convertible debt and securities issued within one year prior
to the filing of that registration statement, at prices or conversion
prices less than the IPO price are outstanding for all periods presented,
regardless of whether the effect is dilutive or anti-dilutive.
The guidance under SAB 83 applies only to those periods presented in
and prior to the Company's initial S-1 Registration Statement; all
subsequent periods are governed solely by APB 15. Therefore, the net loss
per share for periods after the IPO are computed in accordance with APB 15.
Under this guidance, options, warrants, convertible debt and securities and
other common stock equivalents are considered as outstanding only if their
effect is dilutive (i.e. increasing the net loss per share).
The Supplemental net loss per share amount for the period June 12,
1990 to March 31, 1996 gives effect to the conversion of the Preferred
Stock and Convertible Notes into Common Stock which occurred
contemporaneously with the closing of the Company's public offering.
6
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3. Preferred Stock Issuance
On February 29, 1996, the Company sold 300,000 shares of Series A
Convertible Preferred Stock, $.001 par value, for an aggregate
consideration of $3,000,000. Each share of Series A Convertible Preferred
Stock is convertible into shares of the Company's common stock at the
option of the holder at an initial conversion price of $2.25 per share of
Common Stock, representing an initial conversion rate of 4.444444; and
shall be automatically convertible into the securities sold in the
Company's next equity offering of at least $2,500,000 (a "Qualified
Offering"). The conversion price, subject to certain adjustments, will be
the lesser of $2.25 and 75% of the price of the securities sold in the
Qualified Offering. The exercise price and the number of shares of Common
Stock purchasable upon the exercise of the Class A and Class B Warrants and
the underwriter's purchase option were adjusted as a result of the issuance
of the Series A Convertible Preferred Stock. Each Class A Warrant has been
adjusted such that the exercise price is $6.16 and allows the holder to
acquire 1.1 shares of Common Stock. Each Class B Warrant has been
adjusted such that the exercise price is $10.19 and allows the holder to
acquire 1.1 shares of Common Stock. In connection with the Company's
private placement of its Series A Preferred Stock, the Company paid
commissions of $300,000 and non-accountable expense allowances of $90,000
to a company controlled by a significant shareholder which served as the
Placement Agent. In addition, the Company issued to the Placement Agent a
warrant to purchase 30,000 shares of Series A Convertible Preferred Stock,
$.001 par value per share, for an aggregate purchase price of $375,000. The
Company has signed a letter of intent with the placement agent to conduct a
best efforts offering intended to be the Qualifying Offering. However,
there can be no assurance that such proposed offering will be consummated,
or if consummated, when the closing might occur or on w hat terms it will
be consummated.
4. Acquisition of the Business and Assets of Lexin Pharmaceutical
Corporation
On March 15, 1996, the Company acquired the business and assets, and
assumed certain liabilities of Lexin Pharmaceutical Corporation ("Lexin"),
for an initial payment of 2,000,000 shares of the Company's Common Stock.
The purchase agreement provides for the issuance of up to an additional
600,000 shares of Common Stock upon achievement of certain milestones
related to the Lexin assets acquired. The acquisition was accounted for
using the purchase method of accounting. The fair value of the net assets
acquired was recorded based on the carrying value for monetary and fixed
assets with the remaining portion of the purchase price ($3,062,913)
allocated to acquired research and development, which was expensed in the
quarter ended March 31, 1996.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Since its inception in June 1990, the Company has been engaged in
acquiring and developing technologies and drug candidates for the treatment
of cancer and viral diseases. Sparta has not derived revenues from the sale
of any products and expects to incur substantial operating losses for the
next several years. As of March 31, 1996, the Company's accumulated deficit
was $13,667,017.
On March 15, 1996, Sparta acquired the assets and business of Lexin
Pharmaceutical Corporation ("Lexin") of Horsham, Pennsylvania. Lexin has
been in the business of developing and commercializing technology and
compounds which were licensed exclusively from the University of
Pennsylvania and Wichita State University and are directed at the potential
treatment of a number of life threatening diseases. The technology and
compounds are related to inhibition of serine proteases, which are enzymes
which digest proteins and are implicated in a number of diseases including
cancer, cardiovascular disorders and acute inflammation. Lexin's lead
compound LEX032, is under option to Astra Merck Inc. for acute
pancreatitis.
The results of operations for the quarter ended March 31, 1996 include the
operating expenses for the Lexin business from the date of acquisition. The
Company's balance sheet at March 31, 1996 reflects the inclusion of the Lexin
assets acquired.
Results of Operations
Three Months Ended March 31, 1995 and 1996
Revenue decreased from $60,082 for the three months ended March 31,
1995 to $18,713 for the three months ended March 31, 1996 due primarily to
a lower level of interest income. Interest income decreased from $45,902
in the first quarter of 1995 to $18,713 for the same period in 1996 due to
a lower level of investable funds. Interest income is likely to decrease
in subsequent periods as investable funds are consumed by the operations of
the Company, unless the Company is able to secure additional funding.
Contract revenue decreased to $0 for the first quarter of 1996 as compared
to $14,180 for the first quarter of 1995. Contract revenues in the first
quarter of 1995 resulted in part from the completion of work under a Phase
I SBIR grant from the National Cancer Institute, under which grant the
Company produced and tested formulations of etoposide utilizing its
Spartaject(TM) Drug Delivery Technology. The balance of 1995 first quarter
contract revenue related to a fee for a partially completed contract under
which the Company provided a pharmaceutical client with drug formulations
utilizing its Spartaject(TM) Drug Delivery Technology. The amount of
revenues may vary significantly year-to-year and quarter-to-quarter and
depend on, among other factors, the timing and amount of future financings
and the potential awarding of future grants and contracts.
Research and development expenses decreased from $376,673, in the
first quarter of 1995 to $292,858 in the first quarter of 1996. The
decrease is largely attributable to decreased outside development
expenditures by the Company on certain drug candidates during the first
quarter of 1996 partially offset by increases in expenditures on
applications of the Company's L.A.D.D. Technology and RII retinamide
programs. Subject to the receipt of additional funding, the Company
expects research and development expenses to increase during the next
several years as product development, preclinical and clinical trials, and
regulatory activities increase.
General and administrative expenses increased to $312,503, in the
first quarter of 1996 from $257,572, in the first quarter of 1995. This
increase is principally due to financial advisory fees incurred in the
first quarter of 1996.
The Company expects to incur substantial operating losses over the
next several years. The amount of net losses may vary significantly from
year-to-year and quarter-to-quarter and depend on, among other factors, the
timing of research and the progress of preclinical and clinical development
programs.
Liquidity and Capital Resources
On February 29, 1996, the Company completed a private placement of
$3,000,000 of its Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), $.001 par value per share. The Series A Preferred Stock
sold in the financing is convertible at any time at the option of the
holder at an initial conversion price of $2.25 per share of common
8
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stock. In addition, the Series A Preferred Stock is automatically convertible
into the securities sold in the Company's next equity offering of at least
$2,500,000. The conversion price, subject to certain adjustments, will be the
lesser of $2.25 and 75% of the price of the securities sold in the qualifying
offering. In connection with the private placement, the Company paid
commissions of $300,000 and non-accountable expense allowances of $90,000 to a
company controlled by a significant shareholder. In addition, the Company
issued the placement agent a warrant to purchase 30,000 shares of the Series A
Preferred Stock , for an aggregate purchase price of $375,000. Net proceeds of
the financing after commissions, legal fees and other expenses were
approximately $2,570,000.
The Company has used approximately $9,360,693 to fund operations from
inception through March 31, 1996. The Company has financed its operations to
date from the proceeds of its private placement of Series A Preferred Stock, its
initial public offering in June and July 1994, prior placements of equity and
convertible debt securities and investment income. In 1996, the Company is
obligated under its license agreements to make minimum royalty payments and an
annual maintenance fee in the aggregate of $232,000, of which $27,000 has been
paid as of April 30, 1996. Under a collaboration and option agreement, the term
of which has been extended, the Company may have to make payments of up to
$225,000, of which approximately $72,000 had been paid as of April 30, 1996.
The Company currently anticipates making payments totaling $60,000 under this
agreement in 1996, none of which has been paid as of April 30, 1996. The Company
is a party to several research agreements which require payments upon certain
events. The Company anticipates making payments of approximately $457,000 under
the agreements which were in effect as of April 30, 1996. Provided that there
is adequate financing, the amount of the Company's obligations under research
agreements can be expected to increase. In addition, the Company is a party to
employment agreements with two of its executive officers and a former executive
officer as well as certain consulting agreements which provide for annual,
minimum payments of $500,000 and $97,000, respectively in 1996, of which
$177,479 has been paid as of April 30, 1996. Upon the acquisition of the assets
and business of Lexin, Sparta assumed an operating lease obligation which will
require the Company to make payments of approximately $100,000 in 1996. The
Company has contracted with Cato Research Ltd. ("Cato") to provide drug
development services. Cato's services are paid for with a combination of cash
and Common Stock.
As of March 31, 1996, the Company had cash and cash equivalents of
$2,697,862, accounts payable and accrued expenses of $393,433, and working
capital of $2,451,960. The report of the Company's independent auditors on the
Company's financial statements as of December 31,1995 and 1994 for the years
then ended and for the period from June 12, 1990 (inception) to December 31,
1995 contains a paragraph regarding the uncertainty with respect to the ability
of the Company to continue as a going concern.
The Company currently anticipates that the available cash, cash
equivalents, and investments will be sufficient to fund operations through the
third quarter of 1996. However, the Company may be required to obtain
additional financing to continue operations during such period in the event of
cost overruns or unanticipated expenses. The Company has experienced delays in
funding its planned research and development activities and will require
substantial additional funds to finance its business activities on an ongoing
basis. The Company's future capital requirements will depend on numerous
factors, including, but not limited to, progress in its research and development
programs, including preclinical and clinical trials, costs of filing and
prosecuting patent applications and, if necessary, enforcing issued patents or
obtaining additional licenses of patents, competing technological and market
developments, the cost and timing of regulatory approvals, the ability of the
Company to establish collaborative relationships, and the cost of establishing
manufacturing, sales and marketing capabilities. The Company has signed a
letter of intent with a placement agent do a"best efforts" equity offering (the
"Proposed Equity Offering") which is anticipated to commence during the second
quarter of 1996. However, its letter of intent does not represent a legal
commitment to complete the Proposed Equity Offering and there can be no
assurance that the Proposed Equity Offering will be consummated or, if
consummated, when the closing might occur or on what terms it will be
consummated. The Company has no current commitment to obtain other additional
funds and is unable to state the amount or potential source of such other
additional funds. Moreover, because of the Company's potential long-term capital
requirements, it may undertake additional equity offerings whenever conditions
are favorable, even if it does not have an immediate need for additional capital
at that time. There can be no assurance that the Company will be able to obtain
additional funding when needed, or that such funding, if available, will be
obtainable on reasonable terms. Any such additional funding may result in
significant dilution to existing stockholders. If adequate funds are not
available, the Company may be required to delay, reduce or eliminate research
and development programs, capital expenditures, and other operating expenses.
The Company may be required to obtain funds through arrangements with
collaborative partners that may require the Company to relinquish certain
9
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material rights to its products that it would not otherwise relinquish.
The Company's ability to raise funds is likely to be adversely affected if
it is unable to continue to meet the listing criteria on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
SmallCap(SM) Market. The NASDAQ SmallCap Market listing criteria requires a
minimum of $2,000,000 in total assets and a minimum capital and surplus of
$1,000,000. The Company's assets fell below the required minimum during the
third quarter of 1995. The Listing Qualifications Committee of NASDAQ (the
"Qualifications Committee") granted the Company a temporary exception from such
requirements subject to meeting certain conditions, one of which was the closing
of the recently completed private placement no later than February 29, 1996. On
March 14, 1996, the Company was notified that it had satisfied the requirements
for continued listing. If the Company does not raise sufficient funds, it will
again fail to meet such criteria during the first six months of 1996. If such
funds are not received until the later part of such period, the Company either
will have to significantly reduce its operations, particularly its research and
development, in order to maintain compliance or it will cease to be in
compliance during such period. If the Company becomes unable to meet such
criteria and is delisted from NASDAQ, trading, if any, in the Common Stock would
thereafter be conducted in the over-the-counter market in the so-called "pink
sheets" or, if then available, the National Association of Securities Dealers
Inc.'s ("NASD") "Electronic Bulletin Board." If delisting occurs, the Company's
securities may also become "penny stock" as defined in the Securities Exchange
Act of 1934, which may also adversely affect the Company's ability to raise
funds. As a result, an investor would likely find it more difficult to dispose
of, or to obtain accurate quotations as to the value of, the Company's
securities.
10
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to security holders during the quarterly
period ended March 31, 1996.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description
- ------ ------------
%%%2.1 -- Copy of the Asset Purchase Agreement, with
exhibits thereto, dated February 22, 1996,
between the Registrant and Lexin
Pharmaceutical Corporation
%%3.4 -- Restated Certificate of Incorporation
(including Certificate of Designation filed
February 26, 1996 and Certificate of
Retirement filed March 5, 1996)
**4.1 -- Article Fourth, Article Sixth and Article
Seventh of the Certificate of
Incorporation, as amended (filed as
Exhibit 3.1)
**4.2 -- Form of Common Stock Certificate
**4.3 -- Form of Class A Warrant Certificate
**4.4 -- Form of Class B Warrant Certificate
***4.5 -- Unit Purchase Option granted to Americorp
Securities Inc. dated June 28, 1994
***4.6 -- Warrant Agreement entered into among
Midlantic National Bank, Americorp
Securities, Inc., and the Registrant dated
June 21, 1994
*+10.1 -- Exclusive License Agreement, dated
October 1, 1991, between the Registrant and
Yale University ("Yale") and Subscription
Agreement, dated October 21, 1991, between
the Registrant and Yale
*+10.1A -- Revised pages of Exhibit 10.1
*+10.2 -- License Agreement, dated October 7, 1991,
between the Registrant and The Research
Foundation of State University of New York
*+10.2A -- Revised pages of Exhibit 10.2
*+10.3 -- Research and License Agreement, dated as of
October 15, 1991, between the Registrant
and Institute of Materia Medica of the
Chinese Academy of Medical Sciences
("BIMM"), as amended by an Amendment of
Research and License Agreement, dated as of
March 1, 1992, between the Registrant and
BIMM
*+10.3A -- Revised pages of Exhibit 10.3
*+10.4 -- Licensing and First Refusal Agreement,
dated as of March 12, 1992, between the
11
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Registrant and the Dana-Farber Cancer Institute, Inc.
("Dana-Farber"), a Letter Agreement, dated March 12,
1992, between the Registrant and Dana-Farber, and a
Letter Agreement, dated September 12, 1992, between the
Registrant and Dana-Farber
*+10.4A -- Revised pages of Exhibit 10.4
*+10.5 -- License Agreement, dated as of August 31, 1992, between
the Registrant and Imperial Chemical Industries PLC
*+10.5A -- Revised pages of Exhibit 10.5
*10.6 -- Letter Agreement, dated October 30, 1992, among the
Registrant, Imperial Chemical Industries PLC, and ICI
Bioscience Limited
*+10.7 -- Collaboration and Option Agreement, dated September 18,
1992, by and among the Registrant, Cancer Research
Campaign and Cancer Research Campaign Technology Limited
*+10.7A -- Revised pages of Exhibit 10.7
*+10.8 -- Sublicense Agreement, dated July 13, 1992, between the
Registrant and Research Triangle Pharmaceuticals Ltd.
("RTP"), as amended by a Letter Agreement, dated
October 27, 1992, between the Registrant and RTP and by
a Second Amendment to Sublicense Agreement, dated
March 19, 1993, between the Registrant and RTP
*+10.8A -- Revised pages of Exhibit 10.8
*+10.9 -- Service Agreement, dated November 27, 1991, between the
Registrant and Cato Research, Ltd. ("Cato"), as amended
by a Letter Agreement, dated March 16, 1993, between the
Registrant and Cato
*10.9A -- Revised pages of Exhibit 10.9
*10.10 -- Letter Agreement, dated October 28, 1991, between the
Registrant and Cato
*10.11 -- Subscription Agreement, dated November 27, 1991, between
the Registrant and Cato Holding Co
*10.12 -- Subscription Agreement, dated December 10, 1993, between
the Registrant and Cato Holding Co.
*10.13 -- Employment Agreement, dated as of January 28, 1991,
between the Registrant and William M. Sullivan, as
amended by a Letter Agreement, dated as of March 2,
1993, between the parties
*10.14 -- Nonqualified Stock Option Agreement, dated as of
December 3, 1991, between the Registrant and
William M. Sullivan
*10.15 -- Confidentiality Agreement, dated as of January 28, 1991,
between the Registrant and William M. Sullivan
*10.16 -- Employment Agreement, dated July 2, 1992, between the
Registrant and William McCulloch, as amended by a Letter
Agreement, dated as of March 2, 1993, between the
parties, and Guarantee by The Castle Group Ltd.
*10.17 -- Incentive Stock Option Agreement, dated as of October 1,
1992, between the Registrant and William McCulloch
*10.18 -- Nonqualified Stock Option Agreement, dated as of
October 1, 1992, between the Registrant and
William McCulloch
*10.19 -- Nonqualified Stock Option Agreement, dated as of
October 1, 1992, between the Registrant and
William McCulloch
*10.20 -- Confidentiality Agreement, dated as of July 2, 1992,
between the Registrant and William McCulloch
*10.21 -- Noncompetition Agreement, dated as of October 1, 1992,
between the Registrant and William McCulloch
*10.22 -- Employment Agreement, dated September 10, 1992, between
the Registrant and Richard N. Scott, as amended by a
Letter Agreement, dated as of March 2, 1993, between the
parties, and Guarantee by The Castle Group Ltd.
12
<PAGE>
*10.23 -- Incentive Stock Option Agreement, dated as of
September 10, 1992, between the Registrant and
Richard N. Scott
*10.24 -- Nonqualified Stock Option Agreement, dated as of
September 10, 1992, between the Registrant and
Richard N. Scott
*10.25 -- Confidentiality Agreement, dated as of September 10,
1992, between the Registrant and Richard N. Scott
*10.26 -- Confidentiality Agreement, dated as of September 10,
1992, between the Registrant and John S. McBride
*10.27 -- Letter Agreement, dated March 23, 1993, between the
Registrant and Paramount Capital, Inc., as amended by
Letter Agreements dated June 24, 1993, June 28, 1993,
September 24, 1993 and November 5, 1993
*10.28 -- Indemnification Agreement, dated as of June 3, 1992,
between the Registrant and The Castle Group Ltd.
relative to William McCulloch
*10.29 -- Indemnification Agreement, dated as of September 15,
1992, between the Registrant and The Castle Group Ltd.
relative to Richard N. Scott
*10.30 -- 1991 Stock Plan, as amended
*10.31 -- Stock Repurchase Agreement, dated as of November 21,
1991, between the Registrant and Peter Barton Hutt
*10.32 -- Stock Repurchase Agreement, dated as of October 25,
1991, between the Registrant and Charles O. O'Brien
*10.33 -- Stock Repurchase Agreement, dated as of October 15,
1991, between the Registrant and Sir John Vane
*10.34 -- Stock Repurchase Agreement, dated as of December 24,
1991, between the Registrant and The Sir John Vane Trust
*10.35 -- Stock Repurchase Agreement, dated as of October 5, 1993,
between the Registrant and Richard N. Scott and related
Assignment of even date between the parties
*10.36 -- Form of convertible notes issued on or prior to
October 28, 1993 and schedule of purchasers of notes
*10.37 -- Form of Note Purchase and Subscription Agreement for
issuance of convertible notes issued prior to
October 28, 1993 and schedule of purchasers of notes
*10.38 -- Form of convertible notes issued in November 1993 and
schedule of purchasers of notes
*10.39 -- Note Purchase and Subscription Agreement dated as of
November 12, 1993 between the Registrant and Financial
Strategic Portfolios, Inc. -- Health Sciences Portfolio
("FSP") for issuance of convertible notes (See
Exhibit 10.38 hereunder for Exhibit A to this
Exhibit 10.39)
*10.40 -- Form of Note Purchase and Subscription Agreement for
issuance of convertible notes issued in November 1993
other than to FSP
*10.41 -- Form of Note Purchase and Exchange Agreement for
exchange of convertible notes, form of convertible notes
and schedule of parties thereto
*10.41A -- Revised schedule of parties to Exhibit 10.41
*10.42 -- Stock Purchase and Exchange Agreement, dated as of
December 10, 1993, between the Registrant and FBL
Ventures of South Dakota
*10.43 -- Registration Rights Agreement, dated November 12, 1993,
among the Registrant and certain rights holders, as
amended as of December 14, 1993
*10.44 -- Subscription Agreement dated September 14, 1992 and
Letter Agreements dated October 12, 1992 and
December 13, 1993, between the Registrant and Yale
University
*10.44A -- Letter Agreement dated January 4, 1994
*10.45 -- Noncompetition Agreement, dated as of September 10,
1992, between the Registrant and Richard N. Scott
13
<PAGE>
***10.46 -- M/A Agreement between the Registrant and Americorp
Securities, Inc. dated June 28, 1994
**10.47 -- Form of Warrant Purchase Agreement among the Registrant;
Healthcare Capital Investments, Inc. and Societe
Generale Securities Corporation; and the Holders listed
on Schedule I thereto
**10.48 -- Form of Warrant Purchase Agreement among the Registrant,
Paramount Capital, Inc. and the Holders listed on
Schedule I thereto
***10.49 -- Underwriting Agreement between the Registrant and
Americorp Securities, Inc. dated June 21, 1994
***10.50 -- Unit Purchase Option granted to LT Lawrence & Company,
Inc. dated June 28, 1994
#10.51 -- Nonqualified Stock Option Agreement, dated as of
December 16, 1994, between the Registrant and
William M. Sullivan
#10.52 -- Nonqualified Stock Option Agreement, dated as of
July 10, 1994, between the Registrant and Sir John Vane,
FSR
#10.53 -- Nonqualified Stock Option Agreement, dated as of
July 10, 1994, between the Registrant and
Charles O. O'Brien
#10.54 -- Nonqualified Stock Option Agreement, dated as of
July 10, 1994, between the Registrant and
Peter Barton Hutt
#10.55 -- Incentive Stock Option Agreement, dated as of
December 16, 1994, between the Registrant and
William McCulloch
#10.56 -- Amendment (as of March 14, 1994) to the Employment
Agreement, dated July 2, 1992, between the Registrant
and William McCulloch, as amended by a Letter Agreement,
dated as of March 2, 1993, between the parties, and
Guaranteed by The Castle Group Ltd.
#10.57 -- Amendment (dated November 26, 1994) to the Service
Agreement, dated November 27, 1991, between the
Registrant and Cato Holding Co.
#10.58 -- Amendment (dated December 16, 1994) to the Employment
Agreement, dated January 28, 1991, between the
Registrant and William M. Sullivan, as amended by a
Letter Agreement, dated as of March 2, 1993, between the
parties.
##10.59 -- Nonqualified Stock Option Agreement, dated as of June 7,
1995, between the Registrant and Sir John Vane, FSR
##10.60 -- Nonqualified Stock Option Agreement, dated as of June 7,
1995, between the Registrant and Charles O. O'Brien
##10.61 -- Nonqualified Stock Option Agreement, dated as of June 7,
1995, between the Registrant and Peter Barton Hutt
##10.62 -- Amendment (dated June 1, 1995) to the Research and
License Agreement, dated as of October 15, 1991, between
the Registrant and Institute of Materia Medica of the
Chinese Academy of Medical Sciences ("BIMM"), as amended
by an Amendment of Research and License Agreement, dated
as of March 1, 1992, between the Registrant and BIMM
10.63 -- Financial Advisory Agreement between the Registrant and
Americorp Securities, Inc., dated as of June 29, 1995
%10.64 -- Amendment (dated as of September 14, 1994) to the
Collaboration and Option Agreement, dated September 18,
1992, by and among the Registrant, Cancer Research
Campaign and Cancer Research Campaign Technology Limited
%%10.65 -- Form of Nonqualified Stock Option Agreement, dated as of
December 10, 1995, between the Company and William M.
Sullivan
%%10.66 -- Incentive Stock Option Agreement, dated as of
December 10, 1995, between the Company and William
McCulloch
%%10.67 -- Distribution Agreement, dated as of December 1, 1995,
among Sparta Pharmaceuticals, Inc., Orphan Europe SARL
and Swedish Orphan, AB
%%10.68 -- Warrant Agreement between Sparta Pharmaceuticals, Inc.
and Paramount Capital, Inc., dated February 29, 1996
14
<PAGE>
10.69 -- Financial advisory agreement between the Registrant and
Paramount Capital, Inc. dated as of February 29, 1996.
!10.70 -- Evaluation and option agreement between Lexin
Pharmaceutical Corporation and Astra Merck, Inc.
dated as of October 25, 1995. (Assigned to Registrant
pursuant to the Lexin purchase)
!10.71 -- Collaborative Research and Licensing Agreement between
Lexin Pharmaceutical Corporation and Wichita State
University dated as of April 1, 1994. (Assigned to
Registrant pursuant to the Lexin purchase)
!10.72 -- License Agreement between PI Research Corporation
(predecessor in name to Lexin Pharmaceutical
Corporation) and the Trustees of The University of
Pennsylvania dated as of January 2, 1992. (Assigned to
Registrant pursuant to the Lexin purchase)
10.73 -- Amendment (dated March 15, 1996) to the Employment
Agreement dated January 28, 1991, between the
Registrant and William M. Sullivan, as amended by letter
agreements, dated as of March 2, 1993 and December 16,
1994, between the parties.
10.74 -- Placement Agency Agreement between the Registrant and
Paramount Capital, Inc., dated as of January 22, 1996.
11.1 -- Statement Re Computation of Per Share Earnings.
27.1 -- Financial Data Schedule
- -----------------
* Previously filed with the Company's Registration Statement on
Form S-l, Registration Number 33-72882, filed on December 14,
1993, or amendments thereto, and are incorporated by reference
herein.
** Previously filed with the Company's Registration Statement on
Form S-l, Registration Number 33-78086, filed on April 25, 1994,
or in Amendment No. 1 thereto, filed on June 1, 1994.
*** Previously filed with the Company's Quarterly Report on Form 10-
Q for the quarterly period ended June 30, 1994, filed on
August 15, 1994 and are incorporated by reference herein.
# Previously filed with the Company's 1994 Annual Report on Form
10-K, filed on March 31, 1995, and are incorporated by reference
herein.
## Previously filed with the Company's Quarterly Report on form 10-
Q for the quarterly period ended June 30, 1995, filed on
August 14, 1995.
### Previously filed with the Company's Amendment No. 1 to the
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995, filed on January 24, 1996.
% Previously filed with the Company's Quarterly Report on Form 10-
Q for the quarterly period ended September 30, 1995, filed on
November 14, 1995.
%% Previously filed with the Company's 1995 Annual Report on Form
10-K, filed on April 1, 1996,and are incorporated by reference
herein.
%%% Previously filed with the Company's report on Form 8-K filed on
April 1, 1996, and is incorporated by reference herein.
+ Confidential Treatment has been granted by the Securities and
Exchange Commission.
! Confidential Treatment has been requested from the
Securities and Exchange Commission
The Company filed the following reports on Form 8-K during the quarter:
On February 5, 1996, a report on Form 8-K dated January 18, 1996 was
filed with the Securities and Exchange Commission announcing the continued
listing of Sparta Pharmaceuticals' common stock and other securities on the
NASDAQ SmallCap market via an exception from the total assets requirement. No
financial statements were filed with the report.
On February 23, 1996, a report on Form 8-K dated February 22, 1996 was
filed with the Securities and Exchange Commission announcing an agreement to
acquire all of the assets and business of Lexin
15
<PAGE>
Pharmaceutical Corporation ("Lexin"), in exchange for up to 2,600,000 shares
of Sparta Pharmaceuticals' common stock. No financial statements were filed
with the report.
On March 14, 1996, a report on Form 8-K dated March 6, 1996 was filed
with the Securities and Exchange Commission announcing the completion of a
private placement of $3,000,000 of convertible preferred stock. No financial
statements were filed with the report.
On April 1, 1996, a report on Form 8-K dated March 15, 1996 was filed
with the Securities and Exchange Commission announcing the acquisition of the
assets and business of Lexin Pharmaceutical Corporation. The report also
announced the appointments of Dr. Jerry B. Hook, former President, CEO and
Director of Lexin, and Ronald H. Spair, former Vice President and Chief
Financial Officer of Lexin, to those positions at Sparta. Richard L.
Sherman, a former Director of Lexin was appointed a Director of Sparta
Pharmaceuticals, Inc. It was impracticable to provide the required financial
statements for Lexin Pharmaceutical Coporation at the date of filing. The
statements were filed via an amendment to the report on Form 8-K filed on
May 3, 1996.
On May 3, 1996, a report on Form 8-K dated April 30, 1996 was filed with
the Securities and Exchange Commission announcing a change in the Registrant's
independent public accountants.
16
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sparta Pharmaceuticals, Inc.
May 10, 1996 By: /s/ Jerry B. Hook President and Chief Executive
- ------------- ------------------------ Officer (principal executive
Date Jerry B. Hook, Ph.D. officer) and Director
May 10, 1996 By: /s/ Ronald H. Spair Vice President and Chief Financial
- ------------- ------------------------- Officer (principal Financial
Date Ronald H.Spair Officer)
17
<PAGE>
June 29, 1995
Sparta Pharmaceuticals, Inc.
Westpark Corporate Center, Suite 110
4364 South Alston Avenue
Durham, North Carolina 27713
Attention: William M. Sullivan
Gentlemen:
Americorp Securities, Inc. ("Americorp") is pleased to act as a
financial advisor to Sparta Pharmaceuticals, Inc. (the "Company") in
connection with matters relating to the business and capital structure of
the Company as set forth in more detail below. This letter is to confirm
our understanding with respect to our engagement.
1. Americorp will consult with and assist the Company in connection
with the following matters:
2. (a) Optimization of the Company's capital structure, including
matters related to the issuance of debt and equity securities and the
restructuring of the Company's capital structure.
(b) Advice as to the advisability of public and private
offerings of securities.
(c) Identification and discussion with respect to acquisitions
and divestitures in order to enhance the value and viability of the
Company.
(d) Assistance in the preparation of presentations to potential
sources of capital such as underwriters, placement agents and institutional
investors.
(e) Identification and advice with respect to joint ventures
and/or collaborations arrangements.
3. In rendering the services hereunder Americorp shall devote such
time and attention thereto as Americorp determines in its discretion to be
reasonable and adequate.
4. The Company will cooperate with Americorp in connection with its
financial review and analysis and will provide Americorp with such
information concerning the Company as Americorp deems
<PAGE>
reasonably necessary for its financial review and analysis. All such
information provided by the Company will be complete and accurate and not
misleading. All such information which is confidential shall be subject to
a confidentiality agreement to be executed by the parties. Americorp
agrees that it will obtain the Company's consent prior to contacting any
third party with respect to a proposed transaction or other arrangement.
Americorp also agrees that it will not represent that it is an agent of the
Company and acknowledges that the Company shall not have any obligation
hereunder to enter into any transaction or other arrangement with a third
party.
5. In consideration for the services rendered hereunder you agree to
pay to Americorp a fee of $300,000 upon execution of this Agreement.
6. In addition to any fees that may be payable to Americorp under
this letter, you agree that you will reimburse Americorp and its
affiliates, upon request made from time to time, for their reasonable out-
of-pocket expenses which have been approved by you in advance and are
incurred in connection with their activities under this letter. Nothing in
this Agreement shall restrict Americorp's rights to be reimbursed for
expenses under any separate agreement between the parties.
7. This Agreement is for a term of one year.
8. You agree that you will indemnify and hold harmless Americorp and
its affiliates and their respective directors, officers, employees, agents
and controlling persons (each being an "Indemnified Party"), from and
against any and all losses, claims, damages and liabilities, joint or
several, to which such Indemnified Party may become subject under any
applicable law or otherwise relating to or arising out of the performance
by Americorp or its affiliates of the services contemplated by this letter
and will reimburse any Indemnified Party for all expenses (including
reasonable counsel fees and expenses) as they are incurred in connection
with the investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party. You will not be liable under the
foregoing indemnification provision to the extent that any loss, claim,
damage, liability or expense is found in a final judgment by a court to
have resulted primarily from Americorp's bad faith, willful misconduct or
gross negligence or breach by Americorp of this agreement or any other
agreement between the parties pertaining to this agreement.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against the Company, notify the Company in
writing of the commencement thereof, but
<PAGE>
the omission so to notify the Company will not relieve the Company from any
liability which it may have to an Indemnified Party, except to the extent
that the Company has been prejudiced in any material respect by such
failure. No settlement of any action shall be made without the consent of
the Company which shall not be unreasonably withheld in light of all
factors of importance to the Company. Notwithstanding any other provision
of this Section 8, indemnification of Americorp with respect to any
transaction covered by a separate indemnification agreement shall be
covered by the provisions of such agreement and not by the provisions
hereof.
9. This agreement not transferable by either party and may only be
amended, or any provisions hereof waived, in a writing signed by the
parties. This Agreement, together with the letter agreement dated June 28,
1994 between the Company and Americorp, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all other prior oral or written agreements and
understandings relating to the subject matter hereof.
Please confirm that the foregoing correctly sets forth our agreement
by signing and returning to Americorp the duplicate copy of this letter
enclosed herewith. We look forward to the successful conclusion of this
Agreement.
Very truly yours,
AMERICORP SECURITIES, INC.
By: /s/ Thomas J. Jess VP Corporate Finance
---------------------------------------
Name and Title:
Accepted and agreed
to as of the date
first above written
SPARTA PHARMACEUTICALS, INC.
By:/s/ William M. Sullivan Chairman Preso CEO
------------------------------------------
Name and Title:
<PAGE>
P A R A M O U N T C A P I T A L
INCORPORATED MEMBER: NASD, SIPC
February 29, 1996
Sparta Pharmaceuticals, Inc.
Westpark Corporate Center, Suite 110
4364 S. Alston Ave.
Durham, NC 27713
Dear Sirs:
1. This is to confirm our understanding that Paramount
Capital, Inc. ("Paramount") has been engaged as a non-exclusive
financial advisor of Sparta Pharmaceuticals, Inc. (the "Company")
for an initial period of twenty-four (24) months commencing on the
date hereof (as extended pursuant to Paragraph 10 hereto, or by
mutual agreement of the parties hereto, the "Term"). In its role
as financial advisor, Paramount will maintain its familiarity with
the business, operations, properties, financial condition,
prospects and management of the Company and assist the Company in:
(a) identifying prospective strategic partners, acquirors and/or
investors; (b) evaluating offers received from prospective
partners, acquirors and/or investors; and (c) conducting
discussions and negotiations leading toward the consummation of a
strategic partnership, merger or an investment. Paramount agrees
to use its reasonably diligent efforts in rendering the services
hereunder as reasonably requested by the Company. In addition, any
fee otherwise due hereunder solely on account of introductions
made prior to the date hereof shall not be due unless Paramount
shall have participated in some way in effecting such
transactions, if requested by the Company.
2. The Company will pay Paramount a non-refundable retainer
fee for Paramount's services hereunder of $3,000 per month for
twenty-four (24) months. The first payment shall be due within ten
days of the date hereof and thereafter payable on the fifteenth
day of each month during the Term.
The Company also agrees to pay in cash all reasonable out-of-
pocket expenses incurred by Paramount in providing its services
hereunder, including fees and disbursements of Paramount's
counsel, such expenses to be paid upon submission of a bill or
bills by Paramount from time to time. However, any expenses which
in the aggregate exceed $1,000 for any month will require the
prior written approval of the Company. Fees and expenses of
consultants or experts shall not be included unless approved by
the Company.
3. Upon the Closing of each Investment (as defined below)
during the Term or during the twelve-month period following the
expiration or earlier termination of the Term, the Company shall
pay to Paramount a fee in an amount equal to 9 % of the aggregate
value of such Investment and shall issue to Paramount warrants to
purchase an amount of securities equal to 10 % of the securities
sold as part of such Investment at an exercise price of 110% of
the price of such securities, exercisable until five years from
the date of issuance of such warrants. For
<PAGE>
the purposes of this Agreement, an Investment shall be any purchase of
securities of the Company from the Company (other than "firm
commitment" or "best efforts" underwritings, purchases by employees,
directors, officers and consultants of the Company and any financing
contemplated by the Letter of Intent dated January 10, 1996 between the
parties hereto) which is made during the Term or during the twelve-
month period following the expiration of the Term by an investor first
introduced to the Company by or through Paramount during or prior to
the Term.
4. (a) If the Company enters into an agreement with a party
first introduced to the Company by or through Paramount during or prior
to the Term pursuant to which the Company consummates a sale, merger,
consolidation, tender offer, business combination or similar
transaction involving a majority of the business assets or stock of the
Company in which the Company is not the surviving entity (a "Sale")
during the Term, or during the twelve-month period following the
expiration or earlier termination of such Term, then the Company shall
pay Paramount a fee equal to 6.0% of the aggregate consideration paid
to the Company by the acquiror, such fee to be payable in the same
consideration as paid to the Company simultaneously with the closing of
such Sale, with the exception of Acquiror Future Payments in which case
such fees are to be payable at such time, and only if, the Company
receives such Acquiror Future Payments.
(b) If the Company enters into an agreement with an investor first
introduced to the Company by or through Paramount during or prior to
the Term pursuant to which the Company consummates a transaction
wherein the Company acquires all or substantially all of the business
assets or stock of another entity in which the Company is the surviving
entity (an "Acquisition") during the Term, or during the twelve-month
period following the expiration of such Term, then the Company shall
pay Paramount a fee equal to 6.0% of the aggregate consideration paid
by the Company to the entity acquired, such fee to be payable in the
same consideration as paid by the Company simultaneously with the
closing of such Acquisition, with the exception of Acquiror Future
Payments in which case such fees are to be payable at such time, and
only if, the Company receives such Acquiror Future Payments.
(c) For purposes of calculating Paramount's fee under this
Paragraph 4, the aggregate consideration paid with respect to the
business, assets or stock of the Company shall be equal to the total of
all cash, securities and/or other assets paid for such business, assets
or stock by the acquiror. Aggregate consideration shall also include:
(a) any commercial bank or similar indebtedness of the Company that is
repaid or for which the responsibility to pay is assumed by the
acquiror in connection with such transaction, (b) the greater of the
stated value or the liquidation value of preferred stock of the Company
that is assumed or acquired by the acquiror that is not converted into
common stock upon the consummation of such transaction, only to the
extent that the securities into which such preferred stock are
convertible are not otherwise included above, and (c) future payments
for which the acquiror is obligated either absolutely or upon the
attainment of milestones or financial results ("Acquiror Future
Payments"). In the event a Sale of the Company or an Acquisition by the
Company is consummated through a multiple-step transaction wherein the
acquiror is not obligated either
2
<PAGE>
absolutely or upon the attainment of milestones or financial results to
make future payments to further increase the acquiror's ownership in
the Company (the "Multiple-Step Payments"), the Company agrees to pay
Paramount a fee on such Multiple-Step Payments, and such fee shall be
calculated pursuant to this Paragraph 4. Such fee shall be payable when
such Multiple-Step Payments are made and shall be in addition to the
fee paid to Paramount in the first step of such transaction.
5. If the Company enters into an agreement with an investor
first introduced to the Company by or through Paramount during or prior
to the Term pursuant to which the Company consummates a Strategic
Alliance(s) (as defined below) during the Term, or during the twelve-
month period following the expiration of such Term, then the Company
shall pay Paramount a fee equal to 6% of the Aggregate Consideration
(as defined below) to be received by the Company, its shareholders or
employees in each such transaction; such fee to be payable in the same
consideration as paid to the Company simultaneously with the closing of
each such transaction, with the exception of payments received by the
Company after the closing of such transaction as in Paragraphs 5(c) and
5(d) below, in which case such fees are to be payable at such time, and
only if, the Company receives such payments. For the purpose of
calculating Paramount's fee under this Paragraph 5, Aggregate
Consideration shall include, but not be limited to: (a) all payments
made at closing for equity securities, equity security rights or
similar rights, (b) technology access fees or similar up-front
payments, (c) other future payments to be made to the Company or its
employees for which the Strategic Alliance partner(s) (each a
"Partner") is obligated either absolutely or upon the attainment of
milestones, (d) funding provided by the Partner (through reimbursement
or otherwise) relative to research and development, clinical trials and
related expenditures if such work is performed by the Company and shall
not include funding provided by the Partner (through reimbursement or
otherwise) relative to research and development, clinical trials and
related expenditures if such work is not performed by the Company and
(e) the repayment or assumption by the Partner of obligations of the
Company, including indebtedness for money borrowed or amounts owed by
the Company to inventors or owners of technology. The fee due hereunder
on account of payments made under paragraph (d) above shall be 3 %. It
is further understood that Aggregate Consideration shall not be reduced
by the amount of the fee due Paramount hereunder. Any future rights,
commitments, contingent payments and the like (together, "Strategic
Alliance Payments") which are part of the Aggregate Consideration shall
be valued when actually paid to the Company. A "Strategic Alliance" may
include, but is not limited to: (a) joint venture, partnership, license
or other contract for the research, development, manufacturing,
marketing, distribution, sale or other activity relating to the
Company's present and/or future products; (b) the purchase of, or
commitment to purchase from the Company, less than a majority of the
business, assets or stock of the Company by a Partner(s) with respect
to its products and/or technology; (c) the sale of any of the Company's
assets or any rights in respect to its products and/or technology; and
(d) a commitment to provide funding for all or part of the Company's
research and development activities, whether such work is performed or
managed by the Company or Partner. A "Strategic Alliance" shall not
include the Company's transactions with Lexin Pharmaceutical
Corporation.
3
<PAGE>
For the purposes of calculating Paramount's fee, securities
constituting part of Aggregate Consideration that are traded on a
national securities exchange or the Nasdaq National Market System shall
be valued at the last closing price thereof prior to the date of the
consummation or closing of any such transaction. Such securities which
are traded over-the-counter shall be valued at the mean between the
latest bid and asked prices prior to such date.
6. In no event shall a fee be payable under more than one of
Sections 3, 4 or 5 hereof and if more than one section applies to a
transaction, then the fee shall be calculated under Section 5, unless
it is not applicable, in which case it shall be calculated under
Section 4, unless it is not applicable, in which case it shall be
calculated under Section 3.
7. Except as otherwise required by law, any financial advice
rendered by Paramount pursuant to this Agreement (and the existence of
this Agreement) may not be disclosed publicly in any manner without
Paramount' s prior written approval and will be treated by the Company
as confidential. The Company will provide Paramount with all financial
and other information reasonably requested by Paramount for the
purposes of rendering its services pursuant to this Agreement, subject
to the execution and delivery of a confidentiality agreement to the
Company acceptable to the Company.
8. All non-public information given to Paramount by the Company
will be treated by Paramount as confidential. In this regard, Paramount
agrees to enter into such confidentiality agreements which may be
reasonably requested by the Company. Paramount may rely, without
independent verification, on the accuracy and completeness of any
information furnished to Paramount by the Company, subject to its
obligations under the securities laws.
9. The Company agrees to indemnify each of Paramount, the
directors, officers, employees and agents thereof (the "Indemnitees"),
protect, defend, save and hold each Indemnitee harmless from and
against, any and all liabilities, damages, losses, settlements, claims,
actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees) (any of the foregoing, a
"Claim") incurred by or asserted against any Indemnitee of whatever
kind or nature, arising from, in connection with or occurring as a
result of this Agreement or the matters contemplated by this Agreement,
unless and to the extent it shall be finally judicially determined that
such losses, claims, damages or liabilities arise solely out of the
gross negligence or willful misfeasance of Paramount in performing the
services which are the subject of this Agreement. The foregoing
agreement shall be in addition to any rights that any Indemnitee may
have at common law or otherwise. The Company agrees to pay any legal
and other expenses for which it is liable under this subsection (a)
from time to time (but not more frequently than monthly) within thirty
(30) days after its receipt of a bill therefor. Promptly after an
indemnified party learns of the commencement of any action, it will
notify the Company. The Company will be entitled to participate in and
to assume the defense thereof, with counsel reasonably satisfactory to
the indemnified party, and after notice from the Company to the
indemnified party, of its election so to assume the defense thereof,
the Company will not be liable to the indemnified party, for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
4
<PAGE>
investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the Company if the Company has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party;
provided that the fees and expenses of such counsel shall be at the
expense of the Company if the named parties to any such action
(including any impleaded parties) include both the indemnified party
or parties and the Company and, in the judgment of the indemnified
party, it is advisable for the indemnified party or parties to be
represented by separate counsel (in which case the Company shall not
have the right to assume the defense of such action on behalf of the
indemnified party or parties, it being understood, however, that the
Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
for the reasonable fees and expenses of more than one separate firm of
attorneys for the indemnified party or parties). No settlement of any
action against an indemnified party shall be made without the consent
of the indemnified party, which consent shall not be unreasonably
withheld in light of all factors of importance to the indemnified
party.
10. The Term of this Agreement shall be renewed for consecutive six
month periods upon the execution of a written agreement by both parties
to extend such Term. The Company may terminate this Agreement in the
event that Paramount breaches its confidentiality obligations under
this Agreement. Notwithstanding any early termination of this
Agreement, the rights to compensation contained in Paragraphs 3, 4 and
5 and to indemnity and reimbursement contained in Paragraph 9 shall
survive. In addition, Paramount shall be entitled to the reimbursement
of expenses incurred by Paramount as a result of services rendered
prior to the date of the termination.
11. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to
principles of conflicts of law.
12. This Agreement shall be binding upon Paramount and the Company
and the successors and assigns of Paramount. The Company shall not
assign or sell all or substantially all of the Company's business
and/or assets without first requiring in writing that such assignee or
successor is bound by the provisions of this Agreement. This Agreement
shall be subject to amendment only in writing signed by both parties.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes any prior
understandings or agreements in so far as they relate specifically to
the subject matter hereof.
5
<PAGE>
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of
this letter.
Sincerely yours,
PARAMOUNT CAPITAL, INC.
By: /s/ Linsay A. Rosenwald
----------------------------
Name: Lindsay A. Rosenwald, M.D.
Title: Chairman
Confirmed as of the date hereof:
SPARTA PHARMACEUTICALS, INC.
By: /s/ W. M. Sullivan
----------------------------
Name: W. M. Sullivan
Title: Chairman, President & CEO
Exhibit 10.70
EVALUATION AND OPTION AGREEMENT
-------------------------------
EVALUATION AND OPTION AGREEMENT, dated as of October 25,1995, by
and between Astra Merck Inc., a Delaware corporation ("AMI") and Lexin
Pharmaceutical Corporation, a Pennsylvania corporation ("Lexin").
IN CONSIDERATION of the respective covenants, representations,
warranties and agreements set forth herein, and intending to be legally
bound hereby, the parties hereto, hereby agree as follows:
ARTICLE I
EVALUATION AND OPTION GRANT
---------------------------
1.1. Payment by AMI. Subject to the terms and conditions hereof,
--------------
and in consideration of the evaluation and option grant set forth in
Section 1.2, AMI shall pay to Lexin the sum of ______ within thirty days
from the date of this Agreement to be used solely for the purpose of
conducting animal studies of LEX 032 in the treatment of pancreatitis.
The studies shall be completed by Lexin within 180 days from the date
of this Agreement and, subject to the terms and conditions hereof, the
results of the studies shall be available for use by AMI.
1.2. Evaluation and Option Grant. Lexin hereby grants to AMI
---------------------------
an exclusive and irrevocable right to evaluate (i) Patents (as
hereinafter defined) and any intellectual property rights relating
thereto, and (ii) all data, information, know-how and materials,
whether existing now or in the future, relating to the
manufacture, use, stabilization, design and testing of LEX 032 for
the treatment of pancreatitis (collectively, the "Technology")
during the period commencing on the date of this Agreement and
ending ______ year following the receipt of a written report summarizing
the data from the animal studies (the "Period"). Further, Lexin
hereby grants to AMI an exclusive and irrevocable option (the
"Option"), exercisable at any time during the Period, to obtain an
exclusive license under the Patents and
<PAGE>
the Technology for the United States of America, including its
territories, possessions, and Puerto Rico (collectively, the
"Territory"), for the human pharmaceutical treatment of pancreatitis or
other diseases of the gastrointestinal system (whether by prescription,
over-the-counter or otherwise) (the "Field"). During the Period, Lexin
shall not provide to any other party access to the Patents or the
Technology which has not already been provided prior to the date
hereof, or solicit or accept offers to negotiate or otherwise discuss
commercial opportunities regarding the Patents or the Technology for
use in the Field. The Option includes the grant by Lexin to AMI's
parent, Astra AB, of an exclusive option during the Period to negotiate
an agreement for the development and commercialization of products in
the Field and outside the Territory.
For the purposes of this Agreement, the term "Patents" means (i)
all information relating to those patent applications and any division,
continuation, or continuation-in-part thereof and unexpired United
States patents set forth on Schedule 1.1, any United States patents
granted on the basis of the patent applications set forth in Schedule
1.1 and any division, continuation or continuation-in-part thereof;
and (ii) any reissue or extension of any of the foregoing patents.
1.3. Representation and Warranty for Technology. Except as
------------------------------------------
otherwise set forth in Schedule 1.3, Lexin represents and warrants to
AMI that (i) to the best of its knowledge, the intellectual property
rights related to Patents and the Technology are subsisting and are not
invalid or unenforceable, in whole or in part; (ii) Lexin has the full
right, power and authority to grant all of the right, title and
interest in the Patents and the Technology under Section 1.2 hereof;
(iii) Lexin has not previously licensed, assigned, transferred,
conveyed or otherwise encumbered such right, title and interest; (iv)
Lexin is the sole and exclusive owner or licensee of the Patents and
the Technology, all of which is free and clear of any liens, charges
and encumbrances, and, except for the licensors listed in Schedule 1.1
hereto, to the best of its knowledge, no other person, corporate or
other private entity, or governmental entity or subdivision thereof has
or shall have any claim of ownership with respect to the Patents or the
Technology; (v) there are no claims, judgments or settlements to be
paid by
-2-
<PAGE>
the Lexin relating to the Patents or Technology or claims pending
litigation relating thereto; and (vi) Lexin knows no basis for any
claims that the Patents or Technology infringes the patents,
copyrights, trade secrets or other proprietary rights of third parties.
1.40 Evaluation by AMI. AMI shall evaluate the Patents and the
-----------------
Technology as it deems appropriate in its sole discretion during the
Period. Lexin shall cooperate with AMI by providing data, information
and reasonable assistance, including but not limited to, scientists
participating in face to face scientific meetings with AMI scientists,
as necessary, so as to enable AMI to properly evaluate the Patents and
the Technology.
1.50 Exercise of Option: Terms Of Definitive Agreement. At any time
-------------------------------------------------
during the Period, AMI may exercise the Option (and Astra AB may
exercise its option described in the last sentence of the first
paragraph of Section 1.2 hereof) by providing written notice thereof to
Lexin. Immediately following such notification, the parties shall
commence negotiations on a definitive agreement(s) and Lexin shall
grant to AMI and/or Astra AB all rights by an exclusive, sublicensable,
royalty-bearing license under all know-how and patents arising from the
Patents to make, have made, use and sell human pharmaceutical products
(i) in the Field in the Territory (for AMI), and (ii) in the Field
outside the Territory (for Astra AB), utilizing the Technology pursuant
to a definitive agreement(s). Such definitive agreement(s) shall
contain such reasonable terms and conditions which are typical in the
industry. Such terms shall include, without limitation, that AMI (or
Astra AB) may terminate the license agreement at any time for any
reason and that the term of the agreement shall be until the last to
expire patent licensed thereunder. The proposal by AMI (or Astra AB)
for the definitive agreement shall include a reasonable compensation
for the Technology, which compensation may include a reasonable
royalty. If the parties cannot agree on the terms of the agreement, the
parties shall submit the matter to arbitration in accordance with
Article II.
1.6. Additional Rights. For so long as AMI and Lexin are either in
-----------------
good faith negotiating a definitive agreement in the Field or
performing under the terms of such definitive agreement, AMI may elect,
in its sole discretion, to enter into negotiations with
-3-
<PAGE>
Lexin for exclusive rights to additional applications for compounds
with a similar mechanism of action or clinical potential as LEX 032, in
or out of the Field ("Additional Applications") on such terms and
conditions as the parties may mutually agree, if AMI notifies Lexin of
its election at any time during the Period or the term of the
definitive agreement, as the case may be. If AMI makes the foregoing
election, the parties shall determine in good faith the terms under
which AMI will have exclusive rights during the Period or the term of
the definitive agreement, as applicable, to negotiate a definitive
agreement with Lexin with respect to each such Additional Application.
If Lexin desires to actively solicit or is approached by a third party
to negotiate commercial opportunities relating to any Additional
Application during the Period or the term of the definitive agreement,
as applicable, Lexin agrees first to provide written notice of such
intention to AMI. AMI shall have a period of thirty (30) days after
receipt of such notice during which to advise Lexin as to whether it
desires to negotiate a definitive agreement with respect to such
Additional Application, and if it desires to do so, an additional sixty
(60) day period to negotiate such agreement before Lexin may actively
solicit or negotiate with another party. If AMI elects not to
negotiate, then Lexin shall be free to negotiate with third parties as
to that Additional Application.
Notwithstanding the foregoing, if AMI elects to negotiate for such
exclusive rights and the parties fail to consummate a definitive
agreement with respect thereto, for a period of one (1) year following
the expiration of AMI's negotiation period, Lexin may not grant rights
to exploit commercial opportunities with respect to such Additional
Application using the Patents or the Technology to any third party on
terms which are in the aggregate materially more favorable than those
last offered to AMI without first offering such terms to AMI, which AMI
shall have a period of 30 days to accept. Lexin's obligations under the
immediately preceding sentence shall survive the termination or
expiration of this Agreement.
-4-
<PAGE>
ARTICLE II
ARBITRATION
-----------
2.1. Arbitration. If the terms of the definitive agreement for
-----------
AMI's Option under Section 1.5 are submitted to arbitration hereunder,
the matter shall be settled by arbitration by a board of arbitrators
consisting of an arbitrator appointed by AMI, an arbitrator appointed
by Lexin and a third arbitrator chosen by the mutual agreement of AMI
and Lexin, which third arbitrator shall be unrelated either to AMI or
Lexin. Such arbitration proceedings shall be held in Philadelphia,
Pennsylvania and shall be held in accordance with the then current
rules of the American Arbitration Association. Arbitration may be
commenced at any time by either party hereto giving written notice to
the other party to a dispute that such dispute has been referred to
arbitration. The arbitrators shall determine a reasonable price, rate
and other terms based on the guidelines set forth in this Agreement and
with reasonable terms based on those typical in the industry and the
offers or proposals of each party and shall enforce the obligations of
Lexin and AMI to license the Technology on such terms pursuant to a
reasonable definitive agreement, the terms of which shall also be
subject to this arbitration provision should the parties be unable to
reach agreement. Any award rendered by the arbitrators shall be
conclusive and binding upon the parties hereto provided, however, that
any such award shall be accompanied by a written opinion of the
arbitrators giving the reasons for the award. The provision for
arbitration shall be specifically enforceable by the parties and the
decision of the arbitrators in accordance herewith shall be final and
binding and there shall be no right of appeal therefrom. Each party
shall pay its own expenses of arbitration and the expenses of the
arbitrators shall be equally shared, provided, however, that if in the
opinion of the arbitrators any claim hereunder or any defense or
objection thereto was unreasonable, the arbitrators may assess, as part
of their award, all or any part of the arbitration expenses of the
other party (including reasonable attorneys' fees) and of the
arbitrators against the party raising such unreasonable claim, defense
or objection. The arbitration proceeding shall be conducted in English.
-5-
<PAGE>
ARTICLE III
MISCELLANEOUS
-------------
3.1. Confidentiality. AMI and Lexin agree that all information
---------------
relating to the Technology and the terms of this Agreement, disclosed
by either party in accordance with this Agreement shall be maintained
by the receiving party in secrecy, and each will use all reasonable
diligence to prevent disclosure, except to necessary personnel and,
with respect to AMI, necessary personnel of its affiliates. AMI's and
Lexin's obligations under this Section 3.1 shall be limited to a period
of five years from the date of this Agreement. The parties shall not
have any obligation of confidentiality with respect to any information
that is: (a) in the public domain, other than by a breach of this
Agreement on the part of the receiving party; (b) rightfully received
from a third party without any obligation of confidentiality; (c)
rightfully known to the receiving party without any limitation on use
or disclosure prior to its receipt from the disclosing party as
documented in written records; (d) generally made available to third
parties by the disclosing party without restriction on disclosure; or
(e) independently developed by the receiving party as documented in
written records. Any and all information received by either party from
the other, upon request shall be promptly returned, except that the
receiving party may retain one copy of such information in its
confidential files, solely for record purposes.
3.2. Publication. AMI and Lexin each acknowledge the other party's
-----------
interest in publishing to obtain recognition within the scientific
community and to advance the state of scientific knowledge. Each party
also recognizes the mutual interest in obtaining valid patent
protection and in protecting business interests and trade secret
information. Consequently, a party wishing to make a publication shall
deliver to the other party a copy of the proposed written publication
or an outline of an oral disclosure at least sixty days prior to
submission for publication or presentation. The reviewing party shall
have the right to propose modifications to the publication for patent
reasons, trade secret reasons or business reasons or to request a
reasonable delay in publication or presentation in order to protect
patentable information. If a reviewing party requests a delay, the
publishing party shall delay
-6-
<PAGE>
submission or presentation for a period of ninety days to enable patent
applications protecting each party's rights in such information to be
filed. Upon expiration of such ninety days, the publishing party shall
be free to proceed with the publication or presentation. If a reviewing
party requests modifications to the publication, the publishing party
shall edit such publication to prevent disclosure of trade secret or
proprietary business information prior to submission of the publication
or presentation.
3.3. Governing Law. The interpretation and construction of this
-------------
Agreement, and all matters relating hereto, shall be governed by the
laws of the Commonwealth of Pennsylvania applicable to agreements
executed and to be performed solely within such Commonwealth without
reference to principles of conflicts of laws.
3.4. Enforcement. Each party shall have the right at all times to
-----------
enforce the provisions of this Agreement in strict accordance with the
terms hereof notwithstanding any conduct or custom on its part in
refraining from doing so at any time. The failure of any party at any
time to enforce its rights hereunder strictly in accordance with the
same shall not be construed as having created a custom contrary to the
specific provisions hereof or as having in any way modified or waived
the same.
3.5. Notices. Any notice, request, demand, waiver, consent,
-------
approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given only if
delivered personally or sent by a telegram or telecopier (with
transmission confirmed) or by registered or certified mail, return
receipt requested and postage prepaid, or by federal express or an
equivalent overnight delivery service, addressed
-7-
<PAGE>
to the parties at their respective addresses as set forth below or to
such other addresses at which notice of change shall have been duly
given.
If to AMI, to:
Astra Merck Inc.
725 Chesterbrook Boulevard
Wayne, Pennsylvania 19087-5677
Attention: Executive Director of Licensing and Business
Development
If to Lexin, to:
Lexin Pharmaceutical Corporation
Rock Plaza III, 111 Rock Road
Horsham, Pennsylvania 19044-2310
Attention: Jerry B. Hook, Ph.D.
Such notice, request, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so
delivered, telegraphed, or telecopied, or on the fifth day after
deposit in the United States mail, or on the second day after the
deposit with Federal Express or an equivalent overnight delivery
service. It is understood and agreed that this Section 3.5 is not
intended to govern the day-to-day business communications necessary
between the parties in performing their duties, in due course, under
the terms of this Agreement.
3.6. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter hereof
and all prior agreements with respect thereto are superseded hereby and
each party confirms that it is not relying on any representations or
warranties of the other party except as specifically set forth herein,
No amendment or modifications hereof shall be binding upon the parties
unless in writing and duly executed by authorized representatives of
both parties.
3.7. Binding Effect; Assignment. This Agreement shall inure to the
--------------------------
benefit of and be binding upon the parties and their respective
successors and permitted assigns. Neither party shall assign this
Agreement or any of its rights or obligations hereunder without the
-8-
<PAGE>
prior written consent of the other party, except that Lexin may assign
its rights and obligations to any entity with which it may merge or
consolidate, or to which it may transfer substantially all of its
assets to which this Agreement relates.
3.8. Survival. The respective rights and obligations of the parties
--------
hereunder shall indefinitely survive the termination or expiration of
this Agreement to the extent necessary to the intended preservation of
such rights and obligations.
3.9. Schedules. All schedules referred to herein or referred to in
---------
any schedule hereto are intended to be, and hereby are, specifically
incorporated herein and made a part of this Agreement.
3.10. Counterparts. This Agreement may be executed in one or more
------------
counterpart copies, each of which shall be deemed an original and all
of which taken together shall be deemed to constitute one and the same
instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by
the parties.
3.11. Press Releases. Except as required by applicable law, neither
--------------
of the parties hereto shall give notice to any third parties or
otherwise make any public statement or releases concerning this
Agreement or the transactions contemplated hereby without obtaining the
prior written consent of the other party to this Agreement as to the
contents and manner of presentation and publication thereof, which
consent shall not be unreasonably withheld.
3.12. Severability. If any one or more provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions hereof shall not
in any way be affected or impaired thereby. To the extent permitted by
applicable law, each party waives any provision of law which renders
any provision of this Agreement invalid, illegal or unenforceable in
any respect. In the event any provision shall be held invalid, illegal
or unenforceable the parties shall use their best efforts
-9-
<PAGE>
to substitute a valid, legal and enforceable provision which, insofar
as practical, implements the purposes hereof.
3.13. Further Assurances. Each party shall execute such other
------------------
instruments, give such further assurances and perform such acts which
are or may become necessary or appropriate to effectuate and carry out
the provisions of this Agreement.
3.14. Headings. The article and section headings herein are for
--------
reference purposes only and shall not affect the meaning or
interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their officers thereunto duly authorized as of the date
first set forth above.
LEXIN PHARMACEUTICAL CORPORATION ASTRA MERCK INC.
By: /s/ Jerry B. Hook By: /s/ Wayne P. Yetter
------------------------------- -----------------------
Jerry B. Hook Wayne P. Yetter
President and Chief President and Chief
Executive Officer Executive Officer
-10-
Exhibit 10.71
COLLAB0RATIVE RESEARCH AND LICENSING AGREEMENT
----------------------------------------------
This Agreement, dated as of the 1st of April, 1994, between Lexin
Pharmaceutical Corporation, Pennsylvania Business Campus, Rock Plaza
III, 111 Rock Road, Horsham, PA 19044-2310 ("LEXIN") and Wichita
State University, 1845 N. Fairmount Avenue, Wichita, Kansas
67206-0007 ("UNIVERSITY").
WITNESSETH:
WHEREAS, UNIVERSITY and LEXIN possess certain know-how in the field
of small and large serine protease inhibitors for all uses and
applications (except agricultural uses and applications) and all
aspects of molecular interaction with serine proteases;
WHEREAS, UNIVERSITY, on behalf of William C. Groutas, Ph.D. ("DR.
GROUTAS"), is desirous of and prepared to conduct collaborative
research in this field which may lead to the development of
commercial products;
WHEREAS, LEXIN is prepared to provide support to UNIVERSITY for
such research by DR. GROUTAS, providing it receives certain license
rights under inventions, biological materials, and/or know-how; and
WHEREAS, UNIVERSITY represents, subject to potential rights under
Article III.D hereof, that it has full rights by assignment to such
inventions, biological materials, and/or know-how and wishes to have
such inventions, biological materials, and/or know-how perfected and
marketed in order that products resulting therefrom might be available
for public use and benefit; and
WHEREAS, UNIVERSITY represents, subject to potential rights under
Article III.D hereof, and warrants to LEXIN that: (i) it has full right
and authority to enter into this Agreement without consent or approval
of any other party; and (ii) it is not subject to any restrictions
which would prevent or impair the grant to LEXIN of the licenses.
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally
bound, the parties hereto mutually agree as follows:
<PAGE>
ARTICLE I - DEFINITIONS
-----------------------
A. Research Program. The term "Research Program" shall refer to
----------------
the work outlined in Appendix A.
B. Licensed Invention. The term "Licensed Invention" shall mean
------------------
any and all technical information, trade secrets, developments,
discoveries, know-how, methods, techniques, formulae, processes and
other proprietary ideas, whether or not patentable or copyrightable,
that are discovered, developed or reduced to practice arising out of
the research performed under this Agreement, as set forth in Appendix
A.
C. Patent Rights. The term "Patent Rights" shall mean United
-------------
States or foreign patent application rights owned or controlled by
UNIVERSITY which arise under any United States or foreign patent
applications, or any patents issuing from said applications, including
any divisions, continuations, continuations-in-part, re-examinations,
or reissues thereof and patents of addition thereto, and cover the
making, using, or selling of Product.
D. Product. The term "Product" shall mean any product derived
-------
from a Licensed Invention used in the Field.
E. Net Sales. With respect to any quantity of Product subject to
---------
royalty under this Agreement that is sold by LEXIN or any of its
sublicensees to any third party, the term "Net Sales" shall mean the
gross invoice selling price for that quantity of Product, less: (a)
discounts and allowances to customers,
(b) credits for returned goods, (c) prepaid freight, (d) sales taxes or
other governmental charges paid in connection with the sale; and (e)
commissions and other fees paid to distributors and other sales
agencies for or in connection with the sale of Product.
F. Affiliate. The term "Affiliate" shall mean any corporation,
---------
company, partnership and/or firm which controls or is controlled by or
is under common control with LEXIN. For purposes of this Paragraph,
control shall mean: (a) in the case of corporate entities, direct or
indirect ownership of at least fifty per cent (50%) of the stock or
participating shares entitled to vote for the election of directors;
and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest or the
power to direct the management and policies of such entity.
G. Effective Date. The term "Effective Date" shall mean the date
--------------
first indicated above as the effective date of this Agreement.
2
<PAGE>
H. Field. The term "Field" shall mean use for any diagnostic,
-----
therapeutic and/or prophylactic purpose.
ARTICLE II - COLLABORATIVE RESEARCH PROGRAM
-------------------------------------------
A. For the one (1) year ending [ ] (the
"Research Term"), LEXIN agrees, as as set forth below to pay
UNIVERSITY funds to support the Research Program, and UNIVERSITY
shall supply the services of requisite personnel and to furnish
the necessary facilities to carry out such Research Program, all
according to a Plan for Research and Budget agreed upon by LEXIN
and UNIVERSITY as set forth in Paragraph B of this Article.
B. The Plan for Research and Budget for the Research Term
is set forth in Appendix A hereto. The budget for the Research
Term shall be $[ ], payable quarterly in advance.
C. The parties shall have the option to continue the Research
Program for an additional period after the Research Term, under
substantially identical terms as set forth herein; however, continued
funding shall be solely at the discretion of LEXIN.
D. The Research Program shall be under the direction of DR.
GROUTAS. In the event that the services of DR. GROUTAS become
unavailable during the course of the Research Program, LEXIN may
terminate the Research Program by giving written notice to UNIVERSITY
and reimbursing UNIVERSITY for all previously incurred and
noncancellable expenses for the Research Program.
E. UNIVERSITY shall report in writing to LEXIN the results and
status of its research under this Agreement within fifteen (15) days
after the end of each six (6) month period hereunder. At the conclusion
of the Agreement, LEXIN shall receive a complete detailed report of the
work carried out and funded by this Agreement. Further, DR. GROUTAS and
the staff engaged on the Research Program shall be available at times
mutually agreed upon for the purpose of discussing the progress of the
Research Program. In the event of termination of the Research Program,
LEXIN shall receive a final summary report of all work carried out and
all inventions conceived and/or arising out of the research performed
under this Agreement.
ARTICLE III- PATENT RIGHTS
--------------------------
A. UNIVERSITY will promptly inform LEXIN of any ideas,
improvements and inventions arising out of the research performed under
this Agreement solely by UNIVERSITY personnel or by UNIVERSITY
personnel jointly with employees of LEXIN.
3
<PAGE>
Inventions, including biological materials, made solely by UNIVERSITY
personnel and any patent applications and patents thereon shall be
owned by UNIVERSITY. Inventions made jointly by UNIVERSITY personnel
with LEXIN employees and any patent applications and patents thereon
shall be jointly owned by UNIVERSITY and LEXIN.
B. UNIVERSITY shall be responsible for filing and prosecuting
United States and foreign patent applications on inventions owned
solely by UNIVERSITY. Both UNIVERSITY and LEXIN shall be mutually
responsible for making decisions regarding the scope and content of any
such applications and prosecution thereof. The expenses in connection
with filing and prosecution of any applications for University-owned
patents or patents jointly owned with LEXIN, United States and/or
foreign and the maintenance of issued patents thereon shall be borne by
LEXIN. All expenses incurred by LEXIN in applying for patent protection
relating to inventions conceived by UNIVERSITY shall be creditable
against any future royalty payments due UNIVERSITY by LEXIN; however,
royalties due UNIVERSITY in any payment period shall not be reduced to
less than 50% of what they otherwise would have been.
C. LEXIN shall be entitled to file and prosecute United States
and/or foreign patent applications on jointly owned inventions.
UNIVERSITY and LEXIN shall be jointly responsible for making decisions
regarding the scope and content of applications and prosecution thereof
on any such jointly owned inventions. UNIVERSITY will be expected to
assist in assembling inventorship information and data for filing
patent applications on jointly owned inventions. Decisions on when,
where and whether to file on jointly owned inventions will be made by
LEXIN after consulting with UNIVERSITY. The expenses in connection with
filing and prosecution of any jointly owned patent applications, United
States and/or foreign, and the maintenance of issued patents thereon
shall be borne by LEXIN. All expenses incurred by LEXIN in applying for
patent protection relating to inventions conceived jointly with
UNIVERSITY shall be creditable against any future royalty payments due
UNIVERSITY by LEXIN; however, royalties due UNIVERSITY in any payment
period shall not be reduced to less than 50% of what they otherwise
would have been.
D. LEXIN acknowledges that certain ideas, improvements and
inventions arising out of the research performed under this Agreement
by UNIVERSITY personnel may be subject to rights retained by the United
States government in accordance with P.L. 96-517, as amended by P.L.
98-620, and any regulations issued thereunder.
4
<PAGE>
ARTICLE IV - LICENSE TO LEXIN
-----------------------------
A. In consideration of LEXIN's support for research and other
consideration hereunder, UNIVERSITY hereby grants to LEXIN:
(1) an exclusive, worldwide license to make, have made, use,
sell and have sold Product derived from Licensed
Invention or deviations; and
(2) an exclusive, worldwide license under Patent Rights to
make, have made, use, sell and have sold Product.
B. The licenses granted by UNIVERSITY to LEXIN under Paragraph A
of this Article shall include the right to grant sublicenses of no
greater scope than the license granted to LEXIN hereunder.
C. During the term of this Agreement and so long as LEXIN is not
in default with respect to any payment due to UNIVERSITY hereunder,
UNIVERSITY will not assert Patent Rights or Licensed Patent to prevent
any party from using or selling any quantity of Product on which
royalty has been paid hereunder.
ARTICLE V - ROYALTIES AND OTHER CONSIDERATION
---------------------------------------------
A. In consideration of the licenses granted to LEXIN under this
Agreement, LEXIN shall pay UNIVERSITY a royalty of [
] ([ ]) on the Net Sales of Product derived from Licensed
inventions or deviations covered by a claim contained in an issued
Patent Right on a country by country basis.
B. In the event that LEXIN or a sublicense of LEXIN must pay
additional royalties to a third or additional parties to allow for
commercialization of Product developed under this Agreement, LEXIN and
the University shall agree to negotiate in good faith to consider
whether offset of royalty payments is required based upon the
circumstances and, if required, LEXIN shall have the right to reduce
royalty payments to UNIVERSITY in a manner consistent with the need to
offset such additional royalty payments.
ARTICLE VI - REPORTS, PAYMENTS AND ACCOUNTING
---------------------------------------------
A. Upon first commercial sale of Product, LEXIN shall provide to
UNIVERSITY, within ninety (90) days following each calendar quarter, a
written report setting forth the total Net Sales and the royalty due
and payable to UNIVERSITY for such quarter and LEXIN shall remit to
UNIVERSITY with such report the
5
<PAGE>
amount of royalty payments shown thereby to be due. Royalties shall be
payable from the country in which they are earned and subject to
foreign exchange rates then prevailing in such country. Royalties shall
be remitted in United States dollars. For converting any royalty that
accrued in another currency into United States dollars, there shall be
used the closing buying rates quoted by the [Morgan Guaranty Trust
Company of New York, New York] for the last business day of the
calendar quarter in which the royalties were earned.
B. LEXIN shall keep complete and accurate records for the latest
three (3) years showing the Net Sales by LEXIN of Product made under
this Agreement. Such records shall be in sufficient detail to enable
the royalties payable hereunder by LEXIN to be determined. LEXIN agrees
to permit such books and records to be examined but not more often than
once in any calendar year. The examination shall be by an independent
certified public accountant designated by UNIVERSITY and reasonably
acceptable to and approved by LEXIN. Any such audit shall be at the
expense of UNIVERSITY and conducted during business hours of LEXIN and
upon reasonable notice to LEXIN. The purpose of any such audit shall
solely be for verifying the royalties payable as provided for in this
Agreement and said accountant shall only disclose Net Sales to
UNIVERSITY and royalties due and payable thereon.
C. Any tax required to be withheld by LEXIN under the laws or
governmental regulations of any country for royalties payable to
UNIVERSITY shall be promptly paid by LEXIN for and on behalf of
UNIVERSITY to the appropriate governmental authority. LEXIN shall
furnish UNIVERSITY with proof of payment of such tax together with
official or other appropriate evidence issued by the appropriate
government authority sufficient to enable UNIVERSITY to support a claim
for any income tax credit in respect of any tax so paid.
ARTICLE VII - TERM AND TERMINATION
----------------------------------
A. This Agreement, unless terminated earlier as hereinafter
provided, shall terminate on the [ ] anniversary of its
Effective Date or the expiration of the last of the patents licensed
hereunder on a country by country basis, whichever date shall last
occur, whereupon the exclusive licenses granted hereunder shall be
fully paid and LEXIN and its sublicensees shall be free to make,
have made, use and sell Product without further duties or
responsibilities to UNIVERSITY.
B. If any of the terms or conditions of this Agreement are breached
and such breach is not corrected within sixty (60) days after written
notice thereof is given by a complaining party to the breaching party,
the complaining party shall have the option
6
<PAGE>
to terminate this Agreement by giving written notice thereof to the
breaching party.
ARTICLE VIII - ASSIGNABILITY
----------------------------
LEXIN may, without the prior written consent of UNIVERSITY, assign
this Agreement or any of its rights or obligations hereunder to an
Affiliate. Such assignee may, without the prior written consent of
UNIVERSITY, assign such Agreement or rights or obligations hereunder
back to LEXIN or to an Affiliate without the prior written consent of
UNIVERSITY. Neither this Agreement nor any of the rights or obligations
of UNIVERSITY hereunder shall be assignable or otherwise transferable
by UNIVERSITY without the prior written consent of LEXIN.
ARTICLE IX- DEVELOPMENT OF PRODUCT
----------------------------------
LEXIN shall use reasonable diligence in the development of Product
and to introduce or cause the introduction of Product in the commercial
market at a reasonable date.
ARTICLE X - PUBLICATIONS
------------------------
LEXIN reserves the right to approve publications resulting from the
research under this Agreement in advance of submission for publication
in order to protect its proprietary technology including biological
materials, information and know-how. LEXIN shall have the final
authority to determine the scope and content of any publication
materials which contain information relating to LEXIN's proprietary
technology including identification of or reference to biological
materials supplied by LEXIN to UNIVERSITY, information and know-how.
UNIVERSITY shall submit any prepublication materials to LEXIN for
review and comment at least sixty (60) days prior to planned submission
for publication. LEXIN shall notify UNIVERSITY within thirty (30) days
of receipt of the prepublication materials of its intention to approve
or withhold approval of the publication and state the reason for doing
so; provided, however, that LEXIN shall not withhold approval for more
than thirty (30) days to provide LEXIN the opportunity to file patents
to protect its technology.
Except as otherwise provided herein, LEXIN may use the results of the
Research Program for whatever purposes it may desire.
7
<PAGE>
ARTICLE XI - STATUS OF THE PARTIES
----------------------------------
For purposes of this Agreement and in connection with any activity
of UNIVERSITY hereunder, UNIVERSITY shall at all times be an
independent contractor and not an employee or agent of LEXIN.
UNIVERSITY's activities in connection with the Research Project will be
conducted by UNIVERSITY at its own risk. UNIVERSITY shall have full
authority and responsibility for its activities under the Collaborative
Research Program. People working for UNIVERSITY under the Research
Program shall be employees, agents or students of UNIVERSITY and shall
not be employees of LEXIN.
ARTICLE XII - CONFIDENTIALITY
-----------------------------
Except as is necessary for LEXIN to practice commercially under the
rights granted herein, all proprietary information disclosed by either
party to the other hereunder shall be received by the receiving party
(including all appropriate employees, agents and independent
contractors) in strictest confidence and used solely in furtherance of
this Agreement, and shall be accorded the same degree of
confidentiality and secrecy with which the receiving party holds its
own most confidential information of a similar nature, but in no event
less than reasonable care. Such confidential information, subject to
the provisions of the Kansas Open Records Act, K.S.A. 45-201 et. seq.
-- ---
(Supp. 1987), shall not be disclosed to any persons other than: (i)
employees or agents of the receiving party or independent contractors
employed by the receiving party who have reasonable need for access to
such information in connection with the receiving party's performance
under this Agreement and who are bound to the receiving party by a
written agreement of confidentiality containing terms consistent with
those contained in this Agreement; and (ii) governmental authorities,
as required, to obtain necessary regulatory clearances. Information
shall not be deemed to be proprietary information and such restrictions
shall not apply to any such information: (a) which is, or subsequently
may become, within the knowledge of the general public, without the
fault of the receiving party, (b) which is known to the receiving
party prior to the time of receipt thereof from the disclosing party,
as shown by competent written records, (c) which is proved to have
been developed by the receiving party independently and wholly
without resort to the proprietary information of the disclosing
party, as shown by competent written records; or (d) which is
subsequently rightfully obtained from sources other than the
disclosing party and without confidential restriction in favor of
the disclosing party.
8
<PAGE>
ARTICLE XIII - ABATEMENT OF INFRINGEMENT
----------------------------------------
If at any time any third party shall infringe any unexpired patent
licensed hereunder and LEXIN or UNIVERSITY shall give notice in writing
to the other of the existence of such infringement, then LEXIN may at
its election bring suit in its own name against such infringer. Should
LEXIN bring suit in its own name, UNIVERSITY shall execute such legal
papers necessary for the prosecution of such suit as may be requested
by LEXIN, and LEXIN shall be liable for all costs and expenses of such
litigation and shall be entitled to receive and retain all recoveries
therefrom, subject to payment to UNIVERSITY of five percent (5%) of the
amount by which such recovery exceeds LEXIN's out-of-pocket expenses
for such litigation. Should LEXIN not institute suit within 120 days of
notice of the infringement, UNIVERSITY shall have the right but not the
obligation to bring suit in its own name against such infringer. Should
UNIVERSITY bring suit in its own name, LEXIN shall execute such legal
papers necessary for the prosecution of such suit as may be requested
by UNIVERSITY, and UNIVERSITY shall be responsible for all costs and
expenses of such litigation and shall be entitled to receive and retain
all recoveries therefrom.
ARTICLE XIV - NOTICES
---------------------
Any notice required under this Agreement shall be considered given
upon the earlier of: (i) when actually received at the address set
forth below; or (ii) two business days after such notice, properly
addressed and shipped overnight service, is sent by either party to the
other. The proper addresses for notice are as follows:
if to UNIVERSITY:
Wichita State University
1845 N. Fairmount Avenue
Office of Research Administration
Wichita, Kansas 67206
Attention: Harry Williford
if to LEXIN:
Lexin Pharmaceutical Corporation
Pennsylvania Business Campus
Rock Plaza III
111 Rock Road
Horsham, Pennsylvania 19044-2310
Attention: Jerry B. Hook, Ph.D.
President and Chief
Executive Officer
9
<PAGE>
with a copy to:
James A. Lebovitz, Esquire
Ballard Spahr Andrews & Ingersoll
1735 Market Street
Philadelphia, Pennsylvania 19103
ARTICLE XV - MISCELLANEOUS
--------------------------
A. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Kansas. In the event
of any dispute arising hereunder, UNIVERSITY agrees that personal
jurisdiction and venue in any suit between LEXIN and UNIVERSITY shall
be exclusively in either the United States District Court for the
District of Kansas or the Court of Common Pleas of Sedgwick County,
Kansas.
B. UNIVERSITY and LEXIN agree that each party to this Agreement
is operating as an independent contractor and not as an agent of the
other. This Agreement shall not constitute a partnership or joint
venture, and neither party may be bound by the other to any contract,
arrangement or understanding except as specifically stated herein.
C. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and as such
supersedes all previous written and oral negotiations, agreements,
contracts, representations, letters of intent, understandings and
commitments with respect thereto. This Agreement may be modified,
discharged, amended, or extended only by a writing signed by a duly
authorized representative of the parties.
D. Neither LEXIN nor UNIVERSITY shall make any news release or
other public statement, whether to the press, stockholders or
otherwise, disclosing the terms of this Agreement or of any amendment
hereto, or to performance hereunder or the existence of the arrangement
between the parties shall be originated by either LEXIN or UNIVERSITY
or their employees without the prior written approval of the other
party except as required by law.
E. The provisions found in the Contractual Provisions Attachment
(Form DA-146a), which is attached hereto as Appendix B and executed by
the parties to this Agreement, are hereby incorporated in this contract
and made a part hereof.
10
<PAGE>
IN WITNESS WHEREOF, and intending to be bound hereby, the parties
have caused this Agreement to be signed by their duly authorized
representatives,
LEXIN PHARMACEUTICAL CORPORATION
By: /s/ Jerry B. Hook
---------------------------------
Name: Jerry B. Hook
---------------------------------
Title: President
---------------------------------
Date: 23 May 1994
---------------------------------
WICHITA STATE UNIVERSITY
By: /s/ Harry G. Williford
---------------------------------
Name: Harry G. Williford
---------------------------------
Title: Director, Research Administration
---------------------------------
Date: 5/27/94
---------------------------------
AGREED TO AND ACCEPTED BY:
WILLIAM C. GROUTAS, Ph. D.
By: /s/ William C. Groutas
---------------------------------
Name: William C. Groutas
---------------------------------
Title: Endowment Assn. Distinguished
---------------------------------
Professor of Chemistry
---------------------------------
Date: May 26, 1994
---------------------------------
11
<PAGE>
APPENDIX A
RESEARCH PROGRAM
----------------
12
<PAGE>
Proposed Research Scores
-----------------
<PAGE>
Financial Plan
The project will require per year, beginning in 1994:
<PAGE>
Amendment No. 1
to Collaborative Research and Licensing Agreement
This Amendment No 1 is made this 19th day of January, 1995 between
Lexin Pharmaceutical Corporation, Pennsylvania Business Campus,
Horsham, PA 19044-2310 ("Lexin") and Wichita State University, 1845 N.
Fairmount Avenue, Wichita, Kansas 67206-0007 ("University").
RECITALS
A. Lexin and the University entered into a Collaborative Research and
Licensing Agreement ("Agreement") dated April 1, 1994.
B. The parties desire to extend the term of the Agreement for an
additional one year term.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein, and intending to be legally bound, the
parties hereto agree as follows:
1. The term of this agreement is hereby extended to cover the
period [ ]
2. Except as expressly amended herein, all other terms and conditions
of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 1 as of the date first above written.
FOR WICHITA STATE
UNIVERSITY
By: /s/ Harry E. Williford
----------------------------
Name: Harry E. Williford
----------------------------
Title: Director Research
Administration
----------------------------
FOR LEXIN PHARMACEUTICAL
CORPORATION
By: /s/ Jerry B. Hook
----------------------------
Jerry B. Hook, Ph.D.
President & C.E.O.
<PAGE>
State of Kansas Agency No.___ Contract No._____
Department of Administration
Division of Accounts and Reports
DA-1162 (Rev. 9-93)
CONTRACTUAL PROVISONS ATTACHMENT
Important: This form contains mandatory contract provisions and must be
attached to or incorporated in all copies of any contractual
agreement. If it is attached to the vendor/contractor's
standard contract from, then that form must be altered to
contain the following provision:
"The provisions found in Contractual Provisions Attachment
(form DA-146a), which is attached hereto, are hereby
incorporated in this contract and made a part hereof".
The parties agree that the following provisions are hereby incorporated
into the contract to which it is attached and made a part thereof, said
contract being the ____day of ______________________, 19_____
1. TERMS HEREIN CONTROLLING PROVISIONS
-----------------------------------
It is expressly agreed that the terms of each and every provision in
this attachment shall prevail and control over the terms of any other
conflicting provision in any other document relating to and a part of
the contract in which this attachment is incorporated.
2. AGREEMENT WITH KANSAS LAW
-------------------------
All contractual agreements shall be subject to, governed by, and
construed according to the laws of State of Kansas.
3. TERMINATION DUE TO LACK OF FUNDING APPROPRIATION
------------------------------------------------
If, in the judgement of the Director of Accounts and Reports,
Department of Administration, sufficient funds are not appropriated to
continue the function performed in this agreement and for the payment
of the charges hereunder, State may terminate this agreement at the
end of its current fiscal year. State agrees to give written notice
of termination to contractor at least 30 days prior to the end of its
current fiscal year, and shall give such notice for a greater period
prior to the end of such fiscal year as may be provided in this
contract, except that such notice shall not be required prior to 90
days before the end of such fiscal year. Contractor shall have the
right, at the end of such fiscal year, to take possession of any
equipment provided State under the contract. State will pay to the
contractor all regular contractual payments incurred through the end
of such fiscal year, plus contractual charges incidental to the return
of any such equipment. Upon termination of the agreement by State,
title to any such equipment shall revert to contractor at the end of
State's current fiscal year. Ther termination of the contract
pursuant to this paragraph shall not cause any penalty to be charged
to the agency or the contractor.
4. DISCLAIMER OF LIABLILTY
-----------------------
Neither the State of Kansas nor any agency thereof shall hold harmless
or indeminfy any contractor beyond that liability incurred under the
Kansas Tort Claims Act (K.S.A. 75-6101 et seq.).
-- ---
5. ANTI-DISCRIMINATION CLAUSE
--------------------------
The contractor agrees: (a) to comply with Kansas Act Against
Discrimination (K.S.A. 44-1001 et seq.) and the Kansas Age
-- ---
Discrimination in Employment Act (K.S.A 44-1111 et seq.) and the
-- ---
applicable provisions of the Americans with Disabilities Act (42
U.S.C. 12101 et seq.) (ADA) and to not discriminate against any person
-- ---
because of race, religion, color, sex, disability, national origin or
ancestry, or age in the admission or access to, or treatment or
employment in, its programs or activities; (b) to include in all
solicitations or advertisements for employees, the phrase "equal
opportunity employer"; (c) to comply with the reporting requirements
set out at K.S.A. 44-1031 and K.S.A. 44-1116; (d) to include those
provisions in every subcontract or purchase order so that they are
binding upon such subcontractor or vendor; (e) that a fialure to
comply with the reporting requirements of (c) above or if the
contractor is found guilty of any violation of such acts by the Kansas
Human Rights Commission, such violation shall constitute a breach of
contract and the contract may be canceled, terminated or suspended, in
whole or in part, by the contracting state agency or the Kansas
Department of Administration; (f) if it is determined that the
contractor has violated applicable provisions of the ADA, such
violation shall constitute a breach of contract and the contract may
be canceled, terminated or suspended, in whole or in part, by the
contracting state agency or the Kansas Department of Administration.
Parties to this contract understand that the provisions of this
paragraph number 5 (with the exception of those provisions relating to
the ADA) are not applicable to a contractor who employs fewer than
four employees during the term of such contract or whose contracts
with the contracting state agency cumulatively total $5,000 or less
during the fiscal year of such agency.
6. ACCEPTANCE OF CONTRACT
----------------------
This contract shall not be considered accepted, approved or otherwise
effective until the statutorily required approvals and certifications
have been given.
7. ARBITRATION, DAMAGES, WARRANTIES
--------------------------------
Notwithstanding any language to the contrary, no interpretation shall
be allowed to find the State or any agency thereof has agreed to
binding arbitration, or the payment of damages or penalties upon the
occurrence of a contingency. Further, the State of Kansas shall not
agree to pay attorney fees and late payment charges beyond those
available under the Kansas Prompt Payment Act (K.S.A. 75-6403), and no
provision will be given effect which attempts to exclude, modify,
disclaim or otherwise attempt to limit implied warranties of
merchantability and fitness for a particular purpose.
8. REPRESENTATIVE'S AUTHORITY TO CONTRACT
--------------------------------------
By signing this document, the representative of the contractor thereby
represents that such person is duly authorized by the contractor to
execute this document on behalf of the contractor and that the
contractor agrees to be bound by the provisions thereof.
9. RESPONSIBILITY FOR TAXES
------------------------
The State of Kansas shall not be responsible for, nor indemnify a
contractor for, any federal, state or local taxes which may be imposed
or levied upon the subject matter of this contract.
10. INSURANCE
---------
The State of Kansas shall not be required to purchase any insurance
against loss or damage to any personal property to which this contract
relates, nor shall this contract require the State to establish a
"self-insurance" fund to protect against any such loss or damage.
Subject to the provisions of the Kansas Tort Claims Act (K.S.A. 75-
6101 et seq.), the vendor or lessor shall bear the risk of any loss or
-- ---
damage to any personal property in which vendor or lessor holds title.
11. INFORMATION
-----------
No provisions of this contract shall be construed as limiting the
Legislative Division of Post Audit from having access to information
pursuant
Exhibit 10.72
LICENSE AGREEMENT
between
PI RESEARCH CORPORATION
and the
TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
for
ALPHA ANTICHYMOTRYPSIN
and
C1 ESTERASE INHIBITOR
JANUARY 2, 1992
<PAGE>
License between PI Research Corporation and the Trustees of
the University of Pennsylvania
Contents
License Agreement for Alpha-1 Antichymotrypsin
and C1 Esterase Inhibitor
Attachment A: Protatek Cooperative Research Agreement
of 10/1/87 ("Protatek CRA")
Attachment B: Protatek Alpha-1 Antichymotrypsin License
Attachment C: Protatek C1 Esterase License Agreement
Attachment D: Protatek-PIRC-Penn Assignment Agreement
of 9/6/91
Attachment E: PIRC/Penn Stock Purchase Agreement; PIRC
Charter and By-Laws
Attachment F: PIRC/Penn Collaborative Research Agreement
of 3/1/91
Attachment 1: Scope of Work and
Schedule of Payments
Attachment 2: Additional Provisions
for License Agreement
Attachment 3: Confidentiality Agreement
Attachment G: Rubin Stock Agreement
Attachment H: Rubin Consultancy Agreement
Attachment I: Cooperman Stock Agreement
Attachment J: Cooperman Consultancy Agreement
Attachment K: Schechter Stock Agreement
Attachment L: Schechter Consultancy Agreement
Attachment M: Mei-Wang Stock Agreement
Attachment N: Mei-Wang Consultancy Agreement
Attachment O: Letter Agreement among Investigators and
University
<PAGE>
Signature Version
License Agreement for
Alpha-1 Antichymotrypsin and
C1 Esterase Inhibitor
This LICENSE AGREEMENT is made as of the Second day of January,
1992 by and between THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA, a
nonprofit corporation organized and existing under the laws of the
Commonwealth of Pennsylvania (the "University"), PI Research
Corporation, a corporation organized and existing under the laws of
Delaware ("Licensee" or "Company").
R E C I T A L S
A. On October 1, 1987 Protatek International, Inc. ("Protatek"), a
company then based in Minneapolis, MN entered a cooperative research
agreement with the University for the development of human protease
inhibitors. This Agreement is appended as Attachment A and is referred
to as "Protatek CRA."
B. Dr. Harvey Rubin, an assistant professor of medicine at the
University, was the principal investigator under the Protatek CRA and
has assigned all rights, title and interest in and to the Licensed
Technology (as defined below) to the University.
C. On September 27, 1988, Protatek, which had moved to St. Paul, MN
in the intervening period, entered two License Agreements with the
University. One of these agreements was for the human protease
inhibitor, alpha-1 Antichymotrypsin (Attachment B). The second of these
agreements was for the human protease inhibitor, C1 Esterase Inhibitor
(Attachment C).
D. Protatek has offered, and the Company has accepted, an agreement
("Attachment D"), dated September 6, 1991, under which certain rights
held by Protatek virtue of the cooperative research and license
agreements in Attachments A, B, and C were assigned by Protatek to
Licensee in exchange for considerations to Protatek and University as
described in Attachment D and Stock Purchase Agreement
(Attachment E).
E. Company has undertaken and fulfilled the obligations of Protatek
to University under the cooperative research agreement in Attachment A,
which has terminated. Company and
<PAGE>
License Agreement between PI Research Corporation and Penn 2
January 2, 1992
University desire to continue cooperative research under a new
Collaborative Research Agreement with the University, dated March 1,
1991 ("Collaborative Research Agreement"), and appended as Attachment
F.
F. In order to clarify, update and expand the terms of the license
arrangements set forth in Attachments B and C, Company and University
hereby agree that this License Agreement ("Agreement") is in
substitution for and replaces the license agreements in Attachments B
and C, which agreements the parties agree shall be automatically
terminated upon execution of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE 1: DEFINITIONS
1.1 Definitions. This Agreement has several defined
-----------
terms in common with the Collaborative Research Agreement. The
following terms as set forth herein shall have the following meaning:
1.2 "Affiliate" means, when used with reference to Licensee,
----------
any person directly or indirectly controlling, controlled by or under
common control with Licensee. For purposes of this Agreement, "control"
means the direct or indirect ownership of over 50% of the outstanding
voting securities of an entity, or the right to receive over 50% of the
profits or earnings of a person, or the right to control the policy
decisions of a person.
1.3 "Bankruptcy Event" means the person in question becomes
----------------
insolvent, or voluntary or involuntary proceedings by or against such
person are instituted in bankruptcy or under such insolvency law, or a
receiver or custodian is appointed for such person, or proceedings are
instituted by or against such person for corporate reorganization or
the dissolution of such person, which proceedings, if voluntary, shall
not have been dismissed within sixty (60) days after the date of
filing, or such person makes an assignment for the benefit of
creditors, or substantially all of the assets of such person are seized
or attached and not released within sixty (60) days thereafter.
1.4 "Calendar Quarter" means each three-month period, or any
----------------
portion thereof, beginning on January 1, April 1, July 1 and October 1.
1.5 "Confidential Information" means (i) the Technical
------------------------
Information, (ii) any other information or material in tangible form
that is marked as confidential or proprietary by the furnishing party
at the time it is delivered to the receiving party, and (iii)
information that is furnished
<PAGE>
License Agreement between PI Research Corporation and Penn 3
January 2, 1992
orally if the furnishing party identifies such information as
confidential or proprietary when it is disclosed and confirms such
designation in writing within 30 days after such disclosure.
1.6 "Drug" means (i) an article intended for use in the
----
diagnosis, cure, mitigation, treatment, or prevention of disease in man
or other animals; or (ii) an article intended to affect the structure
of any function of the body of man or other animals that requires FDA
approval as a drug.
1.7 "Effective Date" means the first date when the University
--------------
and Licensee have executed this Agreement.
1.8 "Federal Government Interest" means the rights, if
---------------------------
applicable, of the United States Government under Public Laws 96-517,
97-256 and 98-620, codified at 35 U.S.C. Paragraphs 200-212, and any
regulations issued thereunder, as such statute or regulations may be
amended from time to time hereafter.
1.9 "Field" means Technical Information, technology and know-
-----
how relating to the protease inhibitors alpha-1 Antichymotrypsin and C-
1 Esterase Inhibitor, and improvements related thereto developed by Dr.
Harvey Rubin and/or any other Investigator, or University laboratory
personnel during the performance of the Collaborative Research
Agreement.
1.10 "Joint Patented Product" means anything which is made, made
----------------------
for, used or sold, which manufacture, use or sale is covered by any
Valid Claim of a Joint Patent in any country.
1.11 "Joint Patents" means patents and patent applications
---------------
together with any and all patents issuing thereupon, continuation,
divisional, and re-issue applications thereof and continuation-in-part
applications thereof claiming inventions within the Field and any
United States or foreign patents granted upon such applications based
upon inventions and improvements discovered or made by Principal
Investigator and/or any other Investigator jointly with one or more
inventors of Licensee, within the Field during the term of this
Agreement or the Collaborative Research Agreement.
1.12 "Licensed Patents" means United States Patent Applications,
------------------
Serial Numbers 370,704, "Alpha-1 Antichymotrypsin Analogues and Methods
of Production and any patent applications filed by the University on C1
Esterase Inhibitors, and related foreign patents and patent
applications, if any, together with any and all patents issuing
thereupon, including continuation, divisional and re-issue application
and continuation-in-part applications
<PAGE>
License Agreement between PI Research Corporation and Penn 4
January 2, 1992
thereof claiming inventions within the Field, and any United States or
foreign patents granted upon such applications based upon inventions
and improvements discovered by University through Dr. Harvey Rubin
and/or any other Investigator or University laboratory personnel within
the Field during the term of this Agreement or as a result of
performance of the Work Scope set forth in the Collaborative Research
Agreement between the parties.
1.13 "Licensed Product(s)" means and includes all products the
---------------------
manufacture, composition, use, sale or other disposition of which (i)
is subject to one or more Valid Claims of a Licensed Patent or (ii) is
subject to one or more Valid Claims of a Joint Patent.
1.14 "Licensed Technology" means the Licensed Patents and the
---------------------
Technical Information.
1.15 "Net Sales Price" means the gross amount charged by
-----------------
Licensee for the sale of a Licensed Product, net of returns and credits
for rejected goods, and after deducting (i) trade, quantity and cash
discounts actually allowed, (ii) sales, use or other similar taxes,
the legal incidence of which is on Licensee, and (iii) freight
allowances, packing charges, insurance and customs duties, to the
extent any of the foregoing are identified on the invoice for the
Licensed Product, and (iv) uncollectible receivables which are past
due 120 days or more. If a Licensed Product is sold for consideration
other than solely cash, the fair market value of such other
consideration shall be included in the Net Sales Price.
1.16 "Person" or "person" means any corporation, partnership,
-------- --------
joint venture or natural person.
1.17 "Principal Investigator" or "Investigators" refers
------------------------ ---------------
respectively to the Principal Investigator Harvey Rubin, M.D., Ph.D.,
Assistant Professor of Medicine at University, and to Investigators
Barry S. Cooperman, Ph.D., Professor of Chemistry, Norman Schechter,
Ph.D., Research Professor of Dermatology and Zai-Mei Wang, Ph.D.,
Research Associate Infectious Diseases, all at University.
1.18 "Sale," "sale" or any variation thereof means the sale,
--------------
assignment, lease or other disposition of a Licensed Product by
Licensee to a non-Affiliate. A Licensed Product shall be deemed to have
been sold for purposes of calculating royalties under Article III
hereof upon the first to occur of the following: (i) the transfer of
title in the Licensed Product from Licensee to a non-Affiliate; or (ii)
shipment of the Licensed Product from the manufacturing facilities of
Licensee to a non-Affiliate.
<PAGE>
License Agreement between PI Research Corporation and Penn 5
January 2, 1992
1.19 "Technical Information" means and includes all technical
-----------------------
information, trade secrets, developments, formulae, processes and other
information developed by Dr. Harvey Rubin and/or other Principal
Investigator that the University owns or possesses and that relates to
the use of alpha-1 Antichymotrypsin and/or C1 Esterase Inhibitor in the
Field, including by way of illustration and not limitation, designs,
data, drawings, documents, models, and other similar information.
"Technical Information" shall exclude any of the foregoing that are
included in a claim of the Licensed Patents.
1.20 "Valid Claim" means a claim of an unexpired Licensed Patent
-------------
that has not been withdrawn, cancelled or disclaimed or held invalid by
a court or governmental authority of competent jurisdiction in an
unappealed or unappealable decision, or a claim of a pending patent
application.
Article II: Grant of License
2.1 Licensed Technology Grant. University grants to Licensee
--------------------------
for the term of this Agreement an exclusive license, with right to
sublicense, to make, use, have made or sell Licensed Products and
products incorporating Technical Information throughout the world,
subject to the terms and conditions herein.
2.2 Exclusive but for Non-Profit Use. The license grant of this
---------------------------------
Article is exclusive but for the reserved right of the University to
use and permit the use of by non-profit organizations, without cost and
in confidence, the Licensed Patents, the Joint Patent Rights, and the
Technical Information solely for educational and research purposes on a
non-commercial basis, subject to the prior written consent of Licensee
for each such use, such consent not to be unreasonably withheld.
2.3 Right to Sublicense. The right to sublicense conferred upon
--------------------
Licensee under this Agreement is subject to the following conditions:
(a) Licensee shall forward to the University, promptly upon
execution, a complete and accurate written copy of each sublicense
granted hereunder.
(b) In each sublicense, the sublicensee shall be prohibited from
further sublicensing and shall acknowledge that it is subject to the
terms and conditions of the License granted to Licensee under this
Agreement.
(c) Notwithstanding any such sublicense, Licensee shall remain
primarily liable to the University for all of the Licensee's duties and
obligations contained in this
<PAGE>
License Agreement between PI Research Corporation and Penn 6
January 2, 1992
Agreement, and any act or omission of a sublicensee which would be a
breach of this Agreement if performed by Licensee shall be deemed to be
a breach by Licensee of this Agreement.
(d) If Licensee becomes subject to a Bankruptcy Event, all payments
then or thereafter due and owing to Licensee from its sublicensees
shall upon notice from the University to any such sublicensee become
payable directly to the University for the account of the Licensee;
provided however, that the University shall remit to Licensee the
amount by which such payments exceed the amounts owed by licensee to
the University.
2.4 No Riqhts by Implication. No rights or licenses with
-------------------------
respect to the Licensed Technology are granted or deemed granted
hereunder or in connection herewith, other than those rights or
licenses expressly granted in this Agreement.
2.5 Federal Government Interest. Licensee acknowledges that in
----------------------------
accordance with the Federal Government Interest, the United States
Government retains certain rights in inventions funded in whole or in
part under any contract, grant or similar agreement with a Federal
agency. The license to the Licensed Technology granted under this
Article II is expressly subject to all such rights.
Article III: Royalties
3.1 License Fee. In consideration of the Assignment Agreement
------------
in Attachment D, Licensee has issued, on the Effective Date of this
Agreement, common shares in the Licensee to the following parties:
(a) To University a grant of [ ] shares subject to the terms
and conditions described in Attachment E ("University Stock Purchase
Agreement"), such shares constituting an [ ] fully
diluted interest in the Licensee at the Effective Date of this
Agreement;
(b) To Dr. Harvey Rubin an opportunity to
purchase [ ] subject to the terms and conditions
as described in Attachment G ("Rubin Stock Agreement) and Attachment H
("Rubin Consultancy Agreement"), such shares
constituting a [ ] fully diluted interest in
the Licensee at the Effective Date of this Agreement;
(c) To Dr. Barry Cooperman, University Professor of Chemistry and
Investigator, an opportunity to purchase
[ ] shares subject to the terms and conditions described in
Attachment I ("Cooperman Stock Agreement") and Attachment
<PAGE>
License Agreement between PI Research Corporation and Penn 7
January 2, 1992
J ("Cooperman Consultancy Agreement"), such shares constituting a
[ ] fully diluted interest in the Licensee as of
the Effective Date of this Agreement;
(d) To Dr. Norman Schechter, University Research Professor of
Dermatology and Investigator, an opportunity to
purchase [ ] shares subject to the terms and conditions
described in Attachment K ("Schechter Stock Agreement") and
Attachment L ("Schechter Consultantancy Agreement") such
shares constituting a [ ] fully
diluted interest in the Licensee as of the Effective Date of this
Agreement;
(e) To Dr. Zhai-Mei Wang, University Research Associate for
Infectious Disease and Investigator an
opportunity to purchase [ ] shares subject to the terms
and conditions described in Attachment M ("Wang Stock
Agreement") and Attachment N ("Wang Consultancy Agreement"), such
shares constituting a [ ] fully diluted interest
in the Licensee as of the Effective Date of this Agreement;
(f) The provisions of this paragraph 3.1 are further accepted by
the Investigators in the letter agreement appearing in Attachment O.
(g) No additional up-front payment or fee upon execution of this
Agreement is due to the University by Licensee.
3.2 Royalties. In consideration of the exclusive Licensed
---------
Technology grant herein, Licensee shall pay royalties to the University
on the following basis:
(a) Licensee shall pay to University a royalty of [ ]
of the Net Sales Price of each Licensed Product sold by Licensee,
and, subject to Section 3.11, such royalty rate shall not be subject
to reduction by Licensee if Licensee must acquire, for any reason,
patent rights from third parties in order to practice Licensed
Technology or sell Licensed Products.
(b) Licensee shall be exempt from the payment of royalties for sale
of products that incorporate Technical Information, provided such
products do not incorporate Licensed Patents. Royalty free sales of
such products incorporating only Technical Information shall not apply
if Licensee, University, Principal Investigators and Investigators
agree in writing that Technical Information disclosed by University to
Licensee, which is otherwise patentable, shall be maintained as a trade
secret. In such
<PAGE>
License Agreement between PI Research Corporation and Penn 8
January 2, 1992
case a product incorporating such trade secret shall bear
the royal described in Section 3.2 herein for the lesser
of [ ] years following first commercial sale of
such product(s), or for as long as such Technical Information is
maintained as a trade secret.
(c) Licensee shall pay to the University the lesser of
[ ] of all royalties, license fees, advances and other
payments (however characterized) received by Licensee pursuant to a
sublicense of any rights granted Licensee hereunder, or [ ]
of such sublicensee's Net Sales for such Licensed Products sold by
such sublicenses. Any noncash consideration received by the Licensee
from sublicensees in lieu of a license fee or on account of sales of
Licensed Product shall be valued at its fair market value as of the
date of receipt. Monies paid to Licensee exclusively to fund research
and development or clinical testing are not subject to any royalty to
the University.
(d) Sales of any Licensed Product shall not be subject to more than
one assessment of the [ ] royalty due University,
regardless of the number of Licensed Patents or Joint Patents, or
uses of Technical Information treated as trade secret, that are
applicable to such Licensed Product.
3.3 Diligence Obligations of Licensee
---------------------------------
(a) In lieu of diligence fees paid to the University, Licensee
agrees to fund, until such time as minimum royalties are due under
Section 3.4 hereunder, development of Licensed Technologies in annual
amounts substantially similar to the annual budgeted amount of the
Collaborative Research Agreement. Such development work may
be funded at the University, in the facilities of the
Licensee, in the facilities of a sublicensee, or in other venue
reasonably capable of conducting such development. Licensee may
employ its own capital, or governmental or commercial contract
revenues in fulfillment of this obligation. Funds expended by a
sublicensee, and appropriately documented and reported, shall also
be applicable to this obligation of Licensee.
(b) In order to fulfill its obligations under 3.3(a) herein through
February 29, 1992, Licenses shall support research at the University
under the terms of the Collaborative Research Agreement and in such
amounts as described in the budget of the Collaborative Research
Agreement.
3.4 Minimum Royalties. Licensee shall pay to Licensor as a
-----------------
nonrefundable advance against royalties during the ensuing year,
minimum annual royalties on the following
<PAGE>
License Agreement between PI Research Corporation and Penn 9
January 2, 1992
dates in the corresponding amounts (the "Minimum Royalties"):
Minimum Royalty Fiscal Year Beginning
$ [ ] July 1, 1997
--
$ [ ] July 1, 1998
--
$ [ ] July 1, 1999
--
$ [ ] July 1 of each fiscal
year thereafter
Minimum royalties shall be available for full credit against Royalties
due under Section 3.2 during the year in which such Minimum Royalties
are paid and during subsequent years until the amount of the credit is
fully used. In any year that a minimum royalty is due, if the Licensee
sponsors research at the University in the Field under the Principal
Investigator during that year, the full amount of research funding paid
may be applied as a credit against minimum royalties due in that year
and in subsequent years until the full amount of credit is fully used.
3.5 Sales to Federal Government. To the extent required by the
---------------------------
Federal Government Interest, sales by Licensee to the United States
Government shall not be subject to royalty.
3.6 Payments. Royalties payable under Section 3.2 hereof shall
--------
be paid within (30) days following the last day of the Calendar Quarter
in which the royalties accrue. After termination of this Agreement, the
final royalty payment shall be made in accordance with the provisions
of Article 9.4 hereof. Payments may be deemed paid as of the day on
which they are received at the account designated pursuant to Article
3.8.
3.7 Reports. Licensee shall deliver to the University within
-------
thirty (30) days after the end of each Calendar Quarter a report,
certified by the chief financial officer of Licensee, setting forth in
reasonable detail the calculation of the royalties payable to the
University for such Calendar Quarter, including, without limitation,
the Licensed Product sold in each country during such Calendar Quarter,
the Net Sales Price thereof, all compensation received from
sublicensees, and the amount of Minimum Royalties available for credit
for the corresponding Calendar Quarter.
3.8 Currency, Place of Payment, Interest.
------------------------------------
(a) All dollar amounts referred to in this Agreement are expressed
in United States dollars. All payments to the University under this
Agreement shall be made in United States dollars (or other legal
currency of the United States) by check payable to "The Trustees of the
University of Pennsylvania."
<PAGE>
License Agreement between PI Research Corporation and Penn 10
January 2, 1992
(b) If Licensee receives revenues from sales of Licensed Products
in a currency other than United States dollars, royalties shall be
converted into United States dollars at the conversion rate for the
foreign currency as published in the Eastern edition of The Wall Street
---------------
Journal as of the last date of the Calendar Quarter. If at any time
--------
legal restrictions prevent the prompt remittance of part or all
royalties by Licensee or any sublicensee with respect to any country
where a Licensed Product is sold, Licensee or such sublicensee shall
have the right and option to make such payments by depositing the
amount thereof in local currency to the University's account in a bank
or other depository in such country; provided, however, that if such
legal restrictions are not removed within one (1) year after the date
such account is established, Licensee shall then remit promptly to the
University an amount in United States dollars equal to the deferred
royalties held in such account. Upon receipt of these deferred
royalties by the University, Licensee shall be entitled to transfer to
its own account all corresponding amounts held on behalf of the
University in the local bank or depository.
(c) Amounts that are not paid when due shall accrue interest from
the due date until paid, at a rate equal to then prevailing prime rate
of interest plus [ ]. The University may treat
unpaid payments as a breach of this Agreement notwithstanding the
payment of interest.
3.9 Records. Licensee will maintain and cause its sublicensees
-------
to maintain, complete and accurate books and record which enable the
royalties payable hereunder to be verified. The records for each
Calendar Quarter shall be maintained for five years after the
submission of each report under Section 3.7 hereof. Upon reasonable
prior notice to Licensee, the University and its accountants shall
have access to the books and records of Licensee and its sublicensees
to conduct a review or audit thereof. Such access shall be available
not more than once each calendar year, during normal business hours,
and for three years after the expiration or termination of this
Agreement. If the University determines that Licensee has underpaid
royalties by 10% or more, Licensee will pay the costs and expenses of
the University's accountant in connection with its review or audit.
3.10 Duration of Royalty Obligations. Except as described in
-------------------------------
Section 3.2(b) herein, Licensee's royalty obligations for a Licensed
Product shall terminate on a [
]
<PAGE>
Licenee Agreement between PI Research Corporation and Penn 11
January 2, 1992
[
]
3.11 Mandatory Licensing. In the event that Licensee is
-------------------
required by judgment, final order, or agreement with a third party to
settle litigation, to acquire one or mere royalty-bearing licenses from
a third party in order to fully exercise in a given country the rights
granted by the University hereunder, then Licensee shall be entitled to
credit an amount equal to [ ] of the royalties
actually paid to such a third party against royalties payable to the
University under Section 3.2 hereof for Licensed Products sold in
that country, provided however that for any calendar quarter such
credits do not exceed [ ] of the royalties
payable to the University in such calendar quarter.
3.12 Cumulative Credits. Under no circumstances shall Licensee
------------------
be entitled to receive credits against royalties payable to the
University under Section 3.2 hereof that, for any Calendar Quarter,
exceed in the aggregate [ ] of the
royalties payable to the University under that section in such
calendar quarter. This provision does not apply to credits under
Sections 3.4 and 7.2(e but otherwise applies to any credit Licensee
may receive without limitation, under Sections 3.11, 6.3 or 7.1(d)
hereof.
3.13 Unlicensed Sales by Third Parties. In the event that the
---------------------------------
total sales of any Licensed Product in any country by unlicensed third
parties, based on bona fide information reporting such revenue by an
unlicensed third party, equals or exceeds [ ] of
the total revenue of Licensee, its Affiliates and its
sublicensees for sale of such Licensed Product in said country,
then the royalty rate provided in Section 3.2 hereof for such
Licensed Product in such country shall be reduced to [ ]
such royalty rate for Calendar Quarters so affected. This provision
shall have no effect if Licensee fails to use reasonable efforts to
terminate such unlicensed sales.
Article IV: Certain Obligations of the Licensee
4.1 Licensee Efforts; Reporting.
---------------------------
(a) Licensee shall use its best efforts to develop
for commercial use and to market Licensed Products as soon as
practicable, consistent with sound and reasonable business practices.
In this connection, the parties acknowledge that the Licensed
Technology has only recently been invented and that substantial
additional effort, expense and time, as well as regulatory approval,
will be required before manufacture and sales of any Licensed Product
will be possible.
<PAGE>
License Agreement between PI Research Corporation and Penn 12
January 2, 1992
(b) Licensee shall provide the University on each June 1 and
December 1 with written reports, setting forth in such detail as the
University may reasonably request, the progress of the development,
evaluation, testing and commercialization of the Licensed Products.
Licensee also shall notify the University within thirty (30) days after
the first commercial sale of a Licensed Product.
4.2 Compliance with Laws.
--------------------
(a) Licensee shall comply with all prevailing
laws, rules and regulations pertaining to the development, testing,
manufacture, marketing and import or export of the Licensed Products.
Without limiting the foregoing, Licensee acknowledges that the transfer
of certain commodities and technical data is subject to United States
laws controlling the export of such commodities and technical data,
including all Export Administration Regulations of the United States
Department of Commerce. These laws and regulations, among other things,
prohibit or require a license for the export of certain types of data
to specified countries. Licensee will comply with all United States
laws and regulations controlling the export of commodities and
technical data, and will be solely responsible for any violation
thereof by License~e of its sublicensees.
(b) To the extent required by the Federal Government Interest, all
Licensed Products to be used or sold in the United States shall be
manufactured substantially in the United States, and Licensee shall
take such actions necessary to assure that it and its sublicensees
comply with the obligations imposed by this Section 4.2(b).
4.3 Government Approvals. Licensee will be responsible for
--------------------
obtaining at its cost and expense, all governmental approval required
to commercially market the Licensed Products.
4.4 Patent Notices, etc. Licensee shall mark the Licensed
-------------------
Products sold in the United States with all applicable patent numbers.
All Licensed Products shipped to and sold/or sold in other countries
shall be marked and labeled in such a manner as to conform with all
applicable laws of the country where the Licensed Products are sold.
4.5 Security Interest. In consideration of the license and
-----------------
other rights granted in this Agreement, Licensee hereby grants to the
University a security interest in any interest Licensee may have in the
Licensed Technology to secure performance of Licensee's obligations
under this Agreement. Upon default by Licensee or if Licensee becomes
subject to a Bankruptcy Event, the University shall have all the rights
and remedies of a secured party under the Uniform Commercial Code.
Licensee shall execute any such instruments
<PAGE>
License Agreement between PI Research Corporation and Penn 13
January 2, 1992
or documents as shall be required to evidence and perfect such security
interest in any jurisdiction.
Article V: Warranties and Representations
5.1 Representations and Warranties of the University. The
------------------------------------------------
University represents and warrants to the Licensee that: (a) this
Agreement, when executed and delivered by the University, will be the
legal, valid and binding obligation of the University, enforceable
against the University in accordance with its terms; (b) the University
has not granted rights in or to the Licensed Technology to any person
other than the Licensee, except to the extent provided by Federal
Government Interest; (c) the University does not have any knowledge
that the Licensed Technology infringes the proprietary rights of any
third party; and (d) the University does not have any knowledge of any
patent or other proprietary technology of the University other than the
Licensed Patents and the Technical Information which would be required
to make, have made, use and sell the Licensed Products and to practice
under the Licensed Technology in connection therewith. However, the
University gives no representation or warranty that any patent within
the Licensed Patents will be granted or, if granted, that any such
patent will be valid. The representations and warranties in clauses
(b), (c), and (d) hereof are to the knowledge of the University, based
upon conversations with certain officials of the University. The
University has made no independent investigation, examination or review
of the matters which are subject to the foregoing representations.
5.2 Representations and Warranties of Licensee.
------------------------------------------
Licensee represents and warrants to the University as follows:
(a) Licensee is a corporation duly organized, validly existing and
in good standing under the laws of Delaware, and has all requisite
corporate power and authority to execute, deliver and perform this
Agreement;
(b) this Agreement, when executed and delivered by Licensee, will
be the legal, valid and binding obligation of Licensee, enforceable
against Licensee in accordance with its terms; and,
(c) the execution, delivery and performance of this Agreement by
Licensee does not conflict with, or constitute a breach or default
under, (i) the charter documents of Licensee, (ii) any law, order,
judgment or governmental rule or regulation applicable to Licensee, or
(iii) any provision of any material agreement, contract, commitment or
instrument to which Licensee is a party; and the execution, delivery
and performance of this Agreement by Licensee does not require the
consent, approval or
<PAGE>
License Agreement between PI Research Corporation and Penn 14
January 2, 1992
authorization of, or notice, declaration, filing or registration with,
any governmental or regulatory authority.
Article VI:Limitation on Liability and Indemnification
6.1 No Warranties; Limitation on Liability. EXCEPT AS
--------------------------------------
EXPLICITLY SET FORTH IN SECTION 5.1 HEREOF, THE LICENSED TECHNOLOGY IS
PROVIDED ON AN "AS IS" BASIS AND THE UNIVERSITY MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE
LICENSED TECHNOLOGY OR THE LICENSED PRODUCTS. BY WAY OF EXAMPLE BUT NOT
OF LIMITATION, THE UNIVERSITY MAKES NO REPRESENTATIONS OR WARRANTIES
(i) OF COMMERCIAL UTILITY, (ii) OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR (iii) THAT THE USE OF THE LICENSED TECHNOLOGY
WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR OTHER
PROPRIETARY RIGHT OR PROPERTY RIGHTS OF OTHERS. THE UNIVERSITY SHALL
NOT BE LIABLE TO LICENSEE, LICENSEE'S SUCCESSORS OR ASSIGNS OR ANY
THIRD PARTY WITH RESPECT TO ANY CLAIM ON ACCOUNT OF, OR ARISING FROM,
THE USE OF INFORMATION IN CONNECTION WITH THE LICENSED TECHNOLOGY
SUPPLIED HEREUNDER OR THE MANUFACTURE, USE OR SALE OF LICENSED PRODUCTS
OR ANY OTHER MATERIAL DERIVED THEREFROM. THE UNIVERSITY SHALL NOT BE
LIABLE TO LICENSEE OR ANY OTHER PERSON FOR ANY LOSS OF PROFITS, LOSS OF
BUSINESS OR INTERRUPTION OF BUSINESS, OR FROM ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND INCURRED BY LICENSEE OR ANY OTHER
PERSON WHETHER UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF THE
UNIVERSITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS.
6.2 Licensee Indemnification. Licensee will defend, indemnify
------------------------
and hold harmless the University, its trustees, officers, faculty,
agents and employees, and students (collectively, the "Indemnified
Parties") from and against any and all liability, loss, damage, action,
claim or expense suffered or incurred by the Indemnified Parties
(including reasonable attorney's fees) (individually, a "Liability"
and collectively, the "Liabilities") which results from or arises out
of (a) the development, use, manufacture, promotion, sale, or other
disposition of the Licensed Technology and any Licensed Products, or
information, results or inventions arising from the Collaborative
Research Agreement by Licensee, its Affiliates, assignees,
sublicenses, vendors or other third parties; (b) breach by Licensee
of any covenant or agreement contained in this Agreement or the
Collaborative Research Agreement; (c) Licensee's use of the Research
Inventions or any results of the Collaborative Research conducted
under the Collaborative Research Agreement and (d) the successful
enforcement by an Indemnified Party of its rights under this Section
6.2. Without limiting the foregoing, Licensee will indemnify and hold
harmless the Indemnified Parties from and against any Liabilities
resulting from:
<PAGE>
License Agreement between PI Research Corporation and Penn 15
January 2, 1992
(i) any product liability or other claim of any kind related to the
use by a third party of a Licensed Product that was manufactured, sold
or otherwise disposed of by Licensee, its Affiliates, assignees,
sublicensees, vendors or other third parties;
(ii) a claim by a third party that the Licensed Technology or the
design, composition, manufacture, use, sale or other disposition of any
Licensed Product infringes or violates any patent, copyright, trademark
or other intellectual property rights of such third party; and
(iii) clinical trials or studies conducted by or on behalf of
Licensee relating to the Licensed Products, including, without
limitation, any claim by or on behalf of a human subject of any such
clinical trial or study, any claim arising from the procedures
specified in any protocol used in any such clinical trial or study, any
claim or deviation, authorized or unauthorized, from the protocols of
any such clinical trial or study, and any claim resulting from or
arising out of the manufacture or quality control by a third party of
any substance administered in any clinical trial or study.
6.3 Procedures. The Indemnified Party shall promptly notify
----------
Licensee of any claim or action giving rise to a Liability subject to
the provisions of Section 6.2. Licensee shall have the right to defend
any such claim or action, at its cost and expense. Licensee shall not
settle or compromise any such claim or action in a manner that imposes
any restrictions or obligations on the University or grants any rights
to the Licensed Technology, without the University's written consent
which consent shall not be unreasonably withheld. If Licensee fails or
declines to assume the defense of any such claim or action within
thirty (30) days after notice thereof, the University may assume the
defense of such claim or action for the account and at the risk of the
Licensee. Licensee shall pay promptly to the Indemnified Party any
Liabilities to which the foregoing indemnity relates, as incurred. The
indemnification rights of the University or other Indemnified Party
contained herein are in addition to all other rights which such
Indemnified Party may have at law or in equity or otherwise.
Notwithstanding the foregoing, in the event of settlement, judgment or
other final resolution of a claim by a third party under Section 6.2
(ii) hereof requiring Licensee to pay royalties to such third party for
Licensed Products sold in a given country, Licensee shall have the
right to credit the full amount of such payment against the royalties
payable to the University under Section 3.2 for sales of Licensed
Products in such country, provided however, that for any calendar
quarter such credits do not exceed fifty percent (50%) of the royalties
payable to the University in
<PAGE>
License Agreement between PI Research Corporation and Penn 16
January 2, 1992
such Calendar Quarter. Unused credits may be applied in subsequent
quarters until the credit is fully used.
6.4 Product Liability Insurance. Beginning with the
---------------------------
commencement of human clinical trials and, for ten (10) years after
Licensee ceases manufacturing and marketing the Licensed Products,
Licensee shall maintain general and product liability insurance in
amounts not less than $2,000,000 per incident and $2,000,000 in the
aggregate, issued by an insurance company rated A or better and naming
the University as an additional insured. The minimum insurance amounts
specified herein shall not be deemed a limitation on Licensee's
indemnification liability under this Agreement. Licensee shall provide
the University with copies of the endorsements to such policies, upon
request of the University. Licensee shall notify the University at
least thirty (30) days prior to cancellation of any such coverage. The
University shall receive a royalty on any insurance award constituting
compensation to Licensee for lost profits on the sale of Licensed
Products.
Article VII: Patents and Infringement
7.1 Prosecution of Patents.
----------------------
(a) The University shall be responsible for and
shall control the preparation, prosecution and maintenance, both
domestic and foreign, of the Licensed Patents and any other rights
included in the Licensed Technology. Licensee shall have the right, at
its own expense, to review and comment upon all patent filings, office
actions and related submissions within such time limits as University
shall reasonably impose in any given instance. Licensee shall reimburse
the University for all documented expenses (including legal fees,
filing and maintenance fees or other governmental charges) incurred
subsequent to the Effective Date of this Agreement in connection with
the filing, prosecution and maintenance of the Licensed Patents or
other Licensed Technology.
(b) Licensee and the University shall mutually determine the
countries, both domestic and foreign, where the Licensed Patents will
be prosecuted and maintained. If Licensee declines to pay for patent
preparation and filing, prosecution and maintenance costs in any
jurisdiction, the University may do so at its cost and expense but such
patents shall be excluded from the definition of Licensed Patents.
(c) If the University elects not to file, prosecute or maintain any
patent or patent application included in the Licensed Patents, it shall
notify Licensee at least sixty (60) days prior to taking, or not
taking, any action which would result in abandonment, withdrawal, or
lapse of such patent or patent application. Licensee shall
<PAGE>
License Agreement between PI Research Corporation and Penn 17
January 2, 1992
then have the right to file, prosecute or maintain the patent or patent
application.
(d) Licensee may credit against running royalty payments due under
Section 3.2 herein one hundred percent (100%) of any amount reimbursed
to University or paid directly by Licensee for the filing, prosecution
or maintenance of Licensed Patents in the United States or other
foreign jurisdictions. Such credits are subject to the limitations of
Section 3.12, but Licensee may apply unused credits from quarter to
quarter until such credits are used.
(e) Each party shall cooperate with the other party to execute all
lawful papers and instruments and to make all rightful oaths and
declarations as may be necessary in the preparation and prosecution of
all such patents and other applications and protections referred to in
this Section 7.1.
7.2 Ownership. The University shall retain all right, title and
---------
interest in and to the Licensed Patents or other Licensed Technology.
Licensee shall have the right, but not the obligation, to enforce the
Licensed Patents and to prosecute any infringement of the Licensed
Patents at its own expense. In such an event, the University shall
cooperate with Licensee, at Licensee's expense. Licensee shall not
settle or compromise any such suit in a manner that imposes any
obligations or restrictions on the University or grants any rights to
the Licensed Technology, without the University's written consent which
consent shall not be unreasonably withheld.
(b) If Licensee fails to prosecute such infringement within ninety
(90) days after receiving notice thereof, the University shall have the
right, but not the
-
obligation, to prosecute such infringement at its own expense. In such
event, Licensee shall cooperate with the University, at the
University's expense.
(c) Any recovery obtained by the prosecuting party as a result of
such proceeding, by settlement or otherwise, shall be applied first to
reimburse the expenses of the litigation, dollar for dollar, incurred
by each of the Licensee or the University, if the University has
incurred such expenses as prosecuting party or has been subject to
royalty credits under 7.2(e) herein. Three-fourths of any remaining
funds shall be paid to the prosecuting party, and one-fourth to the
other party, be it the Licensee or the University as the case may be.
(d) In the event that a claim or suit is asserted or brought
against Licensee that the manufacture or sale of the Licensed Product
by Licensee or its Affiliates,
<PAGE>
License Agreement between PI Research Corporation and Penn 18
January 2, 1992
subsidiaries, or sublicensees, or the use of the Licensed Product by
any customer of the foregoing entities infringes a patent or patents of
a third party, Licensee shall give written notice of such claim or suit
to the University. Licensee may in its sole discretion decide to change
or modify the Licensed Product to avoid such infringement or, if no
such change is made, to settle on terms that Licensee deems in its sole
discretion right and proper, subject to subsection (g) below.
Otherwise, Licensee shall have the right, but not the obligation, to
defend any such claims or suit for infringement brought against it by
the third party and if required by law or if requested by University,
to join University as a party defendant. In the event Licensee elects
not to defend such claim or suit, the University shall have the option
to defend such claim or suit.
(e) In the event Licensee (i) initiates an action to enforce
Licensed Patents or (ii) defends a suit for infringement, Licensee may
credit against royalties due under this Agreement an amount equal to up
to fifty percent(50%) of expenses incurred but not recovered in
bringing such action or defending such suit. Licensee will make an
accounting of all such expenses as part of its reporting obligations
under Article 3. The limitations on the use of royalty credits as
described in Paragraph 3.12 shall not apply to credits granted under
7.2(e) herein. Unused credits in any given Calendar Quarter may be
carried into subsequent quarters until all credits are used.
(f) Licensee shall have the sole right in accordance with the terms
and conditions herein to sublicense any alleged infringer of the
Licensed Patents to prevent future infringements. Amounts received from
any such sublicensee constituting retroactive royalties shall be
considered amounts received in settlement and accounted for under
Section 7.2(c) above. Otherwise, amounts received from such sublicensee
shall be treated as sublicense revenues under Section 3.2(c) above.
(g) Licensee shall not compromise or settle any claim or action in
any manner that would affect the rights of the University without the
consent of the University. The University shall not compromise or
settle any claim or action in any manner that would affect the right of
the Licensee without the consent of Licensee.
(h) Nothing contained in this Section 7.2 shall be deemed to limit
in any way Licensee's indemnification obligations under Sections 6.2
and 6.3 of this Agreement.
7.3 Certain Notices. Licensee shall notify the University at
---------------
least sixty (60) days before the Licensee uses or exports the Licensed
Technology or any Licensed Product in or to any country outside of the
United States, to allow
<PAGE>
License Agreement between PI Research Corporation and Penn 19
January 2, 1992
the University to make any patent filings or to take other actions
necessary to protect the Licensed Technology.
Article VIII: Confidentiality
Confidentiality.
---------------
(a) During the term of this Agreement and for a
period of thereafter, Licensee and its
sublicensees shall maintain in confidence and shall not disclose to
any third party the Confidential Information received pursuant to the
Agreement, without the prior written consent of the University. The
foregoing obligation shall not apply to:
(i) information that is known to Licensee or independently
developed by Licensee prior to the time of disclosure, in each case, to
the extent evidenced by written records promptly disclosed to the
University upon receipt of the Confidential Information;
(ii) information disclosed to Licensee by a third party that has a
right to make such disclosure;
(iii) information that becomes patented, published or otherwise
part of the public domain as a result of acts by the University or a
third person obtaining such information as a matter of right; or
(iv) information that is required to be disclosed by order of the
U.S. Food and Drug Administration or similar authority or a court of
competent jurisdiction; provided that the parties shall use their best
efforts to obtain confidential treatment of such information by the
agency or court.
(b) Licensee will take all reasonable steps to protect the
Confidential Information of the University with the same degree of care
Licensee uses to protect its own confidential or proprietary
information. Without limiting the foregoing, Licensee shall ensure that
all of its employees having access to the Confidential Information of
the University are obligated to abide by Licensee's obligations
hereunder.
(c) The University shall not be obligated to accept any
Confidential Information of the Licensee. If Licensee desires to
furnish any such Confidential Information to any University personnel,
Licensee may request such individual to sign a confidentiality
agreement with Licensee in the form of Attachment 3 to Attachment F
hereto. The University bears no institutional responsibility
<PAGE>
License Agreement between PI Research Corporation and Penn 20
January 2, 1992
for maintaining the confidentiality of any Confidential Information of
Licensee.
8.2 Publication.
-----------
(a) Licensee acknowledges that the basic
objective of research and development activities of the University is
the generation of new knowledge and its expeditious dissemination. To
further that objective, the University retains the right, at its
discretion, to demonstrate, publish or publicize a description of the
Licensed Technology and any results of research conducted by the
University with the Licensed Technology, subject to the provisions of
clauses (b) and (c) below.
(b) Should the University desire to disclose publicly, in writing
or by oral presentation, Confidential Information related to the
Licensed Technology for which a patent application has not been filed,
the University shall notify Licensee in writing of its intention at
least thirty (30) days before submission of such material that would
make such disclosure. The University shall include with such notice a
description of the oral presentation or, in the case of a manuscript or
other proposed written disclosure, a current draft of such written
disclosure. Licensee may request the University, no later than thirty
(30) days following the receipt of the University's notice, to file a
patent application, copyright or other appropriate form of intellectual
property protection related to the information to be disclosed. All
such filings shall be subject to the provisions of Section 7.1 of this
Agreement. Upon receipt of such request, the University shall arrange
for a short delay in publication, not to exceed sixty (60) days, to
permit filing of a patent or other application by the University, or if
the University declines to file such application, to permit Licensee to
make such a filing. If University receives no such request from
Licensee to delay submission of material making such disclosure,
University may submit such material for publication or presentation
provided that University first confirms in a reasonable way that
Licensee has received and reviewed such materials.
(c) If the University desires to demonstrate, publish or publicize
Confidential Information related to the Licensed Technology that is not
patentable in the United States, and Licensee objects to such proposed
disclosure within the time period specified in clause (b) above, the
parties will negotiate in good faith to determine whether the proposed
disclosure can be modified or withheld, consistent with the objectives
of each party. In no event shall the University be prohibited from
proceeding with any such publication.
Use of Name. Nothing contained in this Agreement shall be construed
-----------
as conferring any right to use any name,
<PAGE>
License Agreement between PI Research Corporation and Penn 21
~
January 2, 1992
trade name, trademark, or other designation of either party hereto
(including any contraction, abbreviation or simulation of any of the
foregoing), or the name of any trustee, director, officer or employee
thereof, without the express prior written approval of the affected
party, except where, upon advice of counsel, such use is required to
comply with any law or regulation of a governing body having
jurisdiction over a party or over the making, using or selling of a
Licensed Product. Each party hereto further agrees not to use or refer
to this Agreement or any license granted hereunder in any promotional
activity associated with Licensed Products, without the express prior
written approval of the other party.
Article IX: Term and Termination
9.1 Term. This Agreement and the license granted herein shall
----
commence on the date first set forth above and shall continue, subject
to earlier termination under Sections 9.2 or 9.3 hereof,
9.2 Termination by the University.
-----------------------------
(a) Upon the occurrence of any of the events set
forth below ("Events of Default"), the University shall have the right
to terminate this Agreement by giving written notice of termination,
such termination effective as described in each event:
(i) nonpayment of any amount payable to the
University that is continuing calendar days
after the University gives licensee written notice of such
nonpayment;
(ii) breach by Licensee of any covenant (other than a payment
breach referred to in clause (i) above) or any representation or
warranty contained in this Agreement that is continuing calendar days
after the University gives Licensee written notice of such breach;
notwithstanding the foregoing, if Licensee violates the laws,
regulations or other legal authority in any jurisdiction relating to
the development, use, storage, or marketing of the Licensed Products in
a way that the University deems in its reasonable judgment to
constitute a public safety or health hazard, the University may
immediately terminate the license hereunder in the applicable
jurisdiction, but the remainder of the Agreement shall continue in all
other jurisdictions.
(iii) Licensee fails to comply with the terms of the license
granted under Section 2.1 hereof and such noncompliance is continuing
calendar days
<PAGE>
License Agreement between PI Research Corporation and Penn 22
January 2, 1992
after the University gives Licensee notice of such noncompliance;
(iv) Licensee becomes subject to a Bankruptcy Event;
(v) the dissolution or cessation of operations by Licensee.
(b) No exercise by the University of any right of termination shall
constitute a waiver of any right of the University for recovery of any
monies then due to it hereunder or any other right or remedy the
University may have at law or under this Agreement.
9.3 Termination by Licensee. Licensee shall have the right to
-----------------------
terminate this Agreement, at any time and with or
without cause, written notice to the University.
9.4 Rights and Duties Upon Termination. Within thirty (30) days
----------------------------------
after termination of this Agreement, each party shall return to the
other party any Confidential Information of the other party. Licensee
shall provide the University with a written inventory of all Licensed
Products in process of manufacture or in stock, and Licensee (and its
Affiliates and sublicensees) shall have the privilege of disposing of
such Licensed Products in process of manufacture or in stock at the
time notice of termination is served, provided, however, that Licensee
shall pay royalties on any Net Sales of such Licensed Products at the
rate and at the time herein provided and shall render reports thereon
in the manner herein provided.
9.5 Sublicenses. Any sublicense granted by Licensee under
-----------
Sections 2.1 and 2.3 of this Agreement may survive termination in
accordance with the terms of such sublicense, provided however, that
such sublicensee becomes the direct licensee of the University.
9.6 Provisions Surviving Termination. Licensee's obligation to
--------------------------------
pay any royalties accrued but unpaid prior to termination of this
Agreement shall survive such termination. In addition, Sections 2.5,
3.8, 3.9, 7.1, 7.2, 8.1. 8.3, 9.4, 9.5, 9.6, 9.7, 10.1, 10.5 and
Articles 5 and 6 and any other provisions required to interpret the
rights and obligations of the parties arising prior to the termination
date shall survive expiration or termination of this Agreement.
9.7 Notification and Authorization under Drug Price Competition
-----------------------------------------------------------
and Patent Term Restoration.
---------------------------
(a) The University shall notify Licensee of (i) the issuance of
each U.S. patent included within the
<PAGE>
License Agreement between PI Research Corporation and Penn 23
~a January 2, 1992
Licensed Patents, giving the date of issue and patent number for each
such patent, and (ii) each notice pertaining to any patent included
within the Licensed Patents which it receives as patent owner pursuant
to the Drug Price Competition and Patent Term Restoration Act (the
"Act"), including but not necessarily limited to notices pursuant to
section 101 and 103 of the Act from persons who have filed an
abbreviated NDA or a "paper" NDA. Such notices shall be given promptly,
but in any event within ten (10) days of each such patent's date of
issue or receipt of each such notice pursuant to the Act, whichever is
applicable.
(b) The University hereby authorizes Licensee to include in any NDA
for a Licensed Product, as Licensee may deem appropriate under the Act,
a list of patents included within the Licensed Patents identifying the
University as patent owner that relate to such Licensed Product and
such other information as is required to be filed pursuant to the Act.
The University agrees as patent owner under the Act to apply for an
extension of the term of any patent included within the Licensed
Patents, as patent owner under the Act, upon request by and at the
expense of Licensee. The University also agrees to execute such
documents and take such additional action as the U.S. Patent and
Trademark Office or U.S. Food and Drug Administration may require in
connection therewith; provided however, that the University's costs in
connection with this Section 9.7 are reimbursed by Licensee.
Article X: Additional Provisions
10.1 Arbitration.
-----------
(a) All disputes arising between the University
and Licensee under this Agreement shall be settled by arbitration
conducted in the English language in accordance with the Commercial
Arbitration Rules of the American Arbitration Association relating to
voluntary arbitrations with a panel of three arbitrators. The parties
will cooperate with each other in causing the arbitration to be held in
as efficient and expeditious a manner as practicable. Any arbitration
proceeding instituted by either party under this Agreement shall be
brought in Philadelphia, Pennsylvania.
(b) Any award rendered by the arbitrators shall be final and
binding upon the parties hereto. Judgment upon the award may be entered
in any court of record of competent jurisdiction. Each party shall pay
its own expenses of arbitration and the expenses of the arbitrators
shall be equal shared unless the arbitrators assess as part of their
award all or any part of the arbitration expenses of one party
(including reasonable attorneys' fees) against the other party.
<PAGE>
License Agreement between PI Research Corporation and Penn 24
January 2, 1992
10.2 Assignment. No rights hereunder may be assigned by the
----------
Licensee directly, unless by merger or acquisition of Licensee, without
the express written consent of the University; provided, however, that
Licensee may assign the same to an Affiliate that assumes all
obligations of Licensee under this Agreement or to any entity in
connection with any merger, acquisition or sale of all or
substantially all of its business relating to the Licensed
Products. Any prohibited assignment of this Agreement or rights
hereunder shall be null and void. No assignment shall relieve
Licensee of-responsibility for the performance of any accrued
obligations which it has prior to such assignment less the
University consents in writing to the release of such accrued
obligations. This agreement shall inure to the benefit of
permitted assigns of Licensee.
10.3 No Waiver. A waiver by either party of a breach or
---------
violation of any provision of this Agreement will not constitute or be
construed as a waiver of any subsequent breach or violation of that
provision or as a waiver of any breach or violation of any other
provision of this Agreement.
10.4 Independent Contractor. Nothing herein shall be deemed to
----------------------
establish a relationship of principal and agent between the University
and Licensee, nor any of their agents or employees for any purpose
whatsoever. This Agreement shall not be construed as constituting the
University and Licensee as partners, or as creating any other form of
legal association or arrangement which could impose liability upon one
party for the act or failure to the act of the other party.
10.5 Notices. Any notice under this Agreement shall be
-------
sufficiently given if sent in writing by prepaid, first class,
certified or registered mail, return receipt requested, addressed as
follows:
if to the University, to:
University of Pennsylvania Center for Technology
Transfer 133 South 36th Street, Suite 419
Philadelphia, PA 19104
Attn: Director
with copy to:
Office of the General Counsel University of Pennsylvania
110 College Hall
Philadelphia, PA 19104
Attn: General Counsel
<PAGE>
License Agreement between PI Research Corporation and Penn 25
January 2, 1992
if to Licensee, to:
PI Research Corporation c/o Mr. Robert Kunze
Hambrecht & Quist Life Science
Venture Partners One Bush Street
San Francisco, CA 94104
Attn: Chief Executive Officer
with copy to:
Hambrecht & Quist Life Science
Venture Partners One Bush Street
San Francisco, CA 94104
Attn: Mr. Robert Kunze
with copy to:
Cooley Godward Castro Huddleson & Tatum One Maritime
Plaza, 20th Floor San Francisco, CA 94111
Attn: Kenneth L.Guernsey, Esq.
or to such other addresses as may be designated from time to time by
Notice given in accordance with the terms of this Section.
10.6 Entire Agreement. This Agreement embodies the entire
----------------
understanding between the parties relating to the subject matter hereof
and supersedes all prior understandings and agreements, whether written
or oral. This Agreement may not be varied except by a written document
signed by duly authorized representatives of both parties.
10.7 Severability. Any of the provisions of this
------------
Agreement which are determined to be invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability in such jurisdiction, without rendering invalid or
unenforceable the remaining provisions hereof or affecting the validity
or unenforceability of any of the terms of this Agreement in any other
jurisdiction.
10.8 Headings. Any headings and captions used in this Agreement
--------
are for convenience or reference only and shall not affect its
construction or interpretation.
10.9 No Third Party Benefits. Nothing in this Agreement, express
-----------------------
or implied, is intended to confer on any person other than the parties
hereto or their permitted assigns, any benefits, rights or remedies.
<PAGE>
License Agreement between PI Research Corporation and Penn 26
January 2, 1992
10.10 Governing Law. This Agreement shall be construed,
-------------
governed, interpreted and applied in accordance with the laws of the
State of Delaware, without giving effect to conflict of law provisions.
10.11 Counterparts. This Agreement shall become binding
------------
when any one or more counterparts hereof, individually or taken
together, shall bear the signatures of each of the parties hereto. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed as original as against the party whose signature
appears thereon, but all of which taken together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
License Agreement as of the date first above written.
For The Trustees of the For PI Research Corporation
University of Pennsylvania
/s/ Stephen M. Sammut /s/ Robert Kunze
--------------------------- ---------------------------
Stephen M.Sammut Robert Kunze
Director, Center for Chairman
Technology Transfer
Agreed to and Acknowledged:
/s/ Harvey Rubin /s/ Barry Cooperman
------------------------- -----------------------
Dr. Harvey Rubin Dr. Barry Coopenman
Principal Investigator Investigator
/s/ Norman Schechter /s/ Zhai-Mei Wang
------------------------- ------------------------
Dr. Norman Schechter ~Dr. Zhai-Mei Wang
Investigator Investigator
<PAGE>
Attachment A: Protatek Cooperative Research Agreement
of 10/1/87 ("Protatek CRA")
<PAGE>
Cooperative Research
Agreement Between
University of Pennsylvania
and Protatek International
<PAGE>
Table of Contents
Article 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Field of the Agreement . . . . . . . . . . . . . . . . . . . 1
1.2 Sponsored Research . . . . . . . . . . . . . . . . . . . . . 1
1.3 The General Research . . . . . . . . . . . . . . . . . . . . 1
1.4 Specific Research . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Proprietary Information . . . . . . . . . . . . . . . . . . . 1
1.6 Confidential Information . . . . . . . . . . . . . . . . . . 1
1.7 Invention . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Patent Expenses . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Principal Investigators . . . . . . . . . . . . . . . . . . . 2
Article 2. Sponsored Research . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Sponsored Research will consist of both the General
Research protocol and Specific Research projects . . . . . . . 2
Article 3. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Protatek agrees to pay to PENN . . . . . . . . . . . . . . . 2
3.2 PENN is under no obligation to fund . . . . . . . . . . . . . 2
3.3 When three or more Research Projects . . . . . . . . . . . . 2
Article 4. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article 5. Publication . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 PENN retains the right to publish the results. . . . . . . . . 3
5.2 All publications will be treated as invention disclosures. . . 3
5.3 PENN agrees to use its best efforts in its publications not
to jeopardize . . . . . . . . . . . . . . . . . . . . . . . . 3
Article 6. Handling of Confidential Information . . . . . . . . . . . . 3
6.1 Each party to this agreement will handle . . . . . . . . . . 3
6.2 In order to minimize the potential . . . . . . . . . . . . . 3
6.3 Such obligations of confidentiality and limited use . . . . . 3
Article 7. Title to Inventions ..........................................
Article 8. Patent Applications and Expenses . . . . . . . . . . . . . . 4
. 8.1 Control of the preparation. . . . . . . . . . . . . . . . . 4
8.2 All expenses . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 9. Transfer of Rights to Commercialize Intellectual Property
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
9.1 From time 10 time, the results of the General
Research . . . . . . . . . . . . . . . .. . . . . . . . . 4
9.1.1 The Research Results are of no interest to
Protatek . . . . . . . . . . . . . . . . . . . . 4
9.1.2 The Research Results are insufficient to
support a viable patent . . . . . . . . . . . . . . . . . . 4
9.1.3 The Research Results can be demonstrated
to have been previously known . . . . . . . . . . . . . . . 4
<PAGE>
9.1.4 The Research Results are of commercial
interest to Protatek . . . . . . . . . . . . 5
9.2 If the Research Results are insufficiently described or
incomplete . . . . . . . . . . . . . . . . . . . . . . 5
9.3 If Protatek should elect not to file a patent application 5
9.4 PENN hereby grants and Protatek hereby accepts . . . . . .5
9.5 Should Protatek and PENN fail to reach agreement
regarding the terms . . . . . . . . . . . . . . . . . . 5
Article 10. Term and Termination . . . . . . . . . . . . . . . . . 6
10.1 The intent of the parties . . . . . . . . . . . . . . . 6
10.2 Should either party to this agreement be at fault. . . . 6
10.3 Protatek may terminate this agreement . . . . . . . . . 6
10.4 PENN may terminate this Agreement . . . . . . . . . . . 6
10.5 Surviving termination . . . . . . . . . . . . . . . . . 6
Article 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . 6
11.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . 6
------
11.2 Use of name . . . . . . . . . . . . . . . . . . . . . . 7
-----------
11.3 Scope . . . . . . . . . . . . . . . . . . . . . . . . 7
-----
11.4 Assignability . . . . . . . . . . . . . . . . . . . . . 7
-------------
11.5 Venue . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----
IN WITNESS WHEREOF . . . . . . . . . . . . . . . . . . 7
<PAGE>
THIS AGREEMENT, effective the 1st day of August 1988, is by and
between The Trustees of The University of Pennsylvania, with offices at
133 South 361h Street Philadelphia, PA 19104 ("PENN"), and Protatek
International, Inc with offices in Minneapolis, MN 55108 ("Protatek").
WHEREAS, Dr. Harvey Rubin and Dr. Barry S. Cooperman, faculty
members of the PENN are interested in studying Protease Inhibitors, and
WHEREAS, Protatek is interested in such research and wishes to
commercially develop and exploit the results of such research for the
good of mankind; and
WHEREAS, PENN has determined that the research program contemplated
by this Agreement furthers the educational, scholarship and research
objectives of PENN as a nonprofit tax-exempt educational institution;
NOW, THEREFORE be it agreed among the parties as follows:
Article 1. Definitions.
1.1 Field of the Agreement means research related to, the production
of, or any application of Protease Inhibitors derived from
peptides or compounds, methods, know-how, or improvements
derived therefrom.
1.2 Sponsored Research means research performed at PENN with the
support of Protatek in one or both of two categories: (1)
General Research in the Field of the Agreement; and (2) Specific
Research directed at potential products and applications of
compounds and their derivatives in the Field of the Agreement
which may result from General Research.
1.3 The General Research protocol and budget is described in
Attachment A and is included herein by reference.
1.4 Specific Research projects may be defined and included in this
document as addendum labeled "Addendure SRP - n" (where n is the
number of the addendum).
1.5 Proprietary Information means any information, idea or concept
which has been learned or developed by one party without the aid
of the other party and which is not generally available to the
public.
1.6 Confidential Information means Proprietary lnformation or
information developed as unpublished results of Sponsored
Research and is marked as such. Excluded from Confidential
Information is any information which:
1.6.1 is within or comes within the public knowledge (but
only when it so becomes), or
1
<PAGE>
1.6.2 developed independently by either party to this
agreement outside of the scope of this Agreement,
or
1.6.3 revealed to either party by third parties authorized to
reveal such information and under no obligation of
confidentiality to either party to this agreement.
1.7 Invention means any idea, improvement, or enhancement, whether
patentable or not, which results from Sponsored Research.
1.8 Patent Expenses means all out-of-pocket expenses directly related
to the preparation, filing, prosecution and issuance of any
domestic or foreign patent application(s) covering Inventions.
1.9 Principal Investigators means-Dr. Rubin and/or Dr. Cooperman or
should the services of either of these two not be available to
PENN for any reason, any replacement whom PENN can offer who is
acceptable to Protatek as indicated in writing, within sixty
(60) days after the unavailability of either original Principal
Investigator.
Article 2. Sponsored Research.
2.1 Sponsored Research will consist of both the General Research
protocol and Specific Research projects as dictated by General
and/or Specific Research results and as agreed to between the
parties in writing. Once executed by both parties in writing,
such Specific Research Project Addenda will be included as
integral parts of this document. The Specific Research protocols
and budgets as outlined in the Addenda may draw funds and
research time away from the General Research protocol, or they
may involve additional resources in terms of time and funding as
agreed to by the parties.
Article 3. Payment.
3.1 Protatek agrees to pay to PENN certain moneys in order to
partially defray the cost to PENN of the Sponsored Research.
The schedule of payments for moneys to be paid by Protatek to
PENN are contained in the Attachment B to this document which
is included herein by reference and which may be amended from
time to time by mutual written agreement between the parties.
3.2 PENN is under no obligation to fund any of the Sponsored
Research.
3.3 When three or more Research Projects are defined and have not
been terminated, Protatek agrees to pay PENN an additional per
year for administration of intellectual property rights.
2
<PAGE>
Article 4. Reports.
4.1 Principal Investigators will generally administer and supervise
the Sponsored- Research, and will submit annual written
scientific reports.
Article 5. Publication.
5.1 PENN retains the right to publish the results of Sponsored
Research in scholarly journals and meetings, subject to the
provisions of this Article and Article 6.
5.2 All publications will be treated as invention disclosures for the
purposes of review by Protatek for the potential disclosure of
patentable inventions. Copies of all proposed publications or
abstracts which result from Sponsored Research will be sent to
Protatek at least forty-five (45) days in advance of the expected
publication or presentation date. Should Protatek believe that
such publication or abstract would constitute the disclosure of
patentable material, Protatek will promptly notify PENN in writing
of the relevant material, and PENN will delay publication or
presentation of such article or abstract until either (a) a U.S.
patent application has been filed, or (b) the relevant material
has been sufficiently deleted from the proposed publication or
abstract so as not to present an obvious public disclosure of
patentable material. However, in no event will the requirements of
(a) or (b) above be allowed to take longer than one hundred twenty
(120) days.
5.3 PENN agrees to use its best efforts in its publications not to
jeopardize the commercial value of the results of Sponsored
Research and will bear in mind the editorial comments of
Protatek regarding disclosure of non-patentable material and
potential trade secrets.
Article 6. Handling of Confidential Information.
6.1 Each party to this agreement will handle the other party's
confidential information with the same degree of security and
confidentiality with which it maintains its own confidential
information, and will not use such information for any commercial
purpose without first obtaining license from the owning party.
6.2 In order to minimize the potential for accidental disclosure of
Confidential Information, neither party will give the other party
any Confidential Information which is not essential to the
performance of the Supported Research. Further, any party
receiving Confidential Information retains the right to refuse to
accept Confidential Information which it feels is not essential to
the Supported Research.
6.3 Such obligations of confidentiality and limited use of
information shall be maintained for a minimum of from the date
of receipt of any Confidential Information by either party.
3
<PAGE>
Article 7. Title to Inventions.
7.1 Title to any Inventions made by personnel employed by Protatek
will belong to Protatek. Title to any Inventions made by
personnel employed by PENN will belong to PENN. Title to
Inventions made jointly by personnel employed by Protatek and
personnel employed by PENN will belong jointly to Protatek and
PENN.
Article 8. Patent Applications and Expenses.
8.1 Control of the preparation, filing and prosecution of all patent
applications will reside with the party to whom the covered
Invention belongs. In the case of joint ownership, control will be
joint. However, both parties will cooperate as necessary in the
preparation, filing and prosecution of all patent. applications
covering Inventions.
8.2 All expenses related to the preparation, filing or prosecution of
patent applications covering Inventions which belong either
jointly or solely to Protatek will be borne by Protatek. All
expenses related to the preparation, filing or prosecution of
patent applications covering Inventions which belong solely to
PENN, but which Protatek wishes to make subject to the grant of
the following section will be borne by Protatek. All patent
expenses related to applications covering Inventions not subject
to the grant of the following section will be borne by the party
to whom the Invention belongs.
Article 9. Transfer of Rights to Commercialize Intellectual Property.
9.1 From time to time. the results of the General Research or the
Specific Research protocols may produce results which may be
patentable and which may become the basis for a (further)
Specific Research Protocol. If at any time either party believes
that any research results (from either General Research or
Specific Research) should become the subject of applications
for letters patent, that party will promptly notify the other
party in writing, giving the details of such results.
Within thirty (30) days of receipt of notice by Protatek from
PENN, or concurrent with delivery of notice by Protatek to PENN,
Protatek will inform PENN as to which of the following
categories such research results belong:
9.1.1 The Research Results are of no interest to Protatek and
shall not be subject to the Grant of Article 9.4, and related
patent expenses shall not be borne by Protatek.
9.1.2 The Research Results are insufficient to support a
viable patent application, but Protatek elects to
retain commercial rights to the research results.
9.1.3 The Research Results can be demonstrated to have been
previously known by Protatck and developed independently by
Protatek and are not therefore
4
<PAGE>
subject to this Agreement.
9.1.4 The Research Results are of commercial interest to
Protatek, are subject to the grant of Paragraph 9.4 of
this article and Protatek agrees to bear Patent
Expenses. Such Research Results may be of two types as
further elected by Protatek:
9.1.4.1 The subject of a new Specific Research Addendum; or
9.1.4.2 The subject of either a previous Specific Research
Addendum or to remain as part of the General
Research Protocol.
9.2 If the Research Results are insufficiently described or
incomplete so that it becomes impossible for Protatek to make
the above election without further description or
consultation by PENN Protatek may hold such election in abeyance
until either:
PENN provides sufficient detail; or additional research results
are obtained. In no event however, will such delay exceed ninety
(90) days from the receipt of notice by Protatek from PENN
unless specifically agreed to in writing by the parties.
9.3 If Protatek should elect not to file a patent application under
the provisions of sub-paragraph 9.1.2 for a particular research
result, and PENN files, prosecutes and is issued a U.S. patent
covering these same research results at its own expense, then
any license to Protatek from PENN under such patent will be
subject to an additional on end-products covered by such patent.
9.4 PENN hereby grants and Protatek hereby accepts the exclusive
first right to negotiate in good faith for exclusive world-wide
license(s) (such license(s) may be non-exclusive
at Protatek's sole discretion) under any patent for which it has
borne or will bear Patent Expenses. Such grant for any specific
patent application will automatically terminate six (6) months
from the official date of receipt by the U.S. Patent and
Trademark Office of the relevant patent application unless said
grant is exercised as evidenced by: (i) both beginning good faith
negotiations and (2) agreement to pay any related Patent Expenses.
The details of each license agreement will vary from
technology to technology but will generally follow the format of
the License Agreement attached hereto as Attachment C and
included herein by reference. The earned royalties on net sales
of end-products in such license agreements will generally be
between unless either party can provide compelling as to why
appropriate.
9.5 Should Protatek and PENN fail to reach agreement regarding the
terms of such license, PENN will be free to negotiate license
terms with third parties. However, should third party
negotiations lead to license terms by PENN essentially similar
to those last offered by Protatek, Protatek will be given the
opportunity to take license on such terms, before any third
party.
5
<PAGE>
Article 10. Term and Termination.
10.1 The intent of the parties is that the relationship developed
herein shall continue from year to year on an on-going basis
from the date first written above unless terminated under the
provisions included below in this Article or paragraph 1.9.
10.2 Should either party to this agreement be at fault under the terms
of this agreement, the other party may terminate this agreement
by giving written notice of intent to terminate and the nature
of the fault. If such fault is not corrected within the period,
this agreement will terminate with the expiration of the period.
10.3 Protatek may terminate this agreement upon prior written notice
to PENN.
10.4 PENN may terminate this Agreement upon as prior written notice
to Protatek if PENN can demonstrate that has notit est efforts
or has substantially failed to commercialize the results of
Sponsored Research, and which failure is not corrected
during said period.
10.5 Surviving termination of this agreement are the provisions of
confidentiality and limited use of information contained in
article 9, the grant of article 8, and any licenses which may
have been negotiated between the parties.
Article 11. Miscellaneous.
11.1 Notice. Any notice required under this agreement will be
------
considered given one day after such notice, properly addressed
and shipped overnight service, is sent by either party. Proper
address for notice is as follows:
if to PENN:
Office of Corporate Programs & Technology University of
Pennsylvania Suite 300
133 South 36th Street
Philadelphia, PA 19104
6
<PAGE>
if to Protatek:
President
Protatek International, Inc.
1425 Energy Park Drive
Minneapolis, MN 55108
11.2 Use of name. Neither party will use the name, insignia or logo
-----------
of the other party for any purpose without the prior express
written consent of the other party.
11.3 Scope. This Agreement constitutes the entire agreement between the
-----
parties and it reflects and dissolves all prior agreements and
drafts related to the subject matter hereof. This agreement may
be amended truly by mutual written agreement between the parties.
11.4 Assignability. This Agreement shall be binding upon and enure to
-------------
the parties hereto, their successors and asignees, provided
however, that any such assignment by Protatek will require the
written approval of PENN. Such approval by PENN will not be
withheld by PENN except for reason of situations which might
jeopardize the policies, the good name of PENN, or its mission.
11.5 Venue. This Agreement will be interpreted in and according to the
-----
laws of the Commonwealth of Pennsylvania.
1N WITNESS WHEREOF, both parties set their hand
for Protatek:, for PENN:
/s/ /s/ George C. Sambeck
----------------------------- -------------------------
Signed Signed
Assoc. Dir.
----------------------------- -------------------------
Title Title
9/21/88
----------------------------- -------------------------
Date Date
7
<PAGE>
Attachment B: Protatek Alpha-1 Antichymotrypsin License
<PAGE>
License Agreement Between
The Trustees of The University of Pennsylvania and
Protatek International, Inc.
(alpha-1 Antichymotrypsin)
<PAGE>
Table of Contents:
Article 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Licensed Technology . . . . . . . . . . . . . . . . . . . . 1
1.2. Licensed Patent . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Ultimate Consumer . . . . . . . . . . . . . . . . . . . . . 2
1.4. Licensed Product(s) . . . . . . . . . . . . . . . . . . . . 2
1.5. Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Protatek is understood to include all of its Affiliates. . . 2
Article 2. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. PENN grants to Protatek . . . . . . . . . . . . . . . . . . 2
Article 3. Compliance with Laws, Regulations and Standards . . . . . . 2
3.1. Protatek agrees to comply with .all governmental . . . . . 2
3.2. With respect to operations by the Protatek . . . . . . . . 2
Article 4. Consideration . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. In consideration of the rights granted herein, License shall
pay to
PENN certain amounts . . . . . . . . . . . . . . . . . . . 3
4.2 All amounts due hereunder . . . . . . . . . . . . . . . . . 3
Article 5. Reports, Payments and Accounting . . . . . . . . . . . . . 3
5.1. Protatek agrees to make written reports to PENN . . . . . . 3
5.2. Protatek also agrees to make a similar written report to
PENN within
three months after the date of the Termination . . . . . . 3
5.3. Concurrently with the making of each report . . . . . . . . 3
5.4. Protatek agrees to keep records showing the manufacture,
sales, use,
rentals, and leasing . . . . . . . . . . . . . . . . . . . 3
Article 6. Warranties and Indemnities . . . . . . . . . . . . . . . . 3
6.1. Nothing in this Agreement shall be construed . . . . . . . 3
6.2. PENN makes no representations and extends no warranties . . 4
6.3. Protatek shall indemnify and hold harmless PENN against any
charge
or claim . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article 7. Infringement by Others: Protection of Patents . . . . . . 4
7.1. Protatek shall promptly inform PENN . . . . . . . . . . . 4
7.2. Protatek and PENN shall consider whether and in what manner
litigation . . . . . . . . . . . . . . . . . . . . . . . . 5
Article 8. Commercial Application, Sublicenses . . . . . . . . . . . 5
8.1. Any sublicense granted by Protatek . . . . . . . . . . . . 5
8.2. Any such sublicense may provide for the transfer of all
rights and obligations of the sublicensee . . . . . . . . .6
<PAGE>
Article 9. Term and Termination . . . . . . . . . . . . . . . 6
9.1. The word "Termination" . . . . . . . . . . . . . . 6
9.2. If Protatek shall at any time default in the payment
6
9.3. Protatek shall have the right to Terminate this License
Agreement in
respect to any or all Licensed Patents, . . . . . . 6
Article 10. Assignment . . . . . . . . . . . . . . . . . . . . 7
Article 11. Applicable Law . . . . . . . . . . . . . . . . . . 7
Article 12. Arbitration . . . . . . . . . . . . . . . . . . . 7
Article 13. Notices . . . . . . . . . . . . . . . . . . . . . 7
Article 14. Waiver . . . . . . . . . . . . . . . . . . . . . . 8
Article 15. Scope of the Agreement and Integration . . . . . . 8
IN WITNESS WHEREOF . . . . . . . . . . . . . . . . . . . 9
<PAGE>
This Agreement is by and between The Trustees of The University of
Pennsylvania, a non-profit corporation with offices at 133 South 36th
Street, Philadelphia, PA 19104 (PENN), and Protatek International, Inc
with Offices at 1245 Energy Park Drive, Minneapolis, MN 55108
(Protatek).
Whereas, PENN has discovered human genetic material encoding for
certain peptides which function as inhibitors of proteases; and
Whereas, Protatek has certain proprietary know-how and trade
secrets essential to the production, purification and characterization
of biological materials important to the future exploitation of these
protease inhibitors; and
Whereas, PENN and Protatek have executed a Cooperative Research
Agreement, specifying the terms and conditions for research in the
development of such peptides into useful and valuable products; and
Whereas, under the terms of such Cooperative Research Agreement,
PENN and Protatek have agreed to certain apportionment of rights and
responsibilities and the conditions of cooperation in the research and
commercial development of such research results, if any; and
Whereas, Protatek has supported, in part, the research which has
lead to the results the commercialization of which is contemplated by
this Agreement; and
Whereas, PENN wishes to develop and commercially exploit, for the
good of mankind, the results of such research; and
Whereas, PENN desires to see that the results of its research are
expeditiously and competently developed for the good of mankind;
Now Therefore, be it agreed among the parties as follows:
Article 1. Definitions
1.1. Licensed Technology means all inventions, designs and
technology related to alpha-1 Anti-Chymotrypsin encoded
for by human DNA and discovered by Dr. Harvey Rubin
and/or his coworkers at PENN whether patented or
unpatented, including all know-how for practicing such
inventions and technology related to such alpha-1 Anti-
Chymotrypsin including inventions, designs and
technology relating to the active site of said protease
inhibitor, its analogues, and their formulation(s) and
applications.
1.2. Licensed Patent means United States letters patent or
applications therefore and any corresponding foreign (to the United
States) applications and foreign patents which have issued or may
issue as a result of corresponding foreign patent application and
any continuation, continuation-in-part, division, reissue or
substitute applications based on any of the foregoing within the
Licensed Technology unless and until such patent or application
has been abandoned,
1
<PAGE>
has lapsed or has been ruled to be wholly invalid by a court
of competent jurisdiction.
1.3. Ultimate Consumer means that person or entity whose use of
the product results in its destruction or loss of activity and/or loss
of value.
1.4. Licensed Product(s) means materials (including expression
systems) which in the course of manufacture, use or sale would, in the
absence of this license, be covered by one or more claims of Licensed
Patent which have not been held invalid by a court from which no
appeal may be taken.
1.5. Net Sales means the gross sales, received by Protatek,
whether invoiced or not, less: returns and allowances
actually granted; packing, insurance, freight out, taxes or
excise duties imposed on the transaction (if separately
invoiced); wholesaler discounts; and cash discounts.
1.6. Protatek is understood to include all of its Affiliates. An
Affiliate of Protatek shall mean any corporation or other business
entity controlled by, controlling, or under common control with
Protatek. For this purpose, "control" means direct or indirect
beneficial ownership of at least fifty percent (50%) interest
in the income of such corporation or other business.
Article 2. Grant
2.1. PENN grants to Protatek a world-wide exclusive, right and
license to make, have made, use and sell Licensed Products under
Licensed Patent. Such right and license shall include the right to
sublicense under terms consistent with this Agreement but without
further right to sublicense.
Article 3. Compliance with Laws, Regulations and Standards
3.1. Protatek agrees to comply with all governmental laws and
regulations applicable to the use, production and/or sale of
Licensed Products.
With respect to operations by the Protatek in the United
States, its territories and possessions, Protatek
specifically expresses its intent to comply with the physical
and biological containment standards set forth in the NIH
Guidelines for Research Involving Recombinant DNA Molecules,
dated 21 November 1980, or any subsequent amended version of
U.S. Government guidelines or regulations pertaining to such
activities in effect during the term of this Agreement.
Protatek further agrees to cooperate with government
agency(ies) authorized to monitor compliance with such
containment standards.
Article 4. Consideration
4.1. In consideration of the rights granted herein, License shall
pay to PENN certain amounts which have been agreed to in
principle and will be embodied
2
<PAGE>
in a separate writing between the parties. Such amounts may
include consideration for: License initiation and
maintentance, minimum royalties and earned royalties.
4.2 All amounts due hereunder by Protatek to PENN shall be paid
to PENN in United States Dollars and shall be paid and
reported upon in a manner consistent with Article 5 hereof.
Article 5. Reports, Payments and Accounting
5.1 Protatek agrees to make written reports to PENN within sixty
(60) days of each June 30 and each December 31 during the
term of this License Agreement stating in each such report
the number of units and Net Sales of Licensed Product(s)
upon which consideration is payable pursuant to Article
4 hereof for the prior six month period.
5.2. Protatek also agrees to make a similar written report to PENN
within three months after the date of the Termination of
this License Agreement on Licensed Products(s) used, sold,
rented, or leased by Protatek and upon which consideration
is payable hereunder but which were not previously reported.
5.3. Concurrently with the making of each report required under
this Article, Protatek shall pay to PENN all considerations
due in connection with the transactions so reported.
5.4. Protatek agrees to keep records showing the manufacture,
sales, use, rentals, and leasing of Licensed Products in
sufficient detail to enable the considerations due and
payable hereunder by Protatek to be determined, and
further agrees to permit its books and records to be
examined from time to time, but not more than once a year,
to the extent necessary to verify reports provided for in
Paragraphs 5.1 and 5.2 of this Article. Such examination is
to be made by an independent, certified accountant
appointed by PENN, with the fees and expenses to be borne
by PENN. Only those considerations due to PENN within the
three year period immediately preceding the start of the
audit and their supporting records, files, and books of
account shall be subject to audit.
Article 6. Warranties and Indemnities
6.1. Nothing in this Agreement shall be construed as:
6.1.1. A warranty or representation by PENN as to the
validity or scope of any Licensed Patent;
6.1.2. A warranty or representation that anything
made, used, sold, rented or leased, under any
license granted by this Agreement is or will
be free from infringement of patents of third
parties;
3
<PAGE>
6.1.3. An obligation to bring or prosecute actions or suit
against third parties for infringement;
6.1.4. Conferring a right to use in advertising,
publicity, or otherwise any trademark or trade name
of either party; or
6.1.5. Granting by implication, estoppel, or otherwise any
licenses or rights under patents of PENN other than
Licensed Patents, regardless of whether such
patents dominate or are subordinate to any Licensed
Patents.
The foregoing notwithstanding, PENN hereby informs Protatek
that it knows of no patents which dominate the Licensed
Patents and under which PENN has the right to grant licenses.
6.2. PENN makes no representations and extends no warranties
of any kind, either expressed or implied. There are no
expressed or implied warranties of merchantability
or fitness for a particular purpose, or that the
use of the Licensed Products will not infringe any
patent, copyright, trademark, or other rights
of any person.
6.3. Protatek shall indemnify and hold harmless PENN against any
charge or claim made by a third party on account of the
rights and license which are objects of this License
Agreement. By way of example, but without limitation,
PENN shall be indemnified against loss due to charges of
product liability, medical malpractice and the like which may be
levied against PENN on account of licensed sales pursuant to this
License Agreement.
Article 7. Infringement by Others: Protection of Patents
7.1. Protatek shall promptly inform PENN of any suspected
infringement of any Licensed Patent by a third party. PENN
and Protatek shall consult to determine whether an
infringement exists and how best to effect its abatement.
This consultation and all related consultations shall be in
furtherance of the community of interest extant between PENN
and Protatek as exemplified by this License Agreement.
7.2. Protatek and PENN shall consider whether and in what manner
litigation or other adjudicative procedures may be brought
against an infringer. PENN and Protatek each shall have the
right to institute an action for infringement of a
Licensed Patent against such third party in accordance with
the following or such other arrangement as the parties may
agree upon:
7.2.1. If PENN and Protatek agree to institute a suit
jointly, the suit shall be brought in both their
names, the out-of pocket costs thereof shall
4
<PAGE>
be borne equally, and recoveries, if any, whether by
judgment, award, decree, or settlement, shall be shared
equally. Protatek shall exercise control over such
action provided, however, that PENN may, if it so
desires, be represented by counsel of its own selection,
the fees for which counsel shall be paid by PENN. PENN
shall have the right to approve the selection of
litigation counsel and the proposed litigation budget,
which approval shall not unreasonably be withheld. PENN
shall have the right to approve any settlement of the
litigation.
7.2.2. In the absence of agreement to institute a suit
jointly, PENN may institute suit and, at its
option, join Protatek as a plaintiff. PENN shall
bear the entire cost of such litigation and shall
be entitled to retain the entire amount of any
recovery by way of judgment or settlement. Protatek
will cooperate fully in the prosecution of any such
suit.
7.2.3. In the absence of agreement to institute a suit
jointly, and if PENN determines not to institute a
suit, Protatek may institute suit, and, and its
option, join PENN as a plaintiff. Protatek shall
bear the entire cost of such litigation and shall
be entitled to retain the entire amount of any
recovery by way of judgment, award, decree, or
settlement for past infringement. PENN will
cooperate fully in the prosecution of any such
suit.
7.2.4. Should either PENN or Protatek commence a suit
under the provisions of this Article and thereafter
elect to abandon the same, it shall give timely
notice to the other party who may, if it so
desires, continue prosecution of such suit
provided, however, that the sharing of expenses and
any recovery in such suit shall be agreed upon
between PENN and Protatek.
Article 8. Commercial Application, Sublicenses
8.1. Any sublicense granted by Protatek under this License
Agreement shall be consistent with the terms and conditions
of this License Agreement, except that sublicense terms and
conditions shall reflect that any sublicensee shall not
further sublicense.
8.2. Any such sublicense may provide for the transfer of all
rights and obligations of the sublicensee, including the
payment of considerations specified in such sublicenses,
to PENN or its designee, in the event that this License
Agreement is terminated and not promptly reinstated.
Article 9. Term and Termination
9.1. The word "Termination" and cognate words, such as "Term" and
"Terminate," as used in this License Agreement, are to be read, except
where the contrary is specifically indicated, as omitting from their
effect the following rights and
5
<PAGE>
obligations, all of which survive any Termination to the
degree necessary to permit their complete fulfillment or
discharge:
9.1.1. Protatek's obligation to supply a terminal report
as specified in Paragraph 5.2 hereof;
9.1.2. PENN's right to receive or recover and Protatek's
obligation to pay royalties, including minimum
royalties, pursuant to Articles 4 and 5 hereof, due
or accruable for payment at the time of
Termination;
9.1.3. Protatek's obligation to maintain records and PENN's
right to conduct an audit as provided in Article 5
hereof;
9.1.4. Licenses and releases running in favor of customers
of Protatek and Protatek's sublicensees with
respect to Licensed Product(s) sold or transferred
prior to any termination and on which consideration
has been paid or is payable by Protatek to PENN as
provided in Articles 4 and 8 hereof;
9.1.5. Any cause of action or claim of either party
hereto, accrued or to accrue because of any breach
or default by the other party; and
9.1.6. The provisions of Article 7.
9.2. If Protatek shall at any time default in the payment of any
consideration or in the making of any report hereunder, or
shall commit any material breach of any covenant herein
contained, or shall make any materially false report
and shall fail to remedy any such default, breach, or report
within ninety (90) days after written notice thereof by
PENN, PENN may, at its option, Terminate this License
Agreement and the licenses herein granted by notice
in writing to such effect.
9.3. Protatek shall have the right to Terminate this License
Agreement in respect to any or all Licensed Patents, upon
giving at least written notice to PENN of its intention and
desire to terminate.
Article 10. Assignment
This Agreement shall be binding upon and enure to the parties
hereto, their successors and asignees, provided, however, that any
such assignment by Protatek will require the written approval of
PENN. Such approval by PENN will not be withheld by PENN except
for reason of situations which might jeopardize the policies, the
good name of PENN, or its mission.
Article 11. Applicable Law
This License Agreement shall be construed, interpreted, and
applied in accordance with the laws of the Commonwealth of
Pennsylvania.
6
<PAGE>
Article 12. Arbitration
12.1. Any controversy arising under or related to this License
Agreement, and any disputed claim by either party
against the other under this License Agreement,
including, without limitation, disputes relating to
patent validity or infringement shall be settled by
arbitration, upon the request of either party in
accordance with the then-prevailing Patent Arbitration
Rules of the American Arbitration Association (AAA). In
the event of such controversy, the matter shall be
submitted to one arbitrator knowledgeable in the field,
who has been selected by mutual agreement of the parties
hereto or by the AAA if the parties cannot agree.
12.2. Any arbitration under Paragraph 13.1 hereof shall be held at
Philadelphia, Pennsylvania, or such other place as may be
mutually agreed upon in writing between the parties.
Judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof.
Article 13. Notices
13.1. All notices, demands, or other writings provided for in this
Agreement to be given, made, or sent by either party to the
other, shall be deemed to have been fully given, made, or
sent when done in writing and deposited in the
United States mail, first class, postage prepaid, and
addressed as follows:
To PENN: University of Pennsylvania
Office of Research Administration
133 South 36th Street
Suite 300
Philadelphia, Pennsylvania 19104-3246
Attention: Associate Director
To Protatek: President
Protatek International, Inc.
1425 Energy Park Drive
Minneapolis, MN 55108
13.2. The address to which any notice, demand, or other writing
may be given or made or sent to any party may be changed
upon written notice given by such party as above provided.
Article 14. Waiver
The parties covenant and agree that, if either party hereunder
fails or neglects for any reason to take advantage of any of the
terms of this License Agreement providing for the Termination of
this License Agreement, or if a party, having the
7
<PAGE>
right to declare this License Agreement terminated, shall fail to
do so, any such failure or neglect by such party shall not be or
be deemed or be construed to be a waiver of any of the terms,
covenants, or conditions of this License Agreement or of the
performance thereof. None of the terms, covenants, and conditions
of this License Agreement can be waived except by the written
consent of the party waiving compliance.
Article 15. Scope of the Agreement and Integration
1.5.1. The article headings herein are for convenience only and in
no manner affect the rights and obligations of the parties,
nor shall they be used to interpret the provisions hereof.
1.5.2. This License Agreement and the above-identified Cooperative
Research '. Agreement constitute the entire agreement
between the parties pertaining to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement in duplicate originals by their officers or representatives
duly authorized as of the date executed.
The Trustees of The University For Protatek International, Inc
of Pennsylvania
/s/ /s/ George C. Sambeck
----------------------------- -------------------------
Signed Signed
President Assoc. Dir.
----------------------------- -------------------------
Title Title
9/21/88
----------------------------- -------------------------
Date Date
8
<PAGE>
Attachment C: Protatek Cl Esterase License Agreement
<PAGE>
License Agreement Between
The Trustees of The University of Pennsylvania
and
Protatek International, Inc.
(C1 Esterase Inhibitor)
<PAGE>
Table of Contents:
Article 1. Definitions . . . . . . . . . . . . . . . . . . . . . 1
1.1. Licensed Technology . . . . . . . . . . . . . . . . . 1
1.2. Licensed Patent . . . . . . . . . . . . . . . . . . . 1
1.3. Ultimate Consumer . . . . . . . . . . . . . . . . . . 2
1.4. Licensed Product(s) . . . . . . . . . . . . . . . . . 2
1.5. Net Sales . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Protatek is understood to include all of its
Affiliates . . . . . . . . . . . . . . . . . . . . . 2
Article 2. Grant . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. PENN grants to Protatek . . . . . . . . . . . . . . . 2
Article 3. Compliance with Laws, Regulations and Standards . . . 2
3.1. Protatek agrees to comply with .all governmental . . 2
3.2. With respect to operations by the Protatek . . . . . 2
Article 4. Consideration . . . . . . . . . . . . . . . . . . . . 3
4.1. In consideration of the rights granted herein,
License shall pay to PENN certain amounts . . . . 3
4.2 All amounts due hereunder . . . . . . . . . . . . . . 3
Article 5. Reports, Payments and Accounting . . . . . . . . . . 3
5.1. Protatek agrees to make written reports to PENN . . . 3
5.2. Protatek also agrees to make a similar written
report to PENN within three months after the
date of the Termination . . . . . . . . . . . . . . 3
5.3. Concurrently with the making of each report . . . . . 3
5.4. Protatek agrees to keep records showing the
manufacture, sales, use, rentals, and leasing . . . 3
Article 6. Warranties and Indemnities . . . . . . . . . . . . . 3
6.1. Nothing in this Agreement shall be construed . . . . 3
6.2. PENN makes no representations and extends no
warranties . . . . . . . . . . . . . . . . . . . . . 4
6.3. Protatek shall indemnify and hold harmless PENN
against any charge or claim . . . . . . . . . . . . 4
Article 7. Infringement by Others: Protection of Patents . . . 4
7.1. Protatek shall promptly inform PENN . . . . . . . . 4
7.2. Protatek and PENN shall consider whether and in what
manner litigation . . . . . . . . . . . . . . . . 5
Article 8. Commercial Application, Sublicenses . . . . . . . . 5
8.1. Any sublicense granted by Protatek . . . . . . . . . 5
8.2. Any such sublicense may provide for the transfer
of all rights and obligations of the sublicensee . 6
<PAGE>
Article 9. Term and Termination . . . . . . . . . . . . . . . . 6
9.1. The word "Termination" . . . . . . . . . . . . . . . 6
9.2. If Protatek shall at any time default in the payment . 6
9.3. Protatek shall have the right to Terminate this
License Agreement in respect to any or all
Licensed Patents, . . . . . . . . . . . . . . . . . 6
Article 10. Assignment ... . . . . . . . . . . . . . . . . . . . 7
Article 11. Applicable Law . . . . . . . . . . . . . . . . . . . 7
Article 12. Arbitration . . . . . . . . . . . . . . . . . . . . 7
Article 13. Notices . . . . . . . . . . . . . . . . . . . . . . 7
Article 14. Waiver . . . . . . . . . . . . . . . . . . . . . . . 8
Article 15. Scope of the Agreement and Integration . . . . . . . 8
IN WITNESS WHEREOF . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
This Agreement is by and between The Trustees of The University of
Pennsylvania, a non-profit corporation with offices at 133 South 361h
Street, Philadelphia, PA 19104 (PENN), and Protatek International, Inc
with Offices at 1245 Energy Park Drive, Minneapolis, MN 55108
(Protatek).
Whereas, PENN has discovered human genetic material encoding for
certain peptides which function as inhibitors of proteases; and
Whereas, Protatek has certain proprietary know-how and trade
secrets essential to the production, purification and characterization
of biological materials important to the future exploitation of these
protease inhibitors; and
Whereas, PENN and Protatek have executed a Cooperative Research
Agreement, specifying the terms and conditions for research in the
development of such peptides into useful and valuable products; and
Whereas, under the terms of such Cooperative Research Agreement,
PENN and Protatek have agreed to certain apportionment of rights and
responsibilities and the conditions of cooperation in the research and
commercial development of such research results, if any; and
Whereas, Protatek has supported, in part, the research which has
lead to the results the commercialization of which is contemplated by
this Agreement; and
Whereas, PENN wishes to develop and commercially exploit, for the
good of mankind, the results of such research; and
Whereas, PENN desires to see that the results of its research are
expeditiously and competently developed for the good of mankind;
Now Therefore, be it agreed among the parties as follows:
Article 1. Definitions
1.1. Licensed Technology means all inventions, designs and
technology related to C1 Esterase Inhibitor encoded for
by human DNA and discovered by Dr. Harvey Rubin and/or
his coworkers at PENN whether patented or
unpatented, including all know-how for practicing such
inventions and technology related to such C1 Esterase
Inhibitor including inventions, designs and technology
relating to the active site of said protease inhibitor,
its analogues, and their formulation(s) and
applications.
1.2. Licensed Patent means United States letters patent or
applications therefore and any corresponding foreign (to the United
States) applications and foreign patents which have issued or may
issue as a result of corresponding foreign patent application and
any continuation, continuation-in-part, division, reissue
or substitute applications based on any of the foregoing within
the Licensed Technology unless and until such patent or application
has been abandoned,
1
<PAGE>
has lapsed or has been ruled to be wholly invalid by a court
of competent jurisdiction.
1.3. Ultimate Consumer means that person or entity whose use of
the product results in its destruction or loss of activity and/or loss
of value.
1.4. Licensed Product(s) means materials (including expression
systems) which in the course of manufacture, use or sale would, in the
absence of this license, be covered by one or more claims of Licensed
Patent which have not been held invalid by a court from which no appeal
may be taken.
1.5. Net Sales means the gross sales, received by Protatek,
whether invoiced or not, less: returns and allowances
actually granted; packing, insurance, freight out, taxes or
excise duties imposed on the transaction (if separately
invoiced); wholesaler discounts; and cash discounts.
1.6. Protatek is understood to include all of its Affiliates. An
Affiliate of Protatek shall mean any corporation or other business
entity controlled by, controlling, or under common control with
Protatek. For this purpose, "control" means direct or indirect
beneficial ownership of at least fifty percent (50%) interest
in the income of such corporation or other business.
Article 2. Grant
2.1. PENN grants to Protatek a world-wide exclusive, right and
license to make, have made, use and sell Licensed Products under
Licensed Patent. Such right and license shall include the right to
sublicense under terms consistent with this Agreement but without
further right to sublicense.
Article 3. Compliance with Laws, Regulations and Standards
3.1. Protatek agrees to comply with all governmental laws and
regulations applicable to the use, production and/or sale of
Licensed Products.
3.2. With respect to operations by the Protatek in the United
States, its territories and possessions, Protatek specifically
expresses its intent to comply with the physical anti biological
containment standards set forth in the NIH Guidelines
for Research Involving Recombinant DNA Molecules, dated 21
November 1980, or any subsequent amended version of U.S. Government
guidelines or regulations pertaining to such activities in effect
during the term of this
Agreement. Protatek further agrees to cooperate with
government agency(ies) authorized to monitor compliance with such
containment standards.
Article 4. Consideration
4.1. In consideration of the rights granted herein, License shall pay
to PENN certain amounts which have been agreed to in principle and will
be embodied
2
<PAGE>
in a separate writing between the parties. Such amounts may
include consideration for: License initiation and
maintenance, minimum royalties and earned royalties.
4.2 All amounts due hereunder by Protatek to PENN shall be paid
to PENN in United States Dollars and shall be paid and reported upon in
a manner consistent with Article 5 hereof.
Article 5. Reports, Payments and Accounting
5.1. Protatek agrees to make written reports to PENN within sixty
(60) days of each June 30 and each December 31 during the term of this
License Agreement stating in each such report the number of units
and Net Sales of Licensed Product(s) upon which consideration is
payable pursuant to Article 4 hereof for the prior six month period.
5.2. Protatek also agrees to make a similar written report to
PENN within three months after the date of the Termination of this
License Agreement on Licensed Products(s) used, sold, rented, or
leased by Protatek and upon which consideration is payable hereunder
but which were not previously reported.
5.3. Concurrently with the making of each report required under
this Article, Protatek shall pay to PENN all considerations
due in connection with the transactions so reported.
5.4. Protatek agrees to keep records showing the manufacture,
sales, use, rentals, and leasing of Licensed Products in sufficient
detail to enable the considerations due and payable hereunder by
Protatek to be determined, and further agrees to pertnit its books
and records to be examined from time to time, but not more than once
a year, to the extent necessary to verify reports provided for in
Paragraphs 5.1 and 5.2 of this Article. Such examination is to be
made by an independent, certified accountant appointed by PENN, with
the fees and expenses to be borne by PENN.
Only those considerations due to PENN within the three year period
immediately preceding the start of the audit anti their supporting
records, files, and books of account shall be subject to audit.
Article 6. Warranties and Indemnities
6.1. Nothing in this Agreement shall be construed as:
6.1.1. A warranty or representation by PENN as to the
validity or scope of any Licensed Patent;
6.1.2. A warranty or representation that anything
made, used, sold, rented or leased, under any
license granted by this Agreement is or will
be free from infringement of patents of third
parties;
3
<PAGE>
6.1.3. An obligation to bring or prosecute actions or suit
against third parties for infringement;
6.1.4. Conferring a right to use in advertising,
publicity, or otherwise any trademark or trade name
of either party; or
6.1.5. Granting by implication, estoppel, or otherwise any
licenses or rights under patents of PENN other than
Licensed Patents, regardless of whether such
patents dominate or are subordinate to any Licensed
Patents.
The foregoing notwithstanding, PENN hereby informs Protatek
that it knows of no patents which dominate the Licensed
Patents and under which PENN has the right to grant licenses.
6.2. PENN makes no representations and extends no warranties of
any kind, either expressed or implied. There are no expressed
or implied warranties of merchantability or fitness for a
particular purpose, or that the use of the Licensed Products
will not infringe any patent, copyright, trademark, or other
rights of any person.
6.3. Protatek shall indemnify and hold harmless PENN against any
charge or claim made by a third party on account of the rights and
license which are objects of this License Agreement. By way of example,
but without limitation,
PENN shall be indemnified against loss due to charges of
product liability, medical malpractice and the like which may be
levied against PENN on account of licensed sales pursuant to this
License Agreement.
Article 7. Infringement by Others: Protection of Patents
7.1. Protatek shall promptly inform PENN of any suspected
infringement of any Licensed Patent by a third party. PENN
and Protatek shall consult to determine whether an
infringement exists and how best to effect its abatement.
This consultation and all related consultations shall be in
furtherance of the community of interest extant between PENN
and Protatek as exemplified by this License Agreement.
7.2. Protatek and PENN shall consider whether and in what manner
litigation or other adjudicative procedures may be brought
against an infringer. PENN and Protatek each shall have the
right to institute an action for infringement of a
Licensed Patent against such third party in accordance with
the following or such other arrangement as the parties may
agree upon:
7.2.1. If PENN and Protatek agreement to institute a suit
jointly, the suit shall be brought in both their
names, the out-of pocket costs thereof shall
4
<PAGE>
be borne equally, and recoveries, if any, whether by
judgment, award, decree, or settlement, shall be shared
equally. Protatek shall exercise control over such
action provided, however, that PENN may, if it so
desires, be represented by counsel of its own selection,
the fees for which counsel shall be paid by PENN. PENN
shall have the right to approve the selection of
litigation counsel and the proposed litigation budget,
which approval shall not unreasonably be withheld. PENN
shall have the right to approve any settlement of the
litigation.
7.2.2. In the absence of agreement to institute a suit
jointly, PENN may institute suit and, at its
option, join Protatek as a plaintiff. PENN shall
bear the entire cost of such litigation and shall
be entitled to retain the entire amount of any
recovery by way of judgment or settlement. Protatek
will cooperate fully in the prosecution of any such
suit.
7.2.3. In the absence of agreement to institute a suit
jointly, and if PENN determines not to institute a
suit, Protatek may institute suit, and, and its
option, join PENN as a plaintiff. Protatek shall
bear the entire cost of such litigation and shall
be entitled to retain the entire amount of any
recovery by way of judgment, award, decree, or
settlement for past infringement. PENN will
cooperate fully in the prosecution of any such
suit.
7.2.4. Should either PENN or Protatek commence a suit
under the provisions of this Article and thereafter
elect to abandon the same, it shall give timely
notice to the other party who may, if it so
desires, continue prosecution of such suit
provided, however, that the sharing of expenses and
any recovery in such suit shall be agreed upon
between PENN and Protatek.
Article 8. Commercial Application, Sublicenses
8.1. Any sublicense granted by Protatek under this License
Agreement shall be consistent with the terms and conditions
of this License Agreement, except that sublicense terms and
conditions shall reflect that any sublicensee shall not
further sublicense.
8.2. Any such sublicense may provide for the transfer of all
rights and obligations of the sublicensee, including the
payment of considerations specified in such sublicenses,
to PENN or its designee, in the event that this License
Agreement is terminated and not promptly reinstated.
Article 9. Term and Termination
9.1. The word "Termination" and cognate words, such as "Term" and
"Terminate," as used in this License Agreement, are to be read, except
where the contrary is specifically indicated, as omitting from their
effect the following rights and
5
<PAGE>
obligations, all of which survive any Termination to the
degree necessary to permit their complete fulfillment or
discharge:
9.1.1. Protatek's obligation to supply a terminal report
as specified in Paragraph 5.2 hereof;
9.1.2. PENN's right to receive or recover and Protatek's
obligation to pay royalties, including minimum
royalties, pursuant to Articles 4 and 5 hereof, due
or accruable for payment at the time of
Termination;
9.1.3. Protatek's obligation to maintain records and PENN's
right to conduct an audit as provided in Article 5
hereof;
9.1.4. Licenses and releases running in favor of customers
of Protatek and Protatek's sublicensees with
respect to Licensed Product(s) sold or transferred
prior to any termination and on which consideration
has been paid or is payable by Protatek to PENN as
provided in Articles 4 and 8 hereof;
9.1.5. Any cause of action or claim of either party
hereto, accrued or to accrue because of any breach
or default by the other party; and
9.1.6. The provisions of Article 7.
9.2. If Protatek shall at any time default in the payment of any
consideration or in the making of any report hereunder, or
shall commit any material breach of any covenant herein
contained, or shall make any materially false report
and shall fail to remedy any such default, breach, or report
within ninety (90) days after written notice thereof by
PENN, PENN may, at its option, Terminate this License
Agreement and the licenses herein granted by notice
in writing to such effect.
9.3. Protatek shall have the right to Terminate this License
Agreement in respect to any or all Licensed Patents, upon
giving at least written notice to PENN of its intention and
desire to terminate.
Article 10. Assignment
This Agreement shall be binding upon and enure to the parties
hereto, their successors and asignees, provided, however, that any
such assignment by Protatek will require the written approval of
PENN. Such approval by PENN will not be withheld by PENN except
for reason of situations which might jeopardize the policies, the
good name of PENN, or its mission.
Article 11. Applicable Law
This License Agreement shall be construed, interpreted, and
applied in accordance with the laws of the Commonwealth of
Pennsylvania.
6
<PAGE>
Article 12. Arbitration
12.1. Any controversy arising under or related to this License
Agreement, and any disputed claim by either party
against the other under this License Agreement,
including, without limitation, disputes relating to
patent validity or infringement shall be settled by
arbitration, upon the request of either party in
accordance with the then-prevailing Patent Arbitration
Rules of the American Arbitration Association (AAA). In
the event of such controversy, the matter shall be
submitted to one arbitrator knowledgeable in the field,
who has been selected by mutual agreement of the parties
hereto or by the AAA if the parties cannot agree.
12.2. Any arbitration under Paragraph 13.1 hereof shall be
held at Philadelphia, Pennsylvania, or such other place
as may be mutually agreed upon in writing between the
parties. Judgment upon the award rendered by the
arbitrator may be entered in any court having
jurisdiction thereof.
Article 13. Notices
13.1. All notices, demands, or other writings provided for in
this Agreement to be given, made, or sent by either
party to the other, shall be deemed to have been fully
given, made, or sent when done in writing and deposited
in the United States mail, first class, postage prepaid,
and addressed as follows:
To PENN: University of Pennsylvania
Office of Research Administration
133 South 36th Street
Suite 300
Philadelphia, Pennsylvania 19104-3246
Attention: Associate Director
To Protatek: President
Protatek International, Inc.
1425 Energy Park Drive
Minneapolis, MN 55108
13.2. The address to which any notice, demand, or other writing
may be given or made or sent to any party may be changed upon written
notice given by such party as above provided.
Article 14. Waiver
The parties covenant and agree that, if either party hereunder
fails or neglects for any reason to take advantage of any of the
terms of this License Agreement providing For the Termination o
this License Agreement, or if a party, having the
7
<PAGE>
right to declare this License Agreement terminated, shall fail to
do so, any such failure or neglect by such party shall not be or
be deemed or be construed to be a waiver of any of the terms,
covenants, or conditions of this License Agreement or of the
performance thereof. None of the terms, covenants, and conditions
of this License Agreement can be waived except by the written
consent of the party waiving compliance.
Article 15. Scope of the Agreement and Integration
15.1. The article headings herein are for convenience only and
in no manner affect the rights and obligations of the
parties, nor shall they be used to interpret the
provisions hereof.
15.2. This License Agreement and the above-identified
Cooperative Research Agreement constitute the entire
agreement between the parties pertaining to the subject
matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement in duplicate originals by their officers or representatives
duly authorized as of the date executed.
The Trustees of The University For Protatek International, Inc
of Pennsylvania
/s/ /s/ George C. Sambeck
----------------------------- -------------------------
Signed Signed
President Assoc. Dir.
----------------------------- -------------------------
Title Title
9/21/88
----------------------------- -------------------------
Date Date
8
<PAGE>
Attachment D: Protatek-PIRC-Penn Assignment Agreement
of 9/6/91
<PAGE>
PI Research Corporation
Assignment Agreement
--------------------
THIS AGREEMENT is entered into as of September 6, 1991, between PI
Research Corporation, a Delaware Corporation having a place of business
at One Bush Street, San Francisco, California 94104 (hereinafter
referred to as the "Company"), Protatek International, Inc., a
Minnesota corporation, having a place of business at 1491 Energy Park
Drive, St. Paul, Minnesota 55108 (hereinafter referred to as
"Protatek"), the Trustees of the University of Pennsylvania, with
offices at 133 South 36th Street, Philadelphia, Pennsylvania 19104
(hereinafter referred to as the "University").
WHEREAS, the Company desires to acquire certain rights to
technology currently held by Protatek by virtue of certain research and
license agreements that have previously been entered into with the
University; and
WHEREAS, Protatek is willing to assign its rights under such
research and license agreements to the Company in exchange for equity
in the Company; and
WHEREAS, the University desires to consent to such assignment in
exchange for equity in the Company;
NOW THEREFORE, for and in consideration of the mutual covenants and
obligations assumed by the parties hereto, it is agreed as follows:
1. Assignment
----------
Effective as of the date of this Agreement, Protatek hereby assigns
to the Company all right, title and interest that Protatek holds as a
party to the following research and license agreements (collectively,
the Assigned Agreements"):
A. Cooperative Research Agreement between the University and
Protatek dated August 1, 1988;
B. License Agreement between the University and Protatek dated
September 27, 1988, for C1 Esterase Inhibitor; and
<PAGE>
C. License Agreement between the University and
-
Protatek dated September 27, 1988, for alpha-1 Antichymotrypsin.
This assignment by Protatek includes the assignment of any and all
rights that Protatek may have to any discoveries, technology or
inventions related to the subject matter of the Assigned Agreements,
including any and all technology derived during the performance of
Protatek's obligations under the Assigned Agreements.
2. Consideration.
A. To Protatek. In exchange for the foregoing assignment, the
Company will issue to Protatek an aggregate of 1,098,039 shares of the
Company's Common Stock which shares will initially represent twenty-
eight percent (28%) of the total capital stock of the Company
outstanding or reserved for initial issuance. Such Common Stock will be
issued pursuant to a separate Stock Purchase Agreement in customary
form to be executed by the parties as soon as reasonably possible, and
certificates representing such shares of Common Stock will be delivered
to Protatek promptly after the execution of such Stock Purchase
Agreement.
B. To the University and Certain University Faculty. In exchange
for its consent to the foregoing assignment, the Company will issue to
the University and provide an opportunity to purchase for certain
faculty of the University, an aggregate shares shall of the Company's
Common Stock, which shares will initially represent of the total
capital stock of the Company outstanding or reserved for initial
issuance. Specifically, the aforesaid aggregate shares shall be
distributed directly to the University and certain faculty of the
University as follows:
1. To the University, shares, comprising
the total capital stock of the Company outstanding or reserved for
initial issuance;
2. To Dr. Harvey Rubin, Assistant Professor of Medicine, the
opportunity to purchase shares, comprising of the total capital
stock of the Company outstanding or reserved for initial issuance;
3. To Dr. Barry Cooperman, Professor of Chemistry, the
opportunity to purchase shares shall, comprising the
total capital stock of the Company outstanding or reserved for initial
issuance;
2
<PAGE>
4. To Dr. Norman Schechter, Research Professor
of Dermatology, the opportunity to purchase shares
comprising of the total
---------
capital stock of the Company outstanding or reserved for initial
issuance; and
5. To Dr. Zhai-Mei Wang, Research Associate for Infectious
Diseases, the opportunity to purchase shares comprising total
capital stock of the Company outstanding or reserved for initial
issuance.
Such Common Stock will be issued pursuant to separate Stock Purchase
Agreements in customary form to be executed by the parties as soon as
reasonably possible, and certificates representing such shares of
Common Stock or the opportunity to purchase such Common Stock will be
delivered to the University and the faculty identified above,
respectively, promptly after the execution of such Stock Purchase
Agreements.
In further consideration to the University, Company and
University agree to renegotiate in good faith a revised License
Agreement for alpha-1 Antichotrypsin and C-1 Esterase Inhibitor to
substitute for the Agreements referenced in Paragraphs 1.B and 1.C,
and a Collaborative Research Agreement to substitute for the
agreement referenced in Paragraph 1.A.
Protatek and the UniVersity hereby agree to execute such documents
as are reasonably necessary in the opinion of counsel to the Company to
permit the Company lawfully to convey the appropriate equity of the
Company to Protatek and the University, respectively. Protatek and the
University acknowledge and agree that the shares o~ Colon Stock issued
to them will be subject to substantial restrictions on transfer and are
being acquired solely for investment purposes.
3. Acceptance and Consent of Assiqnments.
-------------------------------------
The Company hereby accepts the foregoing assignment by Protatek and
agrees to be bound to all of the provisions therein and to convey the
consideration described above to each party. The University hereby
consents to the assignment of the Assigned Agreement to the Company,
including any rights that may have arisen during the course of
Protatek's performance under the Assigned Agreements.
4. Miscellaneous Provisions.
------------------------
This Agreement shall be governed for all purposes by the law of the
State of Delaware as it applies to contracts
3
<PAGE>
between Delaware residents, made and to be performed entirely within
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
PI RESEARCH CORPORATION PROT~~NTE~A~ONAL, INC. A .
/s/ Robert J. Runze /s/ Roger Headrick
------------------------ ----------------------------
Robert J.Kunze,President Roger Headrick, President
THE TRUSTEES OF THE UNIVERSITY
OF PENNSYLVANIA
/s/ Stephen M. Sammut
-----------------------------
Stephen M. Sammut, Director
Center for Transfer Technology
4
<PAGE>
Attachment F: PIRC/Penn Collaborative Research Agreement
of 3/1/91
<PAGE>
Signature Version
COLLABORATIVE RESEARCH AGREEMENT
--------------------------------
This COLIABORATIVE RESEARCH AGREEMENT is made as of the First day
of March, 1991 by and between THE TRUSTEES OF THE UNIVERSITY OF
PENNSYLVANIA, a nonprofit corporation organized and existing under the
laws of the Commonwealth of Pennsylvania (the "University"), and PI
Research Corporation, a corporation organized and existing under the
laws of Delaware ("Sponsor").
RECITALS
--------
A. Dr. Harvey Rubin, a faculty member and Assistant Professor of
Medicine of the University, has performed research in the field of
human protease inhibitors under a cooperative research agreement,
dated October 1, 1987, with Protatek International, Inc.("Protatek"),
a company then based in Minneapolis, MN.
B. University entered into two license agreements with University
for inventions made under the cooperative research agreement.
C. Protatek contemplates assigning its rights under the
cooperative research agreement and the two license agreements to
Sponsor.
D. University and Sponsor contemplate entering into a revised
license agreement ("License Agreement"), which will replace the two
previous license agreements referred to in recital C above.
E. Sponsor has undertaken and fulfilled the obligations of
Protatek to University under the October 1, 1987 Cooperative Research
Agreement, which has terminated.
F. Sponsor desires to support and collaborate on additional
research with Dr. Rubin, such research to be performed in accordance
with the terms and conditions of this Agreement.
G. Sponsor further desires to obtain an option to license certain
of the results of the research performed collaboratively under this
Agreement on terms substantially similar to those contained in the
License Agreement.
H. The research and development program contemplated by this
Agreement is of mutual interest to Sponsor and the University and
furthers the educational, scholarship and research objectives of the
University as a nonprofit, tax-exempt educational institution.
<PAGE>
Collaborative Research Agreement between PIRC and Penn 2
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and intending to be legally bound hereby,
the parties hereto agree as follows:
ARTICLE 1: DEFINITIONS
1.1 The following terms as used herein shall have the following
meanings:
1.1.1 "Confidential Information, means (i) the University Inventions,
-------------------------
(ii) the Joint Inventions, (iii) Sponsor Inventions, (iv) any
information or material in tangible form that is marked as
confidential or proprietary by the furnishing party at the time it is
delivered to the receiving party, and (v) information that is
furnished orally if the furnishing party identifies such information
as confidential or proprietary when it is disclosed and promptly
confirms such designation in writing within 30 days after such
disclosure.
1.1.2 "Collaborative Research" means the research and development
-----------------------
program related to human protease inhibitors, as more fully described
in Attachment 1 to this Agreement, as such may be modified by mutual
agreement of the parties in writing.
1.1.3 "Effective Date" of this Agreement is March 1, 1991.
---------------
1.1.4 "Inventions" mean and include all technical information,
-----------
trade secrets, developments, discoveries, know-how, methods,
techniques, formulae, processes and other proprietary ideas, whether
or not patentable or copyrightable, that are discovered, developed or
reduced to practice in the performance of the Collaborative Research.
1.1.5 "Joint Inventions" mean Inventions made or conceived jointly
-----------------
by employees of the University and Sponsor.
1.1.6 "Principal Investigators" mean the individuals designated in
------------------------
accordance with Section 92.3 hereof.
1.1.7 "Research Inventions" mean the Joint Inventions, Sponsor
-------------------
Inventions and University Inventions.
1.1.8 "Sponsor Inventions" mean Inventions made or conceived
------------------
solely by employees of Sponsor.
1.1.9 "University Inventions" mean Inventions made or
----------------------
conceived solely by employees of the University.
1.1.10 ~University Principal Investigator" or "University
--------------------------------- -----------
Investigators" refers respectively to the Principal Investigator,
-------------
Harvey Rubin, M.D., Ph.D., Assistant Professor of Medicine at
University, and to Investigators, Barry S. Cooperman, Ph.D.,
Professor of Chemistry, Norman Schechter, Ph.D., Research
<PAGE>
Collaborative Research Agreement between PIRC and Penn 3
Professor of Dermatology and Zai-Mei Wang, Ph.D., Research Associate
Infectious Diseases, all at University.
ARTICLE 2: SPONSORED RESEARCH
2.1 Statement of Work. The parties hereto agree to use reasonable
-----------------
efforts to conduct the Collaborative Research with funds made
available by Sponsor. Each party shall furnish the appropriate
personnel, materials, services, facilities and equipment for the
performance of the Collaborative Research. The University is under no
obligation to fund any of the Collaborative Research.
2.2 Conduct and Supervision of Collaborative Research. The parties
-------------------------------------------------
shall cooperate fully in the conduct and supervision of the
Collaborative Research. Each party acknowledges that the other makes
no express or implied warranties, representations or guarantees with
respect to the completion, success or particular results of the
Collaborative Research.
2.3 Participation of Principal Investigators.
----------------------------------------
2.3.1 Dr. Harvey Rubin, an employee of University, and an employee
of Sponsor to be designated in the future who shall be acceptable to
University, shall serve as Principal Investigators for the
Collaborative Research and shall be responsible for the administration
and supervision of the Collaborative Research. The Principal
Investigators shall meet at reasonable intervals, in mutually
convenient locations to review the findings and the progress of the
Collaborative Research.
2.3.2 If the services of a Principal Investigator become
unavailable to a party for any reason, that party shall be entitled to
designate another member of its staff or faculty who is acceptable to
both parties to serve as a Principal Investigator of the Collaborative
Research. If a substitute Principal Investigator has not been
designated within sixty (60) days after an original Principal
Investigator ceases his or her services under this Agreement, either
party may terminate this Agreement upon written notice thereof to the
other party.
2.4 Access to Facilities
--------------------
Each party shall permit visits and inspections to its facilities,
and observation of the work being performed in connection with the
Collaborative Research program, by the employees and consultants of
the other parties engaged in the performance of Collaborative
Research. All such visiting personnel shall be subject to the health
and safety regulations of the facility in question, and to the
execution of appropriate agreements regarding non-disclosure of
Confidential Information.
<PAGE>
Collaborative Research Agreement between PIRC and Penn 4
ARTICLE 3: PERIOD OF PERFORMANCE
3.1 Period of Performance. The initial term of the Collaborative
---------------------
Research shall be for from the Effective Date of this
Agreement, unless terminated sooner pursuant to Section 7.1
hereof. This Agreement may be extended or renewed only by written
agreement of both parties.
ARTICLE 4: FUNDING, ETC.
4.1 Funding. To support the Collaborative Research of the
-------
University, Sponsor shall pay the University the amounts set forth in
Attachment 1 hereto for the initial term of the Collaborative
Research. Funding amounts for any renewal term shall be determined by
the parties if and when the determination to renew is made under
Article 3 hereof.
4.2 Payment. Sponsor shall make monthly payments on a pro rata
-------
basis in accordance with Attachment 1 by check made payable to "The
Trustees of the University of Pennsylvania," mailed to the University
at the address identified in Section 9.5 hereof.
4.3 Additional Funds. The total of the payments set forth in
----------------
Attachment A (the "Payment Ceiling") represents an estimate only and
not a guarantee of the cost to support the University's research
Activities during the initial term of the Collaborative Research. The
University may submit a request to Sponsor for additional funds at
such time as the University's share of the Collaborative Research
costs may reasonably be projected to exceed the Payment Ceiling.
Sponsor shall not be liable for, and the University shall not incur,
expenditures in excess of the Payment Ceiling unless Sponsor approves
such additional expenditure in writing and funds such additional
expenditure in advance. The University shall not be required to
complete the Collaborative Research in the event that (i) the Payment
Ceiling proves insufficient for that purpose, and (ii) Sponsor
determines not to increase the Payment Ceiling to an amount adequate
to complete the Collaborative Research. Any amounts paid by Sponsor
under this Agreement are nonrefundable, except as provided in Section
7.2 hereof. Payments made by Sponsor under this Section fulfill the
diligence obligations of the Licenses under Section3.3(a) of the
License Agreement.
4.4 University Record Keeping and Reports to Sponsor. The
------------------------------------------------
University shall keep accurate records and books of account relating
to amounts paid to it by Sponsor hereunder, which are to be available
to authorized representatives of Sponsor upon reasonable written
notice during the University's regular business hours. The parties
shall consult and render progress reports to one another quarterly
during the term of the Collaborative Research and shall render to one
another a complete final report on the results of the Collaborative
Research within
<PAGE>
Collaborative Research Agreement between PIRC and Penn 5
one hundred twenty (120) days following termination of the
Collaborative Research.
4.5 Equipment. Title to any equipment purchased, built or
---------
manufactured by the University, its Principal Investigator or
University Investigators in the performance of the Collaborative
Research shall vest in the University and any such equipment shall be
and remain the property of the University following termination of the
Collaborative Research.
ARTICLE 5: INVENTIONS, OPTION TO LICENSE, ETC.
5.1 Disclosure of Inventions. Each party shall provide promptly to
------------------------
the other a complete written disclosure of any Research Invention
reasonably considered patentable.
5.2 Prosecution of Patents.
----------------------
5.2.1 University Inventions. The University shall be responsible
---------------------
for and shall control the preparation, prosecution and maintenance of
all patents and patent applications related to a University Invention.
Sponsor shall advise the University, no later than thirty (30) days
after receipt of disclosure of a University Invention whether it
requests the University to file and prosecute a patent application
related to such University Invention. Sponsor shall reimburse the
University for all documented expenses (including legal fees, filing
and maintenance fees or other governmental charges) incurred in
connection with the filing, prosecution and maintenance of any patents
and patent applications that Sponsor requests the University to
prosecute hereunder. Sponsor and the University shall mutually
determine the countries where the patents and patent applications
related to University Inventions will be prosecuted and maintained. If
Sponsor declines to pay for filing, prosecution and maintenance costs
in any jurisdiction, the University may do so at its cost and expense
but such patents and patent applications shall be excluded from
Sponsor's option to license under Section 5.4 hereof. If the
University elects not to file, prosecute or maintain any patent or
patent application related to a University Invention, Sponsor shall
then have the right to file, prosecute or maintain the patent or
patent application at its own expense.
5.2.2 Joint Inventions and Sponsor Inventions. Sponsor shall be
---------------------------------------
responsible for and shall control, at its own cost, the preparation,
prosecution and maintenance of all patents and patent applications
related to a Joint Invention or a Sponsor Invention. Sponsor shall
advise the University no later than thirty (30) days after disclosure
of a Joint Invention by either party whether it intends to file and
prosecute a patent application related to the Joint Invention. If
Sponsor declines to file and prosecute a patent application for a
Joint Invention in any jurisdiction, the University may do so at its
cost and expense but such patent application and patent shall be
excluded
<PAGE>
Collaborative Research Agreement between PIRC and Penn 6
from Sponsor's option to license under Section 5.4 hereof.
5.2.3 Other Proprietary Rights. The filing and prosecution of
------------------------
copyright, trademark and other intellectual property protection
related to the Research Inventions shall be subject to the provisions
of this Section 5.2.
5.2.4 Cooperation. Each party shall cooperate with the other party
-----------
to execute all lawful papers and instruments and to make all rightful
oaths and declarations as may be necessary in the preparation and
prosecution of all patents and other filings referred to in this
Article 5.
5.3 Ownership.
---------
(a) The University shall retain all right, title and interest in
and to the University Inventions and any patent applications, patents,
copyrights and other protection related thereto, regardless of which
party prepares, prosecutes or maintains the patent applications,
patents, copyrights or other protection related to the University
Inventions.
(b) Sponsor shall retain all right, title and interest in and to
the Sponsor Inventions and any patent applications, patents,
copyrights and other protection related thereto.
(c) Sponsor and the University shall retain all right, title and
interest in and to the Joint Inventions and each shall have an equal
undivided partial interest in any such Joint Invention and any
resulting patent applications, patents, copyrights and other
protection issued or granted thereon, regardless of which party
prepares, prosecutes or maintains the patent applications, patents,
copyrights or other protection related to the Joint Inventions.
(d) Each party shall maintain policies for its employees or
agreements with all of its employees assigned to conduct Collaborative
Research, and all third party contractors engaged in connection with
the Collaborative Research project, providing for the assignment to
such party of all rights of such employee, consultant, or contractor
with respect to inventions made or other technology rights developed
in the course of such person's employment or other engagement by the
party which relate to the Collaborative Research.
5.4 Option to License. In consideration of Sponsor's funding of
-----------------
the Collaborative Research, Sponsor shall have the option to acquire
an exclusive, worldwide, royalty-bearing license to practice any
University Invention or Joint Invention and any patents or patent
applications related thereto and to make, have made, use and sell
products using or incorporating a University Invention or Joint
Invention pursuant to the terms of the License Agreement, as
supplemented or amended by the provisions of Attachment 2 hereto.
Sponsor's option must be
<PAGE>
Collaborative Research Agreement between PIRC and Penn 7
exercised by written notice to the University within three months
after the disclosure of a University Invention or Joint Invention to
Sponsor under Section 5.1 hereof. If Sponsor timely exercises its
option, Sponsor and the University will promptly execute an amendment
to the License Agreement as to each University Invention or Joint
Invention for which the Sponsor has exercised its option. If Sponsor
fails to timely exercise its option, or if Sponsor and the University
fail to execute an amendment to the License Agreement within nine (9)
months after disclosure of the University Invention or Joint Invention
to Sponsor, the University shall be free to license the University
Invention or Joint Invention to any party upon such terms as the
University deems appropriate, without any further obligation to
Sponsor.
5.5 Retained Rights of U.S. Government. Any license granted to
----------------------------------
Sponsor pursuant to Section hereof shall be subject to the rights of
the United States government reserved under Public Laws 96-517, 97-
256, and 98-620, codified at 35 U.S.C. 200-212, and any regulations
issued thereunder.
5.6 Grant of License to Sponsor Technology. Sponsor hereby grants
--------------------------------------
to the University a license, without right of sublicense, to use, but
not to make, have made or sell and solely for the limited purpose of
engaging in the Collaborative Research, any trade secrets,
information, know-how or other proprietary ideas obtained or
developed by Sponsor outside of the performance of the Collaborative
Research that Sponsor, solely in its discretion, discloses to the
University for the purpose of assisting the University in performing
the Collaborative Research.
ARTICLE 6: CONFIDENTIALITY AND PUBLICATION
6.1 Confidentiality. Sponsor shall maintain in confidence and
---------------
shall not disclose to any third party the Confidential Information of
the University received pursuant to this Agreement, without the prior
written consent of the University. The foregoing obligation shall not
apply to:
6.1.1.1 information that is known to Sponsor or
independently developed by Sponsor prior to the time
of disclosure, in each case, to the extent evidenced by
written records promptly disclosed to the University
upon receipt of the Confidential Information;
6.1.1.2 information disclosed to Sponsor by a third
party that has a right to make such disclosure;
<PAGE>
Co11aborative Research Agreement between PIRC and Penn 8
6.1.1.3 information that becomes patented, published
or otherwise part of the public domain as a result of
acts by the University or a third person obtaining such
information as a matter of right; or
6.1.1.4 information that is required to be disclosed
by order of the U.S. Food and Drug Administration or
similar authority or a court of competent jurisdiction;
provided that the parties shall use their best efforts
to obtain confidential treatment of such information by
the agency or court.
6.1.2. Sponsor will take all reasonable steps to protect the
Confidential Information of the University with the same degree of
care Sponsor uses to protect its own confidential or proprietary
information. Without limiting the foregoing. Sponsor shall ensure that
all of its employees having access to the Confidential Information of
the University are obligated to abide by Sponsor's obligations
hereunder.
6.1.3. The University shall not be obligated to accept any
Confidential Information of Sponsor. If Sponsor desires to furnish any
such Confidential Information to the Principal Investigator or other
University personnel, Sponsor may request such individual to sign a
confidentiality agreement with Sponsor in the form of Attachment 3
hereto. The University bears no institutional responsibility for
maintaining the confidentiality of any Confidential Information of
Sponsor.
6.2 Publication.
-----------
6.2.1. Sponsor acknowledges that the basic objective of research
and development activities at the University is the generation of new
knowledge and its expeditious dissemination. To further that
objective, the University retains the right, at its discretion, to
demonstrate, publish or publicize a description of the results of the
Collaborative Research or any University Invention or Joint Invention,
subject to the provisions below.
6.2.2. Should the University desire to disclose publicly, in
writing or by oral presentation, the results of the Collaborative
Research or any University Invention or Joint Invention for which a
patent application has not been filed, the University shall notify
Sponsor in writing of its intention at least thirty (30) days before
submission of such material that
<PAGE>
Collaborative Research Agreement between PIRC and Penn 9
would make such disclosure. The University shall include with such
notice a description of the oral presentation or, in the case of a
manuscript or other proposed written disclosure, a current draft of
such written disclosure.
6.2.3. With respect to University Inventions, Sponsor may request
the University, no later than thirty (30) days following the receipt
of the University's notice, to file a patent application, copyright or
other filing related to such University Invention. All such filings
shall be subject to the provisions of Section 5.2 of this Agreement.
Upon receipt of such request, the University shall arrange for a short
delay in publication, not to exceed sixty (60) days, to permit filing
of a patent or other application by the University, or if the
University declines to file such application, to permit Sponsor to
make such a filing. If University receives no such request from
Licensee to delay submission of material making such disclosure,
University may submit such material for publication or presentation
provided that University first confirms in a reasonable way that
Licensee has received and reviewed material.
6.2.4. With respect to a Joint Invention, Sponsor may request the
University, no later than thirty (30) days following the receipt of
the University's notice, to delay publication for a period not to
exceed sixty (60) days to permit filing of a patent or other
application by the Sponsor. All such filings shall be subject to the
provisions of Section 5.2 of this Agreement.
6.2.5. If the University desires to demonstrate, publish or
publicize the results of the Collaborative Research or any University
Invention of Joint Invention that is not patentable, and Sponsor
objects to such proposed disclosure within the time period specified
in Sections 6.2.3 or 6.2.4 above, the parties will negotiate in good
faith to determine whether the proposed disclosure can be modified or
withheld, consistent with the objectives of each party. In no event
shall the University be prohibited from proceeding with any such
publication.
6.3. Use of Name. Neither party hereto shall directly or
-----------
indirectly use the name of the other party, or the name of any
trustee, director, officer or employee thereof, without the others
written consent.
ARTICLE 7: TERMINATION
7.1 Termination.
-----------
7.1.1 In addition to the termination right set forth in Section
2.3.2 hereof, either party may terminate this Agreement effective upon
written notice to the other party, if the other party breaches the
terms of this Agreement and fails to cure Such breach within days
after receiving notice
<PAGE>
Collaborative Research Agreement between PIRC and Penn 10
thereof.
7.1.2 This Agreement shall automatically terminate if Sponsor
becomes insolvent or voluntary or involuntary proceedings by or
against Sponsor are instituted in bankruptcy or under any insolvency
law, or a receiver or custodian is appointed for Sponsor, or
proceedings are instituted by or against Sponsor for corporate
reorganization or the dissolution of Sponsor, which proceeding, if
involuntary, shall not have been dismissed within the date of filing
or Sponsor makes an assignment for benefit of creditors, or
substantially all of the assets of Sponsor are seized or attached and
not released within thereafter.
7.1.3 In addition, either party may terminate this Agreement for
any reason upon prior written notice to the other party.
7.2. Effect of Termination. In the event of termination of this
---------------------
Agreement prior to its stated term whether for breach or for any other
reason whatsoever, the University shall be entitled to retain from the
payments made by Sponsor prior to termination the University's
reasonable costs of concluding the work in progress. Allowable costs
include, without limitation, all costs or noncancellable commitments
incurred prior to the receipt of, or issuance by, the University of
the notice of termination, and the full cost of each student and
faculty member supported hereunder through the end of the academic
semester in which the effective date of termination fails. In the
event of termination, the University shall submit a final report of
all costs incurred and all funds received under this Agreement within
sixty (60) days after the effective termination date. The report shall
be accompanied by a check in the amount of any excess of funds
advanced over costs and allowable commitments incurred.
7.3. Survival. Termination of this Agreement shall not affect the
--------
rights and obligations of the parties accrued prior to termination
hereof. The provisions of Articles 5, 6, 8 and 9 shall survive such
termination.
ARTICLE 8: DISCLAIMERS, ETC.
8.1. No Warranties. THE UNIVERSITY MAKES NO WARRANTIES, EXPRESS OR
-------------
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
THE CONDUCT OF THE COLLABORATIVE RESEARCH, OR THE CONDITION OF ANY
INVENTION(S) OR PRODUCT(S), WHETHER TANGIBLE OR INTANGIBLE, CONCEIVED,
DISCOVERED, OR DEVELOPED UNDER THIS AGREEMENT, OR THE OWNERSHIP,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE
COLLABORATIVE RESEARCH OR ANY SUCH INVENTION OR PRODUCT. THE
UNIVERSITY SHALL NOT BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL, PUNITIVE
OR OTHER DAMAGES SUFFERED BY SPONSOR OR ANY OTHER PERSON RESULTING
FROM THE COLLABORATIVE RESEARCH OR THE USE OF ANY SUCH INVENTION OR
PRODUCT.
<PAGE>
Collaborative Research Agreement between PIRC and Penn 11
8.2 Indemnity. The indemnification or reimbursement rights and
---------
obligations of the parties hereto shall be governed by Sections 6.2
and 6.3 of the License Agreement.
ARTICLE 9: ADDITIONAL PROVISIONS
9.1 Arbitration.
-----------
9.1.1 Except as provided in Section 6.4 hereof, all disputes
arising between the University and Sponsor under this Agreement shall
be settled by arbitration conducted in the English language in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association relating to voluntary arbitrations with a
panel of three (3) arbitrators. The parties will cooperate with each
other in causing the arbitration to be held in as efficient and
expeditious a manner as practicable. Any arbitration proceeding
instituted under this Agreement shall be brought in Philadelphia,
Pennsylvania.
9.1.2 Any award rendered by the arbitrators shall be final and
binding upon the parties hereto. Judgment upon the award maybe entered
in any court of record of competent jurisdiction. Each party shall pay
its own expenses of arbitration and the expenses of the arbitrators
shall be equally shared unless the arbitrators assess as part of their
award all or any part of the arbitration expenses of one party
(including reasonable attorneys' fees) against the other party.
9.9- Assignment. No rights hereunder may be assigned by Sponsor,
----------
directly, unless by merger or acquisition of Sponsor, without the
express written consent of the University; provided, however, that
Sponsor may assign the same to an Affiliate that assumes all
obligations of Sponsor under this Agreement or to any entity in
connection with any merger, acquisition or sale of all or
substantially all of its business related to this Agreement. Any
prohibited assignment of this Agreement on the rights hereunder shall
be null and void. No assignment shall relieve Sponsor of
responsibility for the performance of any accrued obligations which it
has prior to such assignment, unless the 'University consents in
writing to release of such accrued obligations. This Agreement shall
inure to the benefit of permitted assigns of Sponsor.
9.3 No Waiver. A waiver by either party of a breach or violation
---------
of any provision of this Agreement will not constitute or be construed
as a waiver of any subsequent breach or violation of that provision or
a waiver of any breach or violation of any other provision of this
Agreement.
9.4 Independent Contractor. Nothing herein shall be deemed to
----------------------
establish relationship of principal and agent between the University
and Sponsor, nor any of their agents or employees for any purpose
whatsoever. This Agreement shall not be construed as
<PAGE>
Collaborative Research Agreement between PIRC and Penn 12
constituting the University and Sponsor as partners, or as creating
any other form of legal association or arrangement which would impose
liability upon one party for the act or failure to act of the other
party.
9.5 Notices. Any notice under this Agreement shall be sufficiently
-------
given if-sent in writing by prepaid first class, certified or
registered mail, return receipt requested, addressed as follows:
If to the University:
Center for Technology Transfer
University of Pennsylvania
133 South 36th Street
Philadelphia, PA 19104
Attn: Director
cc: Office of the General Counsel
110 College Hall
University of Pennsylvania
Philadelphia, PA 19104
Attn: General Counsel
cc: Dr. Harvey Rubin
Assistant Professor
Department of Medicine
Hospital of the University of Pennsylvania
3400 Spruce Street
Philadelphia, Pa 19104
If to Sponsor:
P I Research Corporation
c/o Mr. Robert Kunze
Hambrecht & Quist Life Science Venture Partners
One Bush Street
San Francisco, CA 94101
Attn: Chief Executive Officer
with copy to:
Hambrecht & Quist Life Science
Venture Partners
One Bush Street
San Francisco, CA 94104
Attn: Mr. Robert Kunze
with copy to:
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attn: Kenneth L. Guernsey, Esq.
<PAGE>
Collaborative Research Agreement between PIRC and Penn 13
9.6 Entire Agreement; Changes. This Agreement embodies the entire
-------------------------
understanding between the parties relating to the subject matter
hereof and supersedes all prior understandings and agreements, whether
written or oral. This Agreement may not be varied except by a written
document signed by duly authorized representatives of both parties.
9.7 Severability. Any of the provisions of this Agreement which
------------
are determined to be invalid or unenforceable in any jurisdiction
shall be ineffective to the extent of such invalidity or
unenforceability in such jurisdiction, without rendering invalid or
unenforceable the remaining provisions hereof or affecting the
validity or unenforceability of any of the terms of this Agreement in
any other jurisdiction.
9.8 Headings. The headings and captions used in this Agreement are
--------
for convenience of reference only and shall not affect its
constructions or interpretation.
9.9 No Third Party Benefits. Nothing in this Agreement, express or
-----------------------
implied, is intended to confer on any person other than the parties of
their permitted assigns, any benefits, rights or remedies.
9.10 Governing Law. This Agreement shall be construed and governed
-------------
in accordance with the laws of the State of Delaware, without giving
effect to conflict of law provisions.
9.11 Counterparts. This Agreement shall become binding when any
------------
one or more counterparts hereof, individually or taken together, shall
bear the signatures of the University and Sponsor. This Agreement may
be executed in any number of counterparts, each of which shall be
deemed an original as against the party whose signatures appears
thereon, but all of which taken together shall constitute but one and
the same instrument.
9.12 Independent Research. This Agreement shall not be construed
--------------------
to limit the freedom of individuals participating in the Collaborative
Research to engage in any other research.
9.13 Nondiscrimination. The University and Sponsor shall not
-----------------
discriminate against any employee or applicant for employment because
of race, color, sex, sexual or affectational preference, age,
religion, national or ethnic origin, or handicap.
9.14 Force Majeure. Neither party shall be liable for any
-------------
failure to perform as required by this Agreement to the extent
such failure to perform is due to circumstances reasonably beyond
such party's control, including, without limitation, labor
disturbances or labor disputes of any kind, accidents, failure of
any governmental approval required for full performance, civil
disorders or commotions, acts of aggression acts of God, energy
or other conservation measures imposed by law or regulation,
<PAGE>
Collaborative Research Agreement between PIRC and Penn 14
explosions, failure of utilities, mechanical breakdowns, material
shortages, disease, or other such occurrences.
IN WITNESS WHEREOF, the duly authorized representatives of the
parties hereby execute this Collaborative Research Agreement as of the
date first above written.
FOR THE TRUSTEES OF THE FOR THE SPONSOR
UNIVERSITY OF PENNSYLVANIA
/s/ Stephen M. Sammut /s/ Robert Kunze
-------------------------- --------------------------
Stephen M. Sammut Robert Kunze
Director, Center for Chairman
Technology Transfer
Agreed to and Acknowledged:
/s/ Dr. Harvey Rubin /s/ Dr. Barry Cooperman
-------------------------- --------------------------
Dr. Harvey Rubin Dr. Barry Cooperman
Principal Investigator. Investigator
/s/ Dr. Norman Schechter /s/ Dr. Zhai-Mei Wang
-------------------------- --------------------------
Dr. Norman Schechter Dr. Zhai-Mei Wang
Investigator Investigator
<PAGE>
Collaborative Research Agreement between PIRC and Penn 15
Attachment 1
Description of the Collaborative Research
-----------------------------------------
and Schedule of payments
------------------------
<PAGE>
Summary of Proposed Research
<PAGE>
Collaborative Research Agreement
PI Research Corporation/University of Pennsylvania
Budget for the period March 1, 1991 to February 29, 1992
<PAGE>
Collaborative Research Agreement between PIRC and Penn 16
Attachment 2
Additional Terms for License Agreement
--------------------------------------
B. In the event that Sponsor exercises its option
under Section 5.4 of the Agreement to obtain an exclusive license in
or to a University Invention or to the University's undivided interest
in a Joint Invention (collectively, "Additional Licensed Technology")
that are not included under the definition of Licensed Patents in the
License Agreement and/or
are not related to the
parties shall execute a written addendum to the License Agreement
making Additional Licensed Technology subject to all the terms and
conditions of the License Agreement with the exception that Minimum
Royalties for Additional Licensed Technology as otherwise described in
Paragraph 3.4 of the License Agreement shall be administered according
to the following schedule:
Minimum Royalty Year Beginning
--------------- --------------
( ) Anniversary of
Addendum
Each Anniversary of Addendum
thereafter
B. 1.2. University shall not receive an up-front payment or
additional stock for Additional Licensed Technology. Royalties will be
paid on Additional Licensed Technology to the extent that such
Additional Licensed Technologies are incorporated in the sale of
Licensed Products.
<PAGE>
Collaborative Research Agreement between PIRC and Penn 17
Attachment 3
Form of Confidentiality Agreement
-------------------------------------
<PAGE>
CONFIDENTIALITY AGREEMENT
(Acceptable Form Under Paragraph 8.1 (c) of License Agreement and
Paragraph 6.1.3 of Collaborative Research Agreement)
This Agreement is by and between ______________________ an
employee of the University of Pennsylvania ("the University" located
in Philadelphia, PA 19104 (hereinafter referred to as"Recipient"); and
PI Research Corporation, a corporation organized and existing under
the laws of Delaware (hereinafter referred to as "Company").
RECITALS
WHEREAS, a License Agreement, dated October 1, 1991 and a
Collaborative Research Agreement dated March 1, 1991 are in place
between the University and Company in the field of protease inhibitors
with Recipient serving as an Investigator or other researcher for the
University; and
WHEREAS, Company anticipates conducting research in, or working
with third parties that are conducting research in, the field of
protease inhibitors, and may develop or have access to a body of
technical, economic and business information and/or material samples
(hereinafter collectively referred to as "Information") which Company
considers proprietary; and
WHEREAS, in order for Company to conduct research under the
Collaborative Research Agreement with University, or for Company to
facilitate the transfer of technology under the License Agreement, it
may be necessary for Company to disclose to and/or provide Recipient
with Information; and
WHEREAS, the University bears no institutional responsibility to
receive or maintain in confidence such Information, but will allow
Recipient to enter this Agreement on an individual basis in connection
with the Collaborative Research Agreement and the License Agreement;
and
WHEREAS, Recipient is willing to accept as an individual
Information from Company under the terms and conditions set forth
herein in order to conduct the work contemplated by the Collaborative
Research Agreement and/or participate in the transfer of technology
from University to Company under the License Agreement (hereinafter
collectively referred to as "Program Performance").
<PAGE>
Confidentiality Agreement Page 2
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the parties do agree as follows:
1. When Information is clearly marked "Confidential or later
confirmed in writing to be confidential, Recipient agrees to keep the
Information in strict confidence and not to disclose or otherwise use
the Information for any purpose other than Program Performance without
the prior written consent of Company. Accordingly, Recipient agrees to
take all reasonable precautions to prevent the unauthorized disclosure
to any third party of the Information received from Company. Recipient
agrees to disclose such Information only to University employees and
solely to those University employees who:
(a) Recipient knows have entered into a confidentiality agreement
in the form of this Agreement which was signed by Company and which
concerns the Information; and
(b) need to know the Information because they are assisting
Recipient in the Program Performance.
2. The above notwithstanding, Recipient's obligation of
confidence with respect to the Information disclosed or developed
hereunder shall not include:
(a) Information which, at the time of disclosure to
Recipient, is published, known publicly or otherwise becomes part
of the public domain, through no fault of Recipient;
(b) Information which, after disclosure to Recipient, is
published or becomes known publicly or otherwise becomes part of
the public domain through no fault of Recipient;
(c) Information which, prior to the time of disclosure to
Recipient, is known to Recipient, as evidenced by Recipient's
written records; and
(d) Information which has been disclosed to Recipient in good
faith by a third party who has not, or is not, under any
obligation of confidence or secrecy to Company at the time said
third party discloses to Recipient.
3. No rights or license to use any Information disclosed
hereunder, either expressed or implied, is granted by Company.
<PAGE>
Confidentiality Agreement Page 3
4. The obligations of confidentiality and nonuse set forth
herein with respect to any particular Information shall remain in
effect for a period of five (5) years after the date of disclosure of
that Information, or for as long as Company has a documentable
confidentiality obligation to a third party for Information disclosed
to Recipient, whichever is longer.
IN WITNESS WHEREOF, the parties intending to be legally bound have
caused this Agreement to be executed by themselves or by their duly
authorized representatives as of the last date written below.
For PI Research Corporation For Recipient
By: By:
------------------------ ----------------------
Printed Printed
Name: Name:
---------------------- --------------------
Title: Date:
--------------------- --------------------
Date:
----------------------
Exhibit 10.73
<PAGE>
Execution copy
SPARTA PHARMACEUTICALS, INC.
P.O. Box 13288
Research Triangle Park, NC 27709
March 15, 1996
William M. Sullivan
3308 Landor Road
Raleigh, NC 27609
Dear Mr. Sullivan:
This letter sets forth the terms of an amendment (the "Amendment")
to the agreement dated as of January 28, 1991 between you and Sparta
Pharmaceuticals, Inc. (the "Company") relating to the terms of your
employment by the Company, as such agreement has been amended by letter
agreements dated as of March 2, 1993, and December 16, 1994 (the
"Employment Agreement").
The effective date of this Amendment will be March 15, 1996 (the
"Effective Date"), the date on which your resignation as President and
Chief Executive Officer becomes effective, provided however nothing
herein is intended to affect adversely rights which may have accrued to
you under the terms of the Employment Agreement for service prior to
the Effective Date, including but not limited to compensation and
equity compensation to which you may be entitled under the terms of the
Employment Agreement, the 1991 Stock Plan of the Company and stock
option agreements executed pursuant to such Agreement and such Plan.
Subject to the foregoing, the Employment Agreement is hereby
amended in its entirety to read as set forth below. You are sometimes
referred to in this Agreement as the "Executive".
1. Employment. The Company hereby agrees to continue to employ
----------
you, and you hereby agree to continue to be employed, as Chairman of
the Board of Directors of the Company. While serving as Chairman of the
Board of Directors of the Company, you will have such responsibilities,
duties and authority as are prescribed by the By-laws of the Company
and as may from time to time be assigned to you by the Board of
Directors (the "Board") that are customary for, and consistent with
your status as, the Chairman of the Board of Directors, including,
without limitation, presiding at meetings of the stockholders and Board
and assisting management of the Company in preparing therefor, and, as
reasonably requested by management, assisting in presentations to the
financial community and partnering discussions. You shall have such
other duties as you and the Company may from time to time agree. You
will be an officer of the Company and report only to the Board. It is
anticipated that you will devote an average of approximately one day
per week to performance of services hereunder, although you shall not
be required to devote any specific minimum amount of time each week to
the discharge of your duties.
<PAGE>
You shall not be required to perform any legal services in
connection with your duties hereunder. In the event the Company wishes
to retain you to perform legal services and you are willing to do so,
such services shall be on such terms and conditions, and subject to
such additional compensation, as you and the Company may from time to
time agree, including, without limitation, fees for professional
services and expenses and the cost of professional liability insurance
which you may reasonable incur in connection therewith.
2. Work for Others. The Company recognizes and agrees that you
----------------
may perform services for other persons or entities, provided that you
do not deem such services to be a conflict of interest or a breach of
your fiduciary duty to the Company, and provided further that nothing
contained in this Paragraph 2 shall be deemed to prevent or limit your
right to serve as Chairman of the Board, Director of, consultant to, or
in any other capacity with, The Immune Response Corporation, Procyte
Corporation, BioVentures, Inc. and Research Corporation Technologies
and conduct such activities and engage in such duties in connection
with such responsibilities as you may deem necessary or desirable in
connection therewith.
3. Term. (a) Your retention hereunder shall commence on the
----
Effective Date, and will continue until the second anniversary thereof,
subject to extension in accordance with the provisions of the following
paragraph, unless terminated earlier in accordance with the terms
hereof (the "Employment Term").
(b) Notwithstanding the foregoing, on each anniversary of the
Effective Date commencing with the second anniversary of such date,
your employment hereunder shall be automatically extended for one (1)
year unless either you or the Company shall have given written notice
to the other of a desire that such automatic extension not occur, which
notice was given no later than thirty (30) days prior to the relevant
anniversary of the Effective Date.
4. Principal Location. The principal location at which you will
------------------
perform your duties will be your residence or any temporary residence
at which you may be located from time to time.
5. Compensation. (a) In consideration for your services under
------------
this Agreement, you will be paid at the annual rate of $120,000,
payable semi-monthly in arrears, subject to increase from time to time
by action of the Board in accordance with your performance and the
Company's performance (the "Annual Base Salary").
6. Bonuses. You will be entitled to such bonuses as are
-------
determined from time to time by the Board in accordance with your
performance and the Company's performance.
7. Expenses. The Company will reimburse you for travel,
entertainment and other business expenses reasonably incurred by you in
connection with the business of the Company and its Affiliates (as
defined below) to the extent and in a manner consistent with then
Company policy and appropriate to someone in a position of your
stature.
2
<PAGE>
8. Equity Compensation. (a) In connection with your employment
-------------------
by the Company, the Company agrees to grant you an option (the
"Option") under its 1991 Stock Plan to purchase all or any part of an
aggregate of 75,000 shares of Common Stock, $.001 par value ("Common
Stock"), of the Company, subject to exercise at the price per share of
Common Stock of Three Dollars and No Cents ($3.00), the price which the
Company has determined as of the Effective Date is their fair market
value, and vesting at the rate of 3,125 shares on the 15th day of each
of the first twenty four (24) calendar months occurring after the
Effective Date, provided in each ease you are employed by the Company
on such 15th day, and on such other terms and conditions as are
contained in the Company' s 1991 Stock Plan and in the Stock Option
Agreement attached hereto as Exhibit A (the "Option Agreement").
---------
(b) In connection with your employment by the Company, the Company
agrees to amend the options previously granted to you under the
Company's 1991 Stock Plan, and the stock option agreements executed in
connection therewith (the "Outstanding Options"), so that (i) the
periods of exercise of the Outstanding Options are extended in the
event of termination of your employment for any reason during the
Employment Term whether by the Company or yourself so that such options
may be exercised within twenty four (24) months after the date on which
your employment terminates, but may not be exercised thereafter, (ii)
the number of shares of Common Stock (subject to adjustment as provided
in the Stock Option Plan) which may be exercisable under the
Outstanding Options on the Effective Date shall be the greater of (x)
the aggregate amount that is or would be exercisable under the
Outstanding Options on the second anniversary of the respective
effective dates of the grants of the Outstanding Options,
notwithstanding that your employment under the Employment Agreement (as
in effect immediately prior to the Effective Date) may not have
continued until such anniversary, and (y) the aggregate amount that
would be exercisable under the Outstanding Options on the anniversary
of the respective effective dates of the grants of the Outstanding
Options next occurring after the Effective Date if your employment
under the Employment Agreement (as in effect immediately prior to the
Effective Date) had continued until such anniversary, (iii) the number
of shares of Common Stock (subject to adjustment as provided in the
Stock Option Plan) which may be exercisable under the Outstanding
Options and is not exercisable on the Effective Date in accordance with
clause (ii) shall vest on the 15th day of each calendar month occurring
after the Effective Date, provided in each case you are employed by the
Company on such 15th day, at the greater of (A) the rate of one twenty-
fourth (1/24th) of such unvested shares under any Outstanding Option
and (B) the rate determined by a fraction, the numerator of which is
one and the denominator of which is the number of full months remaining
between the applicable anniversary for vesting set forth in clause (ii)
and the date on which an Outstanding Option would otherwise be fully
exercisable, and (iv), notwithstanding the foregoing, the Outstanding
Options are fully exercisable in the event of a "Change of Control" (as
defined in the Option Agreement) while you are employed by the Company,
commencing as of immediately prior to the consummation of a Change of
Control (but subject to the consummation of such Change of Control),
and in the event of a Change of Control as a result of a tender offer,
the Outstanding Options are fully exercisable in a timely manner such
that you may participate in such tender offer at any stage, and on such
other terms and conditions as are contained in the Company's 1991 Stock
Plan and in the Outstanding Options.
3
<PAGE>
9. Benefits. In connection with your employment hereunder, you
--------
will be entitled during the Employment Term to the following additional
benefits:
(a) At the Company' s expense, such fringe benefits as the Company
may provide from time to time for its senior management, but in
any event providing you with benefits which are at least
equivalent to those set forth on Schedule A attached hereto.
(b) The Company shall furnish you with such equipment and services
as shall be reasonably suitable to and appropriate for the
performance of your duties from your residences as set forth
herein, but in no event less than those which have been heretofore
provided to you in connection with your duties under the
Employment Agreement.
10. Termination upon Death or Disability. Your employment by the
--------------------------------------
Company shall terminate upon your death, or if, by virtue of total and
permanent disability, you are unable to perform your duties hereunder.
The determination that, by virtue of total and permanent
disability, you are unable to perform your duties hereunder shall be
made by a physician chosen by the Company and reasonably satisfactory
to you (or your legal representative). The cost of such examination
shall be borne by the Company. Without limiting the generality of the
foregoing, unless otherwise agreed, you shall be conclusively presumed
to be totally and permanently disabled hereunder if for reasons
involving mental or physical illness or physical injury you fail to
perform your duties hereunder for a period of one hundred twenty (120)
consecutive calendar days or for any periods aggregating one hundred
twenty (120) days or more in any twelve (12) consecutive month period.
For purposes of this Paragraph 10, the Termination Date in the
event of death shall be the date of death and in the event of such
total and permanent disability shall be the earlier of the date of such
physician's examination pursuant to which such determination is made or
the first business day after which either such 120-day has expired.
In the event of such a termination of employment as a result of
your death or total and permanent disability, the Company shall have no
further obligations hereunder except as provided in Paragraph 15 and 16
hereof and except as provided below in this Paragraph 10:
(a) In the event of death or total and permanent disability,
the Company shall pay to you or your estate, as the case may be,
an amount equal to $240,000 less the amount of Annual Base Salary
previously paid to you under this Agreement, in twelve equal
monthly installments following the Termination Date if such
Termination Date occurs within twelve months after the Effective
Date, and if such Date occurs later but within twenty four months
after the Effective Date (the "Initial Employment Term"), in a
number of equal installments equal to the number of months
remaining in the Initial Employment Term.
4
<PAGE>
11. Termination by the Executive. Your employment may be terminated
----------------------------
by you, by giving a Notice of Termination at any time by written notice
of at least one (1) month to the Company, which time period may be
waived by the Company in its discretion.
The Termination Date in the event of a termination (i) pursuant to
subparagraph (a) immediately above shall be the date set forth in the
Notice of Termination, except as the Company and you may otherwise
agree to a shorter period of time during which your services hereunder
shall be required, and in such event, the date as of which it is agreed
such services shall end.
12. Termination by the Company. Your employment may be
-----------------------------
terminated at any time by the Company (a) with Cause by a Notice of
Termination to you, effective immediately unless otherwise stated in
such notice, which date shall be the Termination Date therefor, (b)
without Cause at any time, by a Notice of Termination to you, effective
thirty (30) days after the date given, except as you and the Company
may otherwise agree, which date of effectiveness shall be the
Termination Date therefor, or (c) for total and permanent disability in
accordance with Paragraph 10.
For purposes of this Agreement, the Company shall have "Cause" to
terminate your employment hereunder upon (i) the willful and continued
failure by you to substantially perform your duties hereunder (other
than any such failure resulting from your incapacity due to physical or
mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason) after
demand for substantial performance is delivered by the Company to you
that specifically identifies the manner in which the Company believes
you have not substantially performed your duties, (ii) the willful
engaging by you in misconduct which is materially injurious to the
Company, monetarily or otherwise, or (iii) the willful violation by you
of the provisions of Paragraph 17 ("Unauthorized Disclosure"), provided
that such violation results in material injury to the Company. For
purposes of this paragraph, no act, or failure to act, on your part
shall be considered "willful" unless done, or omitted to be done, by
you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause
------
unless (1) reasonable notice to you setting forth the reasons for the
Company's intention to terminate for Cause, (2) an opportunity for you,
together with your counsel, to be heard before the Board, and (3)
delivery to you of a Notice of Termination from the Board finding that
in the good faith opinion of a majority of the Board you were guilty of
conduct set forth above in clause (I), (ii) or (iii) hereof, and
specifying the particulars thereof in detail.
13. Notice of Termination. Any termination of your employment by
----------------------
the Company or by you (other than as a result of death) shall be
communicated by written Notice of Termination to the other party hereto
in accordance with Paragraph 21. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for the termination under the provision so indicated.
5
<PAGE>
14. Payments of Compensation Upon Termination for other than Death
--------------------------------------------------------------
or Disability.
-------------
(a) In the event your employment hereunder is terminated by you for
any reason, or by the Company during the Initial Employment Term other
than for either Cause or total and permanent disability, you shall be
entitled to monthly payments equal to the greater of (i) one twelfth of
the remainder of $240,000 less the amount of Annual Base Salary
previously paid to you under this Agreement and (ii) the amount
determined by multiplying such remainder by a fraction, the numerator
of which is one and the denominator of which is the number of months
remaining in the Initial Employment Term, for the period commencing on
the Termination Date and continuing for twelve (12) months from the
Termination Date if the immediately preceding clause (i) is applicable,
or for the number of months remaining in the Initial Employment Term if
clause (ii) is applicable.
(b) In the event the Company shall terminate your employment for
Cause, then you shall be entitled as of the Termination Date to no
compensation under this Agreement, except as provided in Paragraph 16.
15. Continuation of Benefits. In addition, in the event your
-------------------------
employment hereunder is terminated at the expiration of the Initial
Employment Term or, if earlier, (a) by you for any reason, or (b) by
the Company without Cause or (c) as a result of total and permanent
disability in accordance with Paragraph 10, then you shall continue to
be entitled to the benefits to which you were entitled as of
immediately preceding the expiration of the Initial Employment Term, or
the applicable Termination Date, as the case may be, pursuant to
Paragraph 9(a) hereof at the Company's expense for a period of one (1)
year after the Initial Employment Term or the Termination Date, as the
case may be, except as otherwise required by law.
16. Accrued Compensation. In the event of any termination of your
--------------------
employment for any reason, you (or your estate) shall be paid such
portion of your Annual Base Salary and bonuses as has accrued
(including, without limitation, as provided below) by virtue of your
employment during the period prior to termination and has not yet been
paid, together with any amounts for expense reimbursement and similar
items which have been properly incurred in accordance with the
provisions hereof prior to termination and have not yet been paid. Such
amounts shall be paid within ten (10) days of the Termination Date. The
amount due to you (or your estate) under this Paragraph 16 in payment
of any bonus shall be a proportionate amount of the bonus that would
otherwise have been due to you as if such termination had not occurred.
17. Confidentiality Agreement. The Confidentiality Agreement
-------------------------
dated January 28, 1991, between you and the Company (the
"Confidentiality Agreement") shall remain in full force and effect as
provided therein.
18. Key Man Insurance. You agree to make such disclosures
-----------------
regarding your personal health, engage in a physical examination
conducted by a physician reasonably satisfactory to you,
6
<PAGE>
and execute such documents, as may be reasonably required so that the
Company can obtain and maintain in effect during the term of this
agreement a policy of insurance payable to the Company in the event of
your death of at least $2,000,000, provided that the Company' s failure
to obtain or maintain in effect any such policy shall not otherwise
affect its or your obligations and benefits under this agreement.
19. Parties. This Agreement is personal and shall in no way be
-------
subject to assignment by you except as contemplated hereby. This
Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors and assigns either by merger, operation of
law, consolidation, assignment, purchase or otherwise of a controlling
interest in the business of the Company and shall be binding upon and
shall inure to the benefit of you, your heirs, executors,
administrators, personal and legal representatives, distributees,
devisees, legatees, successors and permitted assigns. If you should die
while any amounts would still be payable to you hereunder if you had
continued to live (other than amounts to which you would be entitled by
reason of continued employment), all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to your devisees, legatees or other designees or, if there be
no such designee, to your estate. The Company agrees that a successor
in interest by merger, operation of law, consolidation, assignment,
purchase or otherwise of a controlling interest in the business of the
Company will be informed prior to such event of the existence of this
Agreement. The Company will require any successor (whether direct or
indirect, by purchase, merger, operation of law, consolidation,
assignment or otherwise of a controlling interest in the business,
stock or other assets of the Company) to assume expressly and agree to
perform this Agreement. As used in this Agreement, "the Company" shall
mean the Company as hereinbefore defined and any successor as
aforesaid.
20. Invalidity. We intend this Agreement to be enforced as written.
----------
However, if any term or provision of this Agreement shall to any extent
be declared illegal or unenforceable by a duly authorized court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such term or provision in circumstances other than those
as to which it is so declared illegal or unenforceable, shall not be
affected thereby, each term and provision of this Agreement shall be
valid and be enforceable to the fullest extent permitted by law and the
illegal or unenforceable term or provision shall be deemed replaced by
a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable
term or provision.
21. Notices. All notices and communications required or permitted
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to be given hereunder shall be duly given by delivering the same in
hand or by depositing such notice or communication in the mall, sent by
certified or registered mail, return receipt requested, postage
prepaid, or by delivery by overnight courier, with a receipt obtained
therefor, as follows:
If sent to the Company: Sparta Pharmaceuticals, Inc.
P.O. Box 13288
Research Triangle Park, NC 27709
7
<PAGE>
If sent to you: 3308 Landor Road
Raleigh, NC 27609
or such other address as either party furnishes to the other by like
notice, provided, however, that any notice of a change of address shall
be effective only upon receipt.
22. Entire Agreement. This Agreement together with Schedule A, the
----------------
Employment Agreement, the Subscription Agreement executed pursuant to
the Employment Agreement, the Option Agreement, the Outstanding
Options, any amendments to the Option Agreement and the Outstanding
Options that may be executed to implement outstanding resolutions of
the Board of Directors and the Confidentiality Agreement constitute the
entire agreement and understanding between us in relation to the
subject matter hereof and there are no promises, representations,
conditions, provisions or terms related thereto other than those set
forth or referred to in this Agreement and the exhibits hereto. This
Agreement supersedes as provided herein all previous understandings,
agreements and representations between the Company and you regarding
your employment by the Company, written or oral.
23. Headings. All captions in this Agreement are intended solely
--------
for the convenience of the parties, and none shall be deemed to affect
the meaning or construction of any provision hereof.
24. Waiver. No failure of the Company or you to exercise any power
------
reserved to it or you, respectively, by this Agreement, or to insist
upon strict compliance by you or the Company, respectively, with any
obligation or condition hereunder, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver of
the Company's or your right, as the case may be, to demand exact
compliance with any of the terms hereof. Waiver by either party of any
particular default by the other party hereto shall not affect or impair
the waiving party's rights with respect to any subsequent default of
the same, similar or different nature, nor shall any delay, forbearance
or omission of either party to exercise any power or right arising out
of any breach or default by the other party of any of the terms,
provisions or covenants hereof, affect or impair our or your right to
exercise the same, nor shall such constitute a waiver by the Company or
you, as the case may be, of any right hereunder, or the right to
declare any subsequent breach or default and to terminate this
Agreement prior to the expiration of its term.
25. Affiliate. As used herein, the term "Affiliate" shall be deemed
---------
to include any corporation, joint venture, or other business
enterprise, whether incorporated or unincorporated, which the Company
directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with.
26. Subsidiaries. As used herein, the term "Subsidiaries" shall
------------
mean all corporations a majority of the capital stock of which
entitling the holder thereof to vote is owned by the Company or a
Subsidiary.
8
<PAGE>
27. Governing Law. This Agreement shall be construed under and be
governed in all respects by the law of the State of North Carolina.
28. Excise Tax. In the event you are subject to any excise tax
-----------
("Excise Tax") on your compensation by the Company or any of its
Affiliates (including but not limited to excise taxes imposed under
Section 4999 of the Internal Revenue Code), the Company agrees that it
will then "gross-up" your compensation by making an additional payment
to you in an amount which, after reduction for any income or excise
taxes payable as a result of receiving such additional payment, is
equal to the Excise Tax.
29. Mitigation. You shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment
or otherwise, nor, shall the amount of any payment provided for herein
be reduced by any compensation earned by you as the result of
employment by another employer or by retirement benefits after the
Termination Date or otherwise.
30. Amendment. No amendment or modification to this Agreement shall
be effective unless in writing and signed by both parties hereto.
31. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each executed counterpart constituting an original and
such counterparts together constituting one agreement.
If you agree with the terms of your employment as set forth in this
Agreement, please execute the duplicate copy hereof in the space
provided below.
SPARTA PHARMACEUTICALS, INC,
By: /s/ Lindsay A. Rosenwald, M.D.
------------------------------
Lindsay A. Rosenwald, M.D.
Director
ACCEPTED AND AGREED
/s/ William M. Sullivan
-----------------------
William M. Sullivan
9
<PAGE>
SCHEDULE A
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BENEFITS
--------
1. Life Insurance Policy payable to beneficiaries designated by
you in the amount of at least $1,000,000.
2. Participation in medical and dental health care benefit
plans, of a type similar to the plans in which you are currently
enrolled by the Company.
3. Non-resident membership in the Sky Club, 200 Park Avenue,
New York, NY.
<PAGE>
EXHIBIT A
Employee Copy ________
Company Copy ________
Option Number ________
SPARTA PHARMACEUTICALS INC.
--------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of the 15th day of March, 1996, between Sparta
Pharmaceuticals, Inc. (the "Company"), a Delaware corporation having a
principal place of business in Research Triangle Park, North Carolina,
and William M. Sullivan of Raleigh, North Carolina, an employee of the
Company (sometimes referred to below as the "Employee" and as the
"Optionee").
WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock, $.001 par value (the "Shares")
under and for the purposes of the 1991 Stock Plan of the Company (the
"Plan");
WHEREAS, the Company and the Employee understand and agree that any
terms used and not defined herein have the same meanings as in the
Plan;
WHEREAS, the Company and the Employee each intend and understand
that the Option granted herein is not an Incentive Stock Option.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration,
the parties hereto agree as follows:
1. GRANT OF OPTION
---------------
The Company hereby irrevocably grants to the Employee, as of the
date first set forth above (the "Effective Date"), the right and option
to purchase all or any part of an aggregate of Seventy Five Thousand
(75,000) Shares on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated
herein by reference. The number of Shares is subject to adjustment, as
provided in the Plan, in the event of a stock split, reverse stock
split or other events affecting the holders of Shares after the date
hereof. Determinations made in connection with this Option pursuant to
the Plan shall be governed by the Plan as it exists on this date. The
Employee acknowledges receipt of a copy of the Plan.
<PAGE>
This Option is in addition to any other options heretofore or
hereafter granted to the Employee by the Company, but a duplicate
original of this instrument shall not effect the grant of another
option.
2. PURCHASE PRICE
--------------
The purchase price of the Shares covered by the Option shall be at
a price per Share of Three Dollars and No Cents ($3.00), subject to
adjustment, as provided in the Plan, in the event of a stock split, a
reverse stock split or other events affecting the holders of Shares.
Payment may be by cash or certified check.
3. EXERCISE OF OPTION
------------------
If the Employee has continued to be employed by the Company on the
15th day of a calendar month occurring after the Effective Date, the
Employee may exercise the Option for up to a number of Shares (subject
to adjustment as provided in the Plan) equal to the amount determined
by multiplying 3,125 by the number of monthly periods during which the
Employee shall have been employed occurring after the Effective Date
and expiring immediately prior to such 15th day. The foregoing rights
are cumulative and subject to the other terms and conditions of this
Agreement and the Plan, including, without limitation, the term of the
Option and the provisions affecting the Employee's ability to exercise
the Option after termination of the employment.
4. TERM OF OPTION
--------------
The Option shall terminate ten (10) years from the date of this
Agreement, but shall be subject to earlier termination as provided
herein or in the Plan.
a. Termination of Employment (Other than for Death or
--------------------------------------------------
Disability)
-----------
If the Employee's employment ceases (for any reason other than
death or Disability), the Option may be exercised within twenty four
(24) months after the date the Employee's employment ceases, or within
the originally prescribed term of the Option, whichever is earlier, but
may not be exercised thereafter.
Notwithstanding the foregoing, in the event of the Employee's death
within twenty four (24) months after the termination of such service,
the Optionee's Survivors may exercise the Option within one (1) year
after the date of the Employee's death, but in no event after the date
of expiration of the term of the Option.
-2-
<PAGE>
b. Termination of Employment as a Result of Disability or
------------------------------------------------------
Death
-----
In the event the Employee's service to the Company terminates by
reason of Disability, as determined in accordance with the Plan, or
death, the Option shall be exercisable only within one (1) year after
the date of such Disability or death, as the case may be, or if
earlier, the term originally prescribed by the Option. In such event,
the Option shall be exercisable:
(1) to the extent that the right to purchase the Shares
hereunder has accrued on the date of Disability or death
and is in effect as of such date; and
(2) and to the extent any such right would have accrued under
Section 3 had the Employee's employment not terminated by
reason of Disability or death prior to the end of the
current monthly accrual period.
c. Change of Status
----------------
"Employment" as used in this Agreement shall include service as a
director, consultant to or as an employee of the Company or any of its
Affiliates and a change of status from one such category to another
shall not be treated as a termination of the "employment" hereunder.
5. METHOD OF EXERCISING OPTION
---------------------------
Subject to the terms and conditions of this Agreement, including,
without limitation, Section 10 hereof, the Option may be exercised by
written notice to the Company, at the principal executive office of the
Company. Such notice shall state the election to exercise the Option
and the number of Shares in respect of which it is being exercised,
shall be signed by the person or persons so exercising the Option, and
shall be in substantially the form attached hereto as Exhibit A. Such
---------
notice shall be accompanied by payment of the full purchase price for
such Shares in United States dollars, and the Company shall deliver a
certificate or certificates representing such Shares as soon as
practicable after the notice shall be received, provided, however, that
the Company may delay issuance of such Shares until completion of any
action or obtaining of any consent, which the Company deems necessary
under any applicable law (including, without limitation, state
securities or "blue sky" laws). The certificate or certificates for the
Shares as to which the Option shall have been so exercised shall be
registered in the name of the person or persons so exercising the
Option (or, if the Option shall be exercised by Employee and if
Employee shall so request in the notice exercising the Option, shall be
registered in the name of the Employee and another person jointly, with
right of survivorship) and shall be delivered as provided above to or
upon the written order of the person or persons exercising the Option.
In the event the Option shall be exercised, pursuant to Section 4
hereof, by any person or persons other than the Employee, such notice
shall be accompanied by appropriate proof of the right of such person
or persons to exercise the Option. All Shares that shall be purchased
upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
-3-
<PAGE>
6. PARTIAL EXERCISE
----------------
Exercise of this Option to the extent above stated may be made in
part at any time and from time to time within the above limits, except
that no fractional Share shall be issued pursuant to this Option.
7. NON-ASSIGNABILITY
-----------------
The Option shall not be transferable by the Employee otherwise than
by will or by the laws of descent and distribution and shall be
exercisable, during the Employee's lifetime, only by the Employee.
Except as provided in the preceding sentence, the Option shall not be
assigned, pledged or hypothecated in any way (whether by operation of
law or otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted transfer, assignment, pledge,
hypothecation or other disposition of the Option or of any tights
granted hereunder contrary to the provisions of this Section 7, or the
levy of any attachment or similar process upon the Option or such
rights, shall be null and void.
8. NO RIGHTS AS STOCKHOLDER UNTIL, EXERCISE
----------------------------------------
The Employee shall have no rights as a stockholder with respect to
Shares subject to this Agreement until a stock certificate therefor has
been issued to the Employee and is fully paid for. Except as is
expressly provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to the
date such stock certificate is issued.
9. CAPITAL CHANGES AND BUSINESS SUCCESSIONS
----------------------------------------
The Plan contains provisions covering the treatment of Options in a
number of contingencies such as stock splits and mergers and sales of
the Company. Provisions in the Plan for adjustment with respect to
stock subject to Options and the related provisions with respect to
successors to the business of the Company are hereby made applicable
hereunder and are incorporated herein by reference.
Notwithstanding the foregoing provisions of this Section 9, in the
event of a "Change of Control" (as defined below) while the Optionee is
an employee of the Company, the Optionee shall be entitled to exercise
this Option, commencing as of immediately prior to the consummation of
such Change of Control (but subject to the consummation of such Change
of Control) and in the event of a Change of Control as a result of a
tender offer, this Option shall become fully exercisable in a timely
manner such that the Optionee may participate in such tender offer at
any stage, for all of the Shares then remaining subject to purchase
under such Option whether or not the right to purchase such Shares
shall have become vested and become exercisable.
A "Change of Control" shall be deemed to have occurred upon the
occurrence of any of
~~ -4-
<PAGE>
the following:
(i) any sale, lease, exchange or other transfer (in one transaction
or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company;
(ii) individuals who, as of March 15, 1996, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for
any reason to constitute at least 50% of the Board of Directors
(hereinafter referred to as a "Board Change"), provided that any
individual becoming a director subsequent to March 15, 1996 whose
election or nomination for election was approved by a vote of at least
a majority of the then Incumbent Directors shall be, for purposes of
provision, considered as though such individual were an Incumbent
Director; or
(iii) any consolidation or merger of the Company (including,
without limitation, a triangular merger) where the shareholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own,
directly or indirectly, Shares representing in the aggregate more than
50% of the combined voting power of all the outstanding securities of
the Company issuing cash or securities in the consolidation or merger
(or of its ultimate parent Company, if any); or
(iv) any "person," as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (or any successor
provision) (the "Exchange Act") (other than the Company, any employee
benefit plan of the Company or any entity organized, appointed or
established by the Company for or pursuant to the terms of any such
plan), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Exchange Act or any successor
provision) of such person, shall become the "beneficial owner" or
"beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act or any successor provision), directly or indirectly, of
securities of the Company representing in the aggregate thirty percent
(30%) or more of either (a) the then outstanding shares of Common
Stock of the Company or (b) the combined voting power of all then
outstanding securities of the Company having the right under ordinary
circumstances to vote in an election of the Board of Directors of the
Company ("Voting Securities") (hereafter referred to as an
"Acquisition"); provided, that, notwithstanding the foregoing, an
Acquisition shall not be deemed to have occurred for purposes of this
clause (iv) (1) solely as the result of an acquisition of securities by
the Company which, by reducing the number of shares of Common Stock or
other Voting Securities outstanding, increases (x) the proportionate
number of shares of Common Stock beneficially owned by any person to
thirty percent (30%) or more of the Common Stock then outstanding or
(y) the proportionate voting power represented by the Voting Securities
beneficially owned by any person to thirty percent (30%) or more of the
combined voting power of all then outstanding Voting Securities or (2)
solely as the result of an acquisition of securities from the Company;
except that if any person referred to in clause (1)(x) or (1)(y) of
this sentence or to which clause (2) of this sentence is applicable
shall thereafter become the beneficial owner of any additional shares
of Common Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend or similar
-5-
<PAGE>
transaction or a transaction to which clause (2) applies), then an
Acquisition shall be deemed to have occurred for purposes of this
clause (iv).
10. TAXES AND WITHHOLDING
---------------------
The Employee acknowledges that any income or other taxes due from
him or her with respect to this Option or the Shares issuable pursuant
to this Option shall be the Employee's responsibility.
In the event of the exercise of this Option, the Company may
withhold from the Employee's fees, if any, or other remuneration, or
as a condition of the exercise hereof, may require the Employee to pay,
additional federal, state, and local income tax withholding and if
applicable at such time, employee contributions to employment taxes, in
respect of the amount that is considered compensation includable in
such person's gross income.
11. PURCHASE FOR INVESTMENT
-----------------------
Unless the offering and sale of the Shares to be issued upon the
particular exercise of the Option shall have been effectively
registered under the Securities Act of 1933, as now in force or
hereafter amended (the "Act"), the Company shall be under no obligation
to issue the Shares covered by such exercise unless and until the
following conditions have been fulfilled:
(a) The person(s) who exercise the Option shall warrant to the
Company, at the time of such exercise, that such person(s)
are acquiring such Shares for their own respective accounts,
for investment, and not with a view to, or for sale in
connection with, the distribution of any such Shares, in
which event the person(s) acquiring such Shares shall be
bound by the provisions of the following legend which shall
be endorsed upon the certificate(s) evidencing the Shares
issued pursuant to such exercise:
"The shares represented by this certificate have been
taken for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, unless (1) either (a) a registration statement
with respect to such shares shall be effective under the
Securities Act of 1933, as amended, or (b) the Company
shall have received an opinion of counsel satisfactory
to it that an exemption from registration under such Act
is then available, and (2) there shall have been
compliance with all applicable state securities laws."
(b) If the Company so requires, the Company shall have received
an opinion of its counsel that the Shares may be issued upon
such particular exercise in compliance with the Act without
registration thereunder. Without limiting the generality of
the foregoing, the Company may delay issuance of the Shares
until completion of any
-6-
<PAGE>
action or obtaining of any consent which the Company deems
necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
12. NO OBLIGATION TO RETAIN
-----------------------
Neither the Company nor any subsidiary is by the Plan or this
Agreement obligated to continue the Employee as an employee to the
Company or any subsidiary or in any other capacity.
13. OPTION IS NOT AN INCENTIVE STOCK OPTION
---------------------------------------
The parties each intend and understand that the Option is not an
incentive stock option. Employee should consult with Employee's own tax
advisors regarding the tax effects of the Option.
14. CONSULTATION WITH TAX ADVISOR
-----------------------------
Employee should consult with Employee's own tax advisors regarding
the tax effects of the Option and the consequences of the nonqualified
status of the Option.
15. NOTICES
-------
Any notices required or permitted by the terms of this Agreement or
the Plan shall be given when delivered in person or by registered or
certified mail, return receipt requested, addressed as follows:
To the Company:
Sparta Pharmaceuticals, Inc.
P.O. Box 13288
Research Triangle Park, NC 27709
Attn: President
To the Employee:
3308 Landor Road
Raleigh, NC 27609
or to such other address or addresses of which notice in the same
manner has previously been given. Any such notice shall be deemed to
have been given when received in accordance with the foregoing
provisions.
-7-
<PAGE>
16. GOVERNING LAW
-------------
This Agreement shall be construed and enforced in accordance with
the law of the State of Delaware.
17. BENEFIT OF AGREEMENT
---
Subject to the provisions of the Plan and the other provisions
hereof, this Agreement shall be for the benefit of and shall be binding
upon the heirs, executors, administrators, successors and assigns of
the parties hereto.
18. ENTIRE AGREEMENT
----------------
This Agreement, together with the Plan, embodies the entire
agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement not
expressly set forth in this Agreement shall affect or be used to
interpret, change or restrict, the express terms and provisions of this
Agreement, provided, however, in any event, this Agreement shall be
subject to and governed by the Plan.
19. MODIFICATIONS AND AMENDMENTS
----------------------------
The terms and provisions of this Agreement may be modified or
amended only by written agreement executed by all parties hereto.
20. WAIVERS AND CONSENTS
--------------------
The terms and provisions of this Agreement may be waived, or
consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall
constitute a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver
or consent shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a continuing
waiver or consent.
21. HEADINGS AND CAPTIONS
---------------------
The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way
modify, or affect the meaning or construction of, any of the terms or
provisions hereof.
22. SURVIVAL
--------
-8-
<PAGE>
The expiration or other termination of the Option granted to the
Employee shall neither affect nor alter the Employee' s obligations
under Sections 10 and 11 hereof.
IN WITNESS WHEREOF, the Company has caused this Nonqualified Stock
Option Agreement to be executed by a duly authorized officer, and the
Employee has hereunto set his or her hand, all as of the day and year
first above written.
SPARTA PHARMACEUTICALS, INC.
By /s/ Carline Campbell
--------------------------
Controller & Treasurer
/s/ William M. Sullivan
--------------------------
William M. Sullivan
-9-
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
To: Sparta Pharmaceuticals, Inc.
Ladies and Gentlemen:
I hereby exercise my Nonqualified Option to purchase _______ shares
(the "Shares") of the common stock, $.001 par value, of Sparta
Pharmaceuticals, Inc. (the "Company"), at the exercise price of $___
per share, pursuant to and subject to the terms of that certain
Nonqualified Stock Option Agreement between the undersigned and the
Company dated as of March 15, 1996.
I am aware that the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act") or any state
securities laws. I understand that the reliance by the Company on
exemptions under the 1933 Act is predicated in part upon the truth and
accuracy of the statements by me in this Notice of Exercise.
I hereby represent and warrant that (1) I have been furnished with
all information which I deem necessary to evaluate the merits and risks
of the purchase of the Shares; (2) I have had the opportunity to ask
questions concerning the Shares and the Company and all questions posed
have been answered to my satisfaction; (3) I have been given the
opportunity to obtain any additional information I deem necessary to
verify the accuracy of any information obtained concerning the Shares
and the Company; and (4) I have such knowledge and experience in
financial and business matters that I am able to evaluate the merits
and risks of purchasing the Shares and to make an informed investment
decision relating thereto.
I hereby represent and warrant that I am purchasing the Shares for
my own personal account for investment and not with a view to the sale
or distribution of all or any part of the Shares.
I understand that because the Shares have not been registered under
the 1933 Act, I must continue to bear the economic risk of the
investment for an indefinite time and the Shares cannot be sold unless
the Shares are subsequently registered under applicable federal and
state securities laws or an exemption from such registration
requirements is available.
I agree that I will in no event sell or distribute or otherwise
dispose of all or any part of
<PAGE>
the Shares unless (1) there is an effective registration statement
under the 1933 Act and applicable state securities laws covering any
such transaction involving the Shares or (2) the Company receives an
opinion of my legal counsel (concurred in by legal counsel for the
Company) stating that such transaction is exempt from registration or
the Company otherwise satisfies itself that such transaction is exempt
from registration.
I consent to the placing of a legend on my certificate for the
Shares stating that the Shares have not been registered and setting
forth the restriction on transfer contemplated hereby and to the
placing of a stop transfer order on the books of the Company and with
any transfer agents against the Shares until the Shares may be legally
resold or distributed without restriction.
I understand that at the present time Rule 144 of the Securities
and Exchange Commission (the "SEC") may not be relied on for the resale
or distribution of the Shares by me. I understand that the Company has
no obligation to me to register the Shares with the SEC and has not
represented to me that it will register the Shares.
I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and
local income tax and securities laws affecting the exercise of the
Option and the purchase and subsequent sale of the Shares.
My check payable to the order of the Company in the amount of $____
is enclosed in payment of 100% of the option exercise price for the
Shares.
I acknowledge that the Company is authorized to withhold from my
wages, if any, or other remuneration, or may require me, as a condition
of the exercise of the Option, to pay, additional federal, state and
local income tax withholding and if applicable, employee contributions
to employment taxes in respect of the amount that is considered
compensation includable in my gross income.
Please issue the stock certificate for the Shares (check one):
____ to me
____ to me and ____________ as joint tenants with right of
survivorship and mail the certificate to me at the following address:
----------------------------
----------------------------
<PAGE>
My mailing address, if different from the address listed above, for
shareholder communications is:
----------------------------
----------------------------
Very truly yours,
-------------------
Employee (signature)
-------------------------------
Print Name
Date
-------------------------------
-------------------------------
Social Security Number
Exhibit 10.74
<PAGE>
SPARTA PHARMACEUTICALS, INC.
PLACEMENT AGENCY AGREEMENT
--------------------------
January 22, 1996
Paramount Capital, Inc.
375 Park Avenue
Suite 1501
New York, New York 10152
Dear Sirs:
Sparta Pharmaceuticals Inc., a Delaware corporation (the
"Company"), hereby confirms its agreement to retain Paramount Capital,
Inc. (the "Placement Agent") on an exclusive basis to introduce the
Company to and to procure subscriptions from certain "accredited
investors" (as defined in Regulation D under the Securities Act of
1933, as amended) as prospective purchasers of units (the "Units") of
the Company at a purchase price to be determined, with each unit
consisting of equity securities of the Company.
The sale to such purchasers (the "Offering") will be made through a
private placement by the Placement Agent (or its designated selected
dealers which will be bound by agreements substantially the same as
contained herein for the Placement Agent) on a "best efforts" basis,
pursuant to the Confidential Term Sheet dated January 22, 1996 and all
supplements and amendments thereto and exhibits thereto (the "Term
Sheet"), separate purchase agreements (the "Subscription Agreements")
and related documents in accordance with Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act") and Regulation D
promulgated thereunder.
The Term Sheet, the Subscription Agreements, the Placement Agency
Agreement, a Financial Advisory Agreement to be dated the date of the
Closing ("the Financial Advisory Agreement") and a specimen of the
Common Stock are collectively referred to herein as the "Offering
Documents."
The Company, at its sole cost, shall prepare and deliver to the
Placement Agent a reasonable number of copies of the Offering Documents
in form and substance satisfactory to the Placement Agent.
Each prospective investor subscribing to purchase Units shall be
required to deliver, among other things, a Subscription Agreement,
which shall include a Confidential Investor Questionnaire
("Questionnaire"). The Company shall make available to each prospective
purchaser at a reasonable time prior to the purchase of the Units the
opportunity to ask questions of and receive answers from the Company
concerning the terms and conditions of the Offering and the opportunity
to obtain additional information necessary to verify the accuracy of
the documents delivered in connection with the purchase of the Units to
the extent it possesses such
<PAGE>
Paramount Capital, Inc.
Page 2
information or can acquire it without unreasonable effort or expense.
After the Offering Documents have been reviewed by investors, and they
have had the opportunity to address all inquiries to the Company,
separate Subscription Agreements shall be completed with each
prospective investor. The Company or Placement Agent shall have the
right to reject subscriptions in its sole discretion. The Company shall
evidence its acceptance of a subscription by countersigning a copy of
the applicable Subscription Agreement and returning the same to you.
Capitalized terms used herein, unless otherwise defined or unless
the context otherwise indicates, shall have the same meanings provided
in the Offering Documents.
1. Appointment of Placement Agent.
-------------------------------
(a) You are hereby appointed exclusive Placement Agent of the
Company (subject to your right to have Selected Dealers, as defined in
Section 1(c) hereof, participate in the Offering) during the Offering
Period herein specified for the purposes of assisting the Company in
finding qualified Subscribers pursuant to the Offering described in the
Offering Documents. You shall not be deemed an agent of the Company for
any other purpose. The Offering Period shall commence on the day the
Offering Documents are first made available to you by the Company for
delivery in connection with the offering for sale of the Units and
shall continue until the earlier to occur of (i) the sale of 30 Units
in the Offering or (ii) February 15, 1996 (unless the Offering is
extended by the Placement Agent for up to an additional 30 days).
If subscriptions for 25 Units are not received prior to the end of
the Offering Period, the Offering will be terminated and
all funds received from Subscribers will be returned, without interest
and without any deduction. The day that the Offering Period terminates
is hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the
completeness and accuracy of all representations and warranties of the
Company contained in this Agreement, the Placement Agent hereby accepts
such agency and agrees to use its best efforts to assist the Company in
finding qualified subscribers pursuant to the Offering described in the
Offering Documents and to keep the Company or its counsel reasonably
informed of subscriptions received. It is understood that the Placement
Agent has no commitment to sell the Units. Your agency hereunder is not
terminable by the Company except upon termination of the Offering
Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Selected Dealers
Agreement in the form provided to the Company to assist you in the
Offering (each such person being hereinafter referred to as a "Selected
Dealer") and you may allow such persons such part of the
<PAGE>
Paramount Capital, Inc.
Page 3
compensation and payment of expenses payable to you hereunder as you
shall determine, provided that such compensation shall be received
pursuant to Section 1(d) hereof.
(d) Subscriptions for Units shall be evidenced by the execution by
Subscribers of a Subscription Agreement. No Subscription Agreement
shall be effective unless and until it is accepted by the Company.
Until the Closing, all subscription funds received shall be held as
described in the Subscription Agreement. The Placement Agent shall not
have any obligation to independently verify the accuracy or
completeness of any information contained in any Subscription Agreement
or the authenticity, sufficiency, or validity of any check delivered by
any prospective investor in payment for Units.
2. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Placement Agent and each Selected
Dealer, if any, as follows:
(a) Securities Law Compliance. The Offering Documents, as of their
-------------------------
respective dates, do and will, as of the date of the Term Sheet and the
Closing, describe the material aspects of an investment in the Company
and conform in all respects with the requirements of Section 4(2) of
the Securities Act and Regulation D promulgated thereunder and with the
requirements of all other published rules and regulations of the
Securities and Exchange Commission (the "Commission") currently in
effect relating to "private offerings" to "accredited investors" of the
type contemplated by the Company. The Offering Documents will not as of
the date of the Term Sheet and the Closing contain an untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided, however, that no
representation is made with respect to information, relating to the
Placement Agent, provided in writing by the Placement Agent to the
Company specifically for inclusion in the Offering Documents. If at any
time prior to the completion of the Offering or other termination of
this Agreement any event shall occur as a result of which it might
become necessary to amend or supplement the Offering Documents so that
they do not include any untrue statement of any material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances then existing, not
misleading, the Company will promptly notify you and will supply you
with amendments or supplements correcting such statement or omission.
The Company will also provide the Placement Agent for delivery to all
offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent and
the Company's counsel reasonably deem necessary to comply with
applicable state and federal law.
The Company acknowledges that the Placement Agent (i) has not
supplied any information for inclusion in the Offering Documents other
than information furnished in writing to the Company by the Placement
Agent specifically
<PAGE>
Paramount Capital, Inc.
Page 4
for inclusion in the Offering Documents; (ii) has no obligation to
independently verify any of the information in the Offering Documents;
and (iii) has no responsibility for the accuracy or completeness of the
Offering Documents, except for the information, relating to the
Placement Agent, furnished in writing by the Placement Agent to the
Company specifically for inclusion in the Offering Documents.
(b) Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own and
lease its properties, to carry on its business as currently conducted
and as proposed to be conducted, to execute and deliver this Agreement
and to carry out the transactions contemplated by this Agreement, as
appropriate and is duly licensed or qualified to do business as a
foreign corporation in North Carolina and each jurisdiction in which
the conduct of its business or ownership or leasing of its properties
requires it to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on the business,
financial condition or prospects of the Company.
(c) Capitalization. The authorized, issued and outstanding
--------------
capital stock of the Company prior to the consummation of the
transactions contemplated hereby is as set forth in the Offering
Documents. All issued and outstanding shares of the Company are validly
issued, fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any stockholder of the Company.
All prior sales of securities of the Company were either registered
under the Act and applicable state securities laws or exempt from such
registration, and no security holder has any rescission rights with
respect thereto. Except as set forth in the Term Sheet, there are no
outstanding options, warrants, agreements, convertible securities,
preemptive rights or other rights to subscribe for or to purchase any
shares of capital stock of the Company. Except as set forth in the Term
Sheet and as otherwise required by law, there are no restrictions upon
the voting or transfer of any shares of the Company's capital stock
pursuant to the Company' s Certificate of Incorporation, By-Laws or
other governing documents or any agreement or other instruments to
which the Company is a party or by which the Company is bound.
(d) Warrants, Preemptive Rights, Etc. Except as set forth in or
--------------------------------
contemplated by the Term Sheet, there are not, nor will there be
immediately after the Closing (as hereinafter defined), any outstanding
warrants, options, agreements, convertible securities, rights of first
refusal, rights of first offer, preemptive rights or other rights to
subscribe for or to purchase or other commitments pursuant to which the
Company is, or may become, obligated to issue any shares of its capital
stock or other securities of the Company and this offering will not
cause any anti-dilution adjustments to such securities or commitments
except as reflected in the Term Sheet.
<PAGE>
Paramount Capital, Inc.
Page 5
(e) Subsidiaries and Investments. The Company has no subsidiaries
----------------------------
and the Company does not own, directly or indirectly, any capital stock
or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other
entity.
(f) Financial Statements. The financial information contained in
--------------------
the Offering Documents is accurate in all material respects. The
Financial Statements have been prepared in conformity with generally
accepted accounting principles consistently applied and show all
material liabilities, absolute or contingent, of the Company required
to be recorded thereon and present fairly the financial position and
results of operations of the Company as of the dates and for the
periods indicated.
(g) Absence of Changes. Since the date of the Term Sheet, except as
------------------
has been or will be reflected in the Term Sheet prior to Closing, the
Company has not incurred any liabilities or obligations, direct or
contingent, not in the ordinary course of business, or entered into any
transaction not in the ordinary course of business, which is material
to the business of the Company, and there has not been any change in
the capital stock of, or any incurrence of long-term debt by, the
Company, or any issuance of options, warrants or other rights to
purchase the capital stock of the Company, or any adverse change or any
development involving, so far as the Company can now reasonably
foresee, a prospective adverse change in the condition (financial or
otherwise), net worth, results of operations, business, key personnel
or properties which would be material to the business or financial
condition of the Company, and the Company has not become a party to,
and neither the business nor the property of the Company has become the
subject of, any material litigation whether or not in the ordinary
course of business.
(h) Title. The Company has good and marketable title to all
-----
tangible properties and assets owned by it, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not
materially significant or important in relation to the Company's
business; all of the material leases and subleases under which the
Company is the lessor or sublessor of properties or assets or under
which the Company holds properties or assets as lessee or sublessee are
in full force and effect, and the Company is not in default in any
material respect with respect to any of the terms or provisions of any
of such leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or
affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such
lease or sublease. The Company owns or leases all such tangible
properties as are necessary to its operations as now conducted and to
be conducted, as presently planned.
<PAGE>
Paramount Capital, Inc.
Page 6
(i) Proprietary Rights. To the best of the Company's knowledge
------------------
and except as has been or will be reflected in the Term Sheet prior to
Closing, the Company owns or possesses adequate and enforceable rights
to use all patents, patent applications, trademarks, service marks,
trade names, corporate names, copyrights, trade secrets, processes,
mask works, licenses, inventions, formulations, technology or know-how
or other intangible property used or proposed to be used in the conduct
of its business as described in or contemplated by the Term Sheet (the
"Proprietary Rights"). To the best of the Company's knowledge and
except as has been or will be reflected in the Term Sheet prior to
Closing, the Company or the entities from whom the Company has acquired
rights has taken all necessary action to protect all of its Proprietary
Rights. Except as set forth in the Term Sheet, the Company has not
received any notice of, and there are not any facts known to the
Company which indicate the existence of (i) any infringement or mis-
appropriation by any third party of any of the Proprietary Rights or
(ii) any claim by a third party contesting the validity of any of the
Proprietary Rights; the Company has not received any notice of any
infringement, misappropriation or violation by the Company or any of
its employees of any Proprietary Rights of third parties, and, to the
best of the Company's knowledge, the Company nor any of its employees
has infringed, misappropriated or otherwise violated any Proprietary
Rights of any third parties; and, to the best of the Company's
knowledge, no infringement, illicit copying, misappropriation or
violation of any intellectual property rights of any third party has
occurred or will occur with respect to any products currently being
sold by the Company or with respect to any products currently under
development by the Company or with respect to the conduct of the
Company's business as currently contemplated. Except as described in
the Term Sheet, the Company is not aware that any of its employees are
obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that
would interfere with the use of the employee's best efforts to promote
the interests of the Company or that would conflict with the Company's
business as proposed to be conducted. To the best of the Company's
knowledge, neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business, as proposed, will
conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated.
(j ) Litigation. Except as set forth in the Term Sheet, there is
----------
no material action, suit, claim or proceeding at law or in equity, or
to the Company's knowledge, investigation or customer complaint, by or
before any arbitrator, governmental instrumentality or other agency now
pending or, to the knowledge of the Company, threatened against the
Company (or basis therefor known to the Company which the Company
believes will result in the foregoing) the adverse outcome of which
would materially adversely affect the Company's business or prospects.
The Company is not subject to any judgment, order, writ, injunction or
decree of any Federal, state, municipal or other governmental
department,
<PAGE>
Paramount Capital, Inc.
Page 7
commission, board, bureau, agency or instrumentality, domestic or
foreign which would materially adversely affect the Company' s business
or prospects.
(k) Non-Defaults, Non-Contravention. The Company is not in
-------------------------------
violation of or default under, nor will the execution and delivery of
this Agreement or any of the Offering Documents and the Escrow
Agreement, or consummation of the transactions contemplated herein or
therein result in a violation of or constitute a default in the
performance or observance of any obligation (i) under its Certificate
of Incorporation, or its By-laws, or any indenture, mortgage, contract,
material purchase order or other agreement or instrument to which the
Company is a party or by which it or its property is bound or affected
or (ii) with respect to any material order, writ, injunction or decree
of any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no existing condition, event or act
which constitutes, nor which after notice, the lapse of time or both,
could constitute a default under any of the foregoing, which in either
case would have a material adverse effect on the business, financial
condition or prospects of the Company.
(1) Taxes. The Company has filed all Federal, state, local and
-----
foreign tax returns which are required to be filed by it and all such
returns are true and correct in all material respects. The Company has
paid all taxes pursuant to such returns or pursuant to any assessments
received by it or which it is obligated to withhold from amounts owing
to any employee, creditor or third party. The Company has properly
accrued all taxes required to be accrued. The tax returns of the
Company have never been audited by any state, local or Federal
authorities (except for an audit by state authorities which has been
concluded and all liabilities in connection therewith paid). The
Company has not waived any statute of limitations with respect to taxes
or agreed to any extension of time with respect to any tax assessment
or deficiency.
(m) Compliance With Laws, Licenses, Etc. The Company has not
-----------------------------------
received notice of any violation of or noncompliance with any Federal,
state, local or foreign, laws, ordinances, regulations and orders
applicable to its business which has not been cured, the violation of,
or noncompliance with which, would have a materially adverse effect on
the business or operations of the Company. The Company has all
governmental licenses and permits and other governmental certificates,
authorizations and permits and approvals (collectively, "Licenses")
required by every Federal, state and local government or regulatory
body for the operation of its business as currently conducted and the
use of its properties, except where the failure to be licensed would
not have a material adverse effect on the business of the Company. The
Licenses are in full force and effect and no violations are or have
been recorded in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.
<PAGE>
Paramount Capital, Inc.
Page 8
(n) Authorization of Documents and Units. Each of the Offering
------------------------------------
Documents and the Escrow Agreement have been duly and validly
authorized, executed and delivered by the Company and the execution,
delivery and performance by the Company of the Offering Documents and
the Escrow Agreement have been duly authorized by all requisite
corporate action by the Company and when delivered, constitute or will
constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to the
availability and enforceability of equitable remedies and to applicable
bankruptcy and other laws relating to the rights of creditors generally
and except as the enforcement of the rights to indemnification and
contribution hereunder and under any other Offering Documents may be
limited by federal or state securities laws or public policy. The
Corporation has full power and lawful authority to authorize, issue and
sell the Units to be sold to the Purchasers.
(o) Exemption from Registration. Assuming (i) the accuracy of the
---------------------------
information provided by the respective Subscribers in the Subscription
Agreements, (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the
Securities Act and (iii) the timely filing of a Form D by the Company,
the offer and sale of the Units pursuant to the terms of this Agreement
are exempt from the registration requirements of the Securities Act and
the rules and regulations promulgated thereunder (the "Regulations").
The Company is not disqualified from the exemption under Regulation D
by virtue of the disqualifications contained in Rule 505(6)(2)(iii) or
Rule 507 promulgated thereunder.
(p) Registration Rights. Except with respect to holders of the
-------------------
Units, and except as set forth in the Term Sheet or disclosed to the
Placement Agent in writing, no person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(q) Brokers. Neither the Company nor any of its officers,
-------
directors, employees or stockholders has employed any broker or finder
in connection with the transactions contemplated by this Agreement
other than the Placement Agent.
(r) Title to Units. When certificates representing the
--------------
securities comprising the Units shall have been duly delivered to the
purchasers and payment shall have been made therefor, the several
purchasers shall have good and marketable title to the Common Stock
free and clear of all liens, encumbrances and claims whatsoever (with
the exception of claims arising through the acts of the purchasers and
except as arising from applicable Federal and state securities laws),
and the Company shall have paid all taxes, if any, in respect of the
original issuance thereof.
<PAGE>
Paramount Capital, Inc.
Page 9
(s) Non-Affiliated Directors. The Company's Board of Directors
------------------------
has not less than two directors who are independent from, and
unaffiliated with, management of the Company.
(t) Accuracy of Reports. All material reports required to be
-------------------
filed by the Corporation within the two years prior to the date of this
Agreement under the Securities and Exchange Act of 1934, as amended,
have been duly filed with the SEC, complied at the time of filing in
all material respects with the requirements of their respective forms
and, except to the extent updated or superseded by the Term Sheet or
any subsequently filed report, were complete and correct in all
material respects as of the dates at which the information was
furnished, and contained (as of such dates) no untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
3. Representations and Warranties of Paramount Capital, Inc. The
--------------------------------------------------------
Placement Agent represents and warrants as follows:
(a) The Placement Agent is duly organized and validly existing and
in good standing as a corporation under the laws of the State of New
York with full and adequate power and authority to enter into and
perform this Agreement.
(b) In offering the Units, the Placement Agent will deliver (or
direct the Company to deliver) to each prospective purchaser, prior to
accepting any subscription from such prospective purchaser, the
Offering Documents, and will not offer any of the Units for sale, or
solicit any offers to subscribe for any Units, or otherwise approach or
negotiate with any person in respect of the Units, on the basis of any
written information except the Offering Documents and any cover or
transmittal letter therefor, and any other documents approved for such
use by the Company or counsel to the Company. The Placement Agent will
cooperate with the Company in the preparation of the Offering
Documents, will exercise reasonable care to ensure that prospective
purchasers for Units are not underwriters within the meaning of Section
2(11) of the Act and will not engage in a general solicitation or
employ general advertising in connection with the Offering.
(c) The Placement Agent will conduct the Offering in compliance
with applicable federal and state securities laws so as to preserve the
exemption provided in Section 4(2) of the Act and any applicable rules
or regulations promulgated thereunder or under such state securities
laws and will make offers to sell Units to, or solicit offers to
subscribe for any Units from, persons in only those states where the
Company has informed the Placement Agent in writing that the Offering
and the Units have been qualified, or the Company has determined that
an exemption from such qualification is available, under the applicable
state securities statute. The Placement Agent will accept subscriptions
only from persons that the
<PAGE>
Paramount Capital, Inc.
Page 10
Placement Agent reasonably believes are "accredited investors" (as
defined in Regulation D under the Securities Act of 1933, as amended).
The final acceptance of any subscription shall be made only after the
Company has reviewed the Subscription Agreement and agreed to such
final acceptance.
(d) The Placement Agent will maintain a record for the period
specified in Rule 17a-4 promulgated by the Securities and Exchange
Commission (the "Commission") under the Act, or such longer period, if
any, required by relevant state regulatory authorities, of all
information obtained by the Placement Agent indicating that prospective
purchasers for Units meet applicable suitability standards and any
other information required thereby, which information shall be
available to the Company at its reasonable request, and at each closing
the Placement Agent will deliver to the Company the original copies of
all accepted Subscription Agreements and have no reason to believe that
said information and the representations of each Purchaser as set forth
in the Subscription Agreement executed thereby are untrue.
(e) The Placement Agent is, and at each closing will be, a
securities broker-dealer registered with the Commission and any
jurisdiction where broker-dealer registration is required in order to
offer and sell the Units and a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD ").
(f) There is no material litigation, governmental or NASD
proceeding, pending or, to the best of the Placement Agent's knowledge,
threatened against the Placement Agent or any controlling person of the
Placement Agent that involves allegations of improper or illegal
conduct under federal or state securities laws.
(g) The Placement Agent will handle, transmit and deposit all funds
from the sale of Units in accordance with the requirements of Rule 15c-
2(4) promulgated under the Act.
(h) The information, relating to the Placement Agent, provided by
the Placement Agent to the Company in writing specifically for
inclusion in the Offering Documents, as of the Closing Date, will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, all in light of the circumstances
under which they were made.
<PAGE>
Paramount Capital, Inc.
page 11
4. Closing; Placement and Fees.
----------------------------
(a) Closing. Provided that at least 25 Units have been
-------
subscribed for and funds representing the sale thereof shall have
cleared, a closing (the "Closing") shall take place at the offices of
the Placement Agent, 375 Park Avenue, New York, N.Y. on the Termination
Date (which date may be accelerated or adjourned by agreement between
the Company and the Placement Agent). At the Closing, payment for the
Units issued and sold by the Company shall be made to the Company in
immediately available funds against delivery of certificates evidencing
the Common Stock comprising such Units.
(b) Conditions to Placement Agent's Obligations. The
-------------------------------------------
obligation of the Placement Agent hereunder will be subject to the
accuracy of the representation and warranties of the Company herein
contained as of the date hereof and as of each Closing Date, to the
performance by the Company of its obligations hereunder and to the
following additional conditions:
(i) Due Qualification or Exemption. (A) The offering
------------------------------
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant
to paragraph 4(c) below not later than the Closing Date, subject to any
filings to be made thereafter, and (B) at the Closing Date no stop
order suspending the sale of the Units shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky
-------------------------
qualification materials nor the Term Sheet, nor any supplement thereto,
will contain an untrue statement of a fact which in opinion of the
Placement Agent is material, or omit to state a fact, which in the
opinion of the Placement Agent is material and is required to be stated
therein, or is necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(iii) Compliance with Agreement. The Company will have
-------------------------
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to each Closing.
(iv) Corporate Action. The Company will have taken all
----------------
necessary corporate action, including, without limitation, obtaining
the approval of the Company's board of directors, for the execution and
delivery of the Offering Documents, the performance by the Company of
its obligations hereunder and the offering contemplated hereby;
<PAGE>
Paramount Capital, Inc.
Page 12
(v) Opinion of Counsel. The Placement Agent shall receive the
------------------
opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (stating
that each of the purchasers may rely thereon as though addressed
directly to such purchaser), dated the Closing, substantially to the
effect that:
(A) the Company is duly organized and is validly existing and in
corporate good standing under the laws of the State of Delaware, has
all requisite corporate power and authority necessary to own or hold
its properties and conduct its business as described in the Term Sheet
and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in the State of North Carolina and
in each other jurisdiction in which the nature of the business
conducted, by it or the properties owned, leased or operated by it,
makes such qualification or licensing necessary or where the failure to
be so qualified or licensed would have a material adverse effect upon
the Company. The Company has no subsidiaries and the Company does not
own, directly or indirectly, any capital stock or other equity
ownership or proprietary interests in any other corporation,
association, trust, partnership, joint venture or other entity;
(B) the execution, delivery and performance of each of the Offering
Documents, including the issuance of the Units, have been duly
authorized by all necessary corporate action on the part of the
Company. Each of the Offering Documents has been duly executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights
and the application of equitable principles in any action, legal or
equitable, and except as rights to indemnity or contribution may be
limited by applicable law. Such counsel shall not be required to
express any opinion herein as to the availability of any equitable
remedy upon breach of any of the agreements, documents or obligations
referred to herein, or as to the enforceability of any indemnification
provisions of any agreement, document or instrument referred to herein
under any federal or state securities law;
(C) the authorized, issued and outstanding capital stock of the
Company as of the date hereof (before giving effect to the transactions
contemplated by this Agreement) is as set forth in the Offering
Documents (provided that the Offering Documents do not state that the
Company has authorized Series B Convertible Preferred Stock and Series
C Convertible Preferred Stock, of which no shares are outstanding and
of which the Company's Board of Directors has authorized the retirement
and resumption of the status of authorized but unissued shares of
preferred stock, $.001 par value). There are no outstanding warrants,
options, agreements, convertible securities, preemptive rights or other
commitments to the best knowledge of such counsel pursuant to which the
Company is, or may become, obligated to issue any shares of its capital
stock or other securities of the Company other than as set forth in the
Term Sheet. All of the issued shares of
<PAGE>
Paramount Capital, Inc.
Page 13
capital stock of the Company have been duly and validly authorized and
issued, are fully paid and nonassessable and have not been issued in
violation of the preemptlye rights of any security holder of the
Company to the best knowledge of such counsel;
(D) assuming (i) the accuracy of the information provided by the
Subscribers in the Subscription Documents, (ii) that the Placement
Agent has complied with the requirements of section 4(2) of the
Securities Act (and the provisions of Regulation D promulgated
thereunder) and (iii) the timely filing with the Securities and
Exchange Commission of a Form D and amendments thereto containing
accurate and complete information, the issuance and sale of the Units
is exempt from registration under the Securities Act and Rule 506 of
Regulation D promulgated thereunder;
(E) neither the execution and delivery of the Offering Documents
nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, has, nor will,
conflict with, result in a breach of, or constitute a default under the
Certificate of Incorporation or By-laws of the Company, or any material
contract, instrument or document to which the Company is a party, or by
which it or any of its properties is bound or violate any applicable
order or decree of any governmental agency or court having jurisdiction
over the Company or any of its properties or business naming the
Company and to the best knowledge of such counsel;
(F) to such counsel's best knowledge, there are no claims,
actions, suits, investigations or proceedings before or by any
arbitrator, court, governmental authority or instrumentality pending or
threatened against the Company which might materially and adversely
affect the business, properties or financial condition of the Company
or which might materially adversely affect the transactions or other
acts contemplated by the Offering Documents or the validity or
enforceability of the Offering Documents, except as set forth in or
contemplated by the Offering Documents. Except as disclosed in the
Offering Documents, to such counsel' s best knowledge, the Company is
not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality naming the Company;
(G) upon the issuance of Common Stock, each of the purchasers shall
acquire such securities, free and clear of all pledges, liens, claims,
encumbrances, preemptive rights, rights of first offer or right of
first refusal and restrictions, to such counsel's best knowledge, and
imposed by or through the Company, except for the transfer restrictions
set forth in the Subscription Agreements and any action taken to
encumber such securities by the holder itself;
(H) the Common Stock has been duly authorized and reserved for
issuance and, upon issuance in accordance with the terms of such
instruments, will be validly issued, fully paid and non-assessable; and
<PAGE>
Paramount Capital, Inc.
Page 14
(I) in course of the preparation of the Offering Documents,
which involved, among other things, discussions and inquiries
concerning the various legal matters and the review of certain
corporate records, documents and proceedings, counsel participated in
conferences with certain officers and other representatives of the
Company and the Placement Agent during which the contents of the
Offering Documents and related matters were discussed. On the basis of
the information which was developed in the course thereof, such counsel
shall advise the Placement Agent (which advice shall not be in the form
of an opinion and is not required to be delivered to the purchasers)
that such counsel has no reason to believe that as of the date of the
Closing, the Term Sheet contained an untrue statement of a material
fact relating to the Company or omitted to state a material fact
relating to the Company required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made in light of the circumstances
under which they were made.
Such counsel may state that the absence of any independent
verification by such counsel of factual matters and the character of
determinations involved in the securities laws disclosure process are
such, however, that it does not assume responsibility for the accuracy,
completeness or fairness of the statements made in the Term Sheet. Such
counsel need not express any opinion or belief as to the financial
statements and related schedules and the other financial and
statistical data contained in the Term Sheet.
(vi) Comfort Letter. If requested by the Placement Agent, the
--------------
Company shall cause the Company's independent public accountants to
address and deliver to the Company and the Placement Agent a letter or
letters (which letters are frequently referred to as "Comfort Letters")
dated as of the Closing Date and the effective date of the registration
statement required to be filed in connection with the Subscription
Agreements.
(vii) Officer's Certificate. The Placement Agent shall receive
---------------------
an Officer's Certificate substantially in the form of Exhibit A and a
Secretary's Certificate substantially in the form of Exhibit B, signed
by the appropriate parties and dated as of the Closing. These
certificates shall state, among other things, that the representations
and warranties contained in Section 2 hereof are true and accurate in
all material respects at such Closing with the same effect as though
expressly made at such Closing.
(viii) Escrow Agreement. The Placement Agent shall receive a
----------------
copy of a duly executed Escrow Agreement with the American Stock
Transfer & Trust Company in the form previously delivered to you.
(ix) Lock-Up Agreement. Certain current stockholders,
-----------------
directors and executive officers of the Company shall agree that, for a
period of thirteen (13) months from the closing of the Offering, they
will not sell,
<PAGE>
Paramount Capital, Inc.
Page 15
assign or transfer any of their shares of the Company's securities
without the Placement Agent's prior written consent.
(x) Transmittal Letters. The Placement Agent shall receive
-------------------
copies of all letters from the Company to the investors transmitting
the Common Stock and shall receive a letter from the Company confirming
transmittal of the securities to the investors.
(xi) Transfer Sheets. For a period of three (3) years from the
---------------
Closing Date, the Company, at its expense, shall provide the Placement
Agent with copies of the Company's daily transfer sheets, if requested
by the Placement Agent.
(c) Blue Sky. A summary blue sky survey, at the sole cost of the
--------
Company (with legal fees and disbursements not to exceed $15,000),
shall be prepared by counsel to the Placement Agent stating the extent
to which and the conditions upon which offers and sales of the Units
may be made in certain jurisdictions. It is understood that such survey
may be based on or rely upon (i) the representations of each Subscriber
set forth in the Subscription Agreement delivered by such Subscriber,
(ii) the representations, warranties and agreements of the Company set
forth in Section 2 of this Agreement, (iii) the representations and
warranties of the Placement Agent, and (iv) the representations of the
Company set forth in the certificate to be delivered at the Closing
pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for and
--------------------------
delivery of the Units at each Closing as provided in paragraph 3(a)
above, the Company shall at such Closing pay to the Placement Agent (i)
a commission equal to ten percent (10%) of the aggregate purchase price
of the Units sold and (ii) a non-accountable expense allowance equal to
three percent (3 %) of the aggregate purchase price of the Units sold.
The Company shall also pay all expenses in connection with the
qualification of the Units under the securities or Blue Sky laws of the
states which the Placement Agent shall designate (with legal fees and
disbursements not to exceed $15,000). The Placement Agent shall be
entitled to warrants to purchase Common Stock equal to 10% of the
Common Stock sold in this Offering at an exercise price equal to 125%
of the price per share of Common Stock sold to investors in the
Offering, upon execution and delivery of a Warrant Purchase Agreement
in a form reasonably acceptable to the Company.
(e) No Adverse Changes. There shall not have occurred, at any time
------------------
prior to the Closing (i) any domestic or international event, act or
occurrence which has materially disrupted, or in the Placement Agent's
opinion will in the immediate future materially disrupt, the securities
markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter
<PAGE>
Paramount Capital, Inc.
Page 16
market; (iii) any outbreak of major hostilities or other national or
international calamity; (iv) any banking moratorium declared by a state
or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any
material interruption in the mail service or other means of
communication within the United States; (vii) any material adverse
change in the business, properties, assets, results of operations, or
financial condition of the Company; or (viii) any change in the market
for securities in general or in political, financial, or economic
conditions which, in the Placement Agent's reasonable judgment, makes
it inadvisable to proceed with the offering, sale, and delivery of the
Units.
5. Covenants of the Company.
-------------------------
(a) Use of Proceeds. The net proceeds of the Offering will be used
---------------
by the Company substantially as set forth in the Term Sheet. The
Company shall not use any of the proceeds from the Offering to repay
any indebtedness of the Company, including, but not limited to,
indebtedness to any current executive officers, directors or principal
stockholders of the Company.
(b) Expenses of Offering. The Company shall be responsible for, and
--------------------
shall bear all expenses directly incurred in connection with, the
proposed Offering including, but not limited to, legal fees relating to
the costs of preparing the Offering Documents and all amendments,
supplements and exhibits thereto; preparing and delivering all
placement agent and selling documents, including, but not limited to,
the Agency Agreement with the Placement Agent and the blue sky
memorandum; Common Stock certificates; blue sky fees, filing fees and
the fees and disbursements of counsel in connection with blue sky
matters (subject to the limit set forth in Section 3(c) hereof) (the
"Company Expenses"). The Company shall pay to the Placement Agent a
non-accountable expense allowance equal to three percent (3%) of the
total proceeds of the Offering (the "Expense Allowance") of which
$20,000 shall be due and payable upon the execution of the Letter of
Intent, to cover the cost of our mailing, telephone, telegraph, travel,
due diligence meetings and other similar expenses including legal fees
of Placement Agent's counsel (other than legal fees in connection with
blue sky matters as to which fees you shall be responsible (subject to
the limit set forth in Section 3(c) hereof). Such prepaid expense
allowances shall be non-refundable.
(c) Notification. The Company shall notify the Placement Agent
------------
immediately, and in writing, (A) when any event shall have occurred
during the period commencing on the date hereof and ending on the later
of the Closing or the Termination Date as a result of which the
Offering Documents would include any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances under which they were made and (B) of the receipt of
any notification with respect to the modification, rescission,
withdrawal or suspension of
<PAGE>
Paramount Capital, Inc.
Page 17
the qualification or registration of the Units, or of any exemption
from such registration or qualification, in any jurisdiction. The
Company will use its best efforts to prevent the issuance of any such
modification, rescission, withdrawal or suspension and, if any such
modification, rescission, withdrawal or suspension is issued and you so
request, to obtain the lifting thereof as promptly as possible.
(d) Blue Sky. The Company will use its best efforts to qualify the
--------
Units for offering and sale under exemptions from qualification or
registration requirements under the securities or "blue sky" laws of
such jurisdictions as you may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in
securities in any jurisdiction in which it is not so qualified. The
Company will not consummate any sale of Units in any jurisdiction in
which it is not so qualified or in any manner in which such sale may
not be lawfully made.
(e) Registration Statement Filing. The Company covenants to use its
-----------------------------
best efforts to file the Registration Statement relating to the
Proposed Equity Financing (as defined in the Term Sheet) as soon as
possible following the Closing of this Offering but in no event later
than sixty (60) days after the Closing of this Offering, subject to the
Placement Agent's cooperation.
(f) Form D Filing. The Company shall file five copies of a
-------------
Notice of Sales of Securities on Form D with the Securities and
Exchange Commission (the "Commission") no later than 15 days after the
Closing. The Company shall file promptly such amendments to such
Notices on Form D as shall become necessary and shall also comply with
any filing requirement imposed by the laws of any state or jurisdiction
in which offers and sales are made. The Company shall furnish the
Placement Agent with copies of all such filings.
(g) Press Releases, Etc. Except as otherwise required by applicable
-------------------
law, the Company shall not, during the period commencing on the date
hereof and ending thirty days after the later of the Closing and the
Termination Date, issue any press release or other communication, or
hold any press conference with respect to the Company, its financial
condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior written consent of the
Placement Agent, which consent shall not be unreasonably withheld.
(h) Public Documents. Following the Closing of the Offering, the
----------------
Company will furnish to the Placement Agent: (i) as soon as practicable
(but in the case of the annual report of the Company to its
stockholders, within 120 days after the end of each fiscal year of the
Company) one copy of: (A) its annual report to its stockholders (which
annual report shall contain financial statements audited in accordance
with generally accepted accounting principles in the United States of
America by a firm of certified public accountants of recognized
standing), (B) if not included in substance in its annual report to
stockholders, its annual report
<PAGE>
Paramount Capital, Inc.
Page 18
on Form 10-K, (C) each of its quarterly reports to its stockholders,
and if not included in substance in its quarterly reports to
stockholders, its quarterly report on Form 10-Q, (D) each of its
current reports on Form 8-K, and (E) a copy of the full Registration
Statement, if filed (the foregoing, in each case, excluding exhibits);
and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause 5(h)(i)(E) and all
other information that is generally available to the public. In
addition, the Company upon reasonable request will meet with the
Placement Agent or its representatives to discuss all information
relevant for disclosure in any Registration Statement covering shares
purchased by purchasers from the Company and offered by them for resale
and will cooperate in any reasonable investigation undertaken by the
Placement Agent for the purpose of confirming the accuracy of the
Registration Statement, including the production of information at the
Company's offices.
(i) Restrictions on Securities. During the two years following
--------------------------
the Closing of the Offering, the Company shall not, without the prior
written consent of the Placement Agent, offer or sell any of its
securities in reliance on Regulation S of the Securities Act, other
than to non-U.S. employees of the Company or its subsidiaries. During
the nine (9) month period following the completion of the Offering, (i)
the Placement Agent shall have the right of first refusal to act as
placement agent for the offering of any securities of the Company
issued for fund raising purposes (excluding "firm commitment"
underwritings, corporate partner arrangements and strategic alliances
and other licensing transactions) and (ii) the Company will not extend
the expiration date or decrease the exercise price of any options or
warrants or other similar security purchase rights without the prior
written consent of the Placement Agent (other than those issued
pursuant to the Company's stock option plan or as required by the
documents governing any such securities).
(j) Financial Advisory Agreement. At the Closing Date, the
----------------------------
Company and the Placement Agent will enter into an engagement agreement
whereby the Placement Agent will act as the Company's non-exclusive
financial advisor to assist the Company in identifying and negotiating
one or more corporate or strategic alliances. Such engagement will
provide that Paramount receive a monthly retainer of $3,000 (minimum
engagement of twenty-four months), out-of-pocket expenses and standard
success fees.
(k) Board Designee. During the three years following the completion
--------------
of the Offering, the Placement Agent shall have the right, at its
option, to designate one director to the Board of Directors of the
Company.
(1) Letter Agreements. The Placement Agent acknowledges that the
-----------------
Company is a party to letter agreements (the "Letter Agreements") dated
June 29, 1995 and June 28, 1994 with Americorp which provide for
Americorp Securities, Inc. ("Americorp") to act as a financial advisor
and for the payment of certain fees to
<PAGE>
Paramount Capital, Inc.
Page 19
be paid to Americorp in connection with certain transactions. Although
the parties hereto do not believe that the Letter Agreements relate to
the Offering, in the event that Americorp is owed and paid a fee
pursuant the Letter Agreements on account of the transactions
contemplated hereby, the Placement Agent agrees to reimburse the
Company, solely out of and to the extent of Cash Commissions actually
paid to the Placement Agent, for any such amounts actually paid to
Americorp.
6. Indemnification.
----------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agent and each Selected Dealer, if any, and their respective
shareholders, directors, officers, agents and controlling persons
within the meaning of the Act (an "Indemnified Party") against any and
all loss, liability, claim, damage, liability and expense whatsoever
(and all actions in respect thereof), and to reimburse the Placement
Agent for legal fees and related expenses as incurred (including, but
not limited to the costs of giving testimony or furnishing documents in
response to a subpoena or otherwise, the costs of investigating,
preparing or defending any such action or claim whether or not in
connection with litigation in which the Placement Agent is a party), in
so far as such loss, liability, claim, damage or expense arises out of
any untrue statement or alleged untrue statement of a material fact
contained in the Offering Documents or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any such Indemnified Party in
writing specifically for use in the Offering Documents;
(b) The company agrees to indemnify and hold harmless an
Indemnified Party to the same extent as the foregoing indemnity, and
subject to the limitations set forth therein, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of
the exercise by any person of any right under the Securities Act or the
Exchange Act or the securities or Blue Sky laws of any state on account
of violations of the representations, warranties or agreements set
forth in Section 2 hereof.
(c) The Placement Agent agrees to indemnify and hold harmless the
Company, the Company's directors, officers, employees and agents and
each person who controls the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act and each and all of them,
to the same extent as the foregoing indemnity from the Company to the
Placement Agent, but only with reference to information, relating to
the Placement Agent, furnished in writing to the Company by the
Placement Agent specifically for inclusion in the Offering Documents.
<PAGE>
Paramount Capital, Inc.
Page 20
(d) Promptly after receipt by a person entitled to indemnification
pursuant to the foregoing subsection (a), (b), (c) or (d) (an
"indemnified party") under this Section of notice of the commencement
of any action, the indemnified party will, if a claim in respect
thereof is to be made against a person granting indemnification (an
"indemnifying party") under this Section, notify in writing the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to the indemnified party otherwise than under this
Section. In case any such action is brought against an indemnified
party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
subject to the provisions herein stated, with counsel reasonably
satisfactory to the indemnified party, and after notice from the
indemnifying party to the indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to the indemnified party under this Section for any legal or other
expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
The indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified
party; provided that the fees and expenses of such counsel shall be at
the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying
party or (ii) the named parties to any such action (including any
impleaded parties) include both the indemnified party or parties and
the indemnifying party and, in the judgment of the indemnified party,
it is advisable for the indemnified party or parties to be represented
by separate counsel (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys for the indemnified party or
parties. No settlement of any action against an indemnified party shall
be made without the consent of the indemnified party, which shall not
be unreasonably withheld in light of all factors of importance to the
indemnified party.
7. Contribution.
------------
(a) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section
6 but it is found in a final judicial determination, by a court of
competent jurisdiction, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii)
any indemnified or indemnifying party seeks contribution under the
Securities Act,
<PAGE>
Paramount Capital, Inc.
Page 21
the Exchange Act, or otherwise, then the Company (including for this
purpose any contribution made by or on behalf of any officer, director,
employee or agent for the Company, or any controlling person of the
Company), on the one hand, and the Placement Agent and any Selected
Dealers (including for this purpose any contribution by or on behalf of
an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which
any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand,
and the Placement Agent and the Selected Dealers, on the other hand;
provided, however, that if applicable law does not permit such
allocation, then other relevant equitable considerations such as the
relative fault of the Company and the Placement Agent and the Selected
Dealers in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. In
no case shall the Placement Agent or a Selected Dealer be responsible
for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the
Selected Dealer Agreement, as the case may be. No person guilty of a
fraudulent misrepresentation shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. For
purposes of this Section 7, each person, if any, who controls the
Placement Agent or a Selected Dealer within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act and each
officer, director, stockholder, employee and agent of the Placement
Agent or a Selected Dealer, shall have the same rights to contribution
as the Placement Agent or the Selected Dealer, and each person, if any
who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and each officer,
director, employee and agent of the Company, shall have the same rights
to contribution as the Company, subject in each case to the provisions
of this Section 7. Anything in this Section 7 to the contrary
notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written
consent. This Section 7 is intended to supersede any right to
contribution under the Securities Act, the Exchange Act, or otherwise.
(b) Notwithstanding the provisions of this Agreement, the aggregate
indemnification or contribution of the Placement Agent for or on
account of any losses, claims, damages, liabilities or actions shall
not exceed the Selling Commissions paid to the Placement Agent. The
respective indemnity and contribution agreements by the Company and the
Placement Agent contained in subsections (a), (b), (c) and (d) of
Section 6 and this Section 7, and the covenants, representations and
warranties of the Company and the Placement Agent set forth in Sections
1, 2, 3, 4 and 5 shall remain operative and in full force and effect
regardless of (i) any investigation made by the Placement Agent, on the
Placement Agent's behalf or by or on behalf of any person who controls
the Placement Agent, the Company or any controlling person of the
Company or any director or officer of the Company, (ii) acceptance of
any of the Units and payment therefor or (iii) any termination of this
Agreement, and shall survive the delivery of the Units, and any
successor of the
<PAGE>
Paramount Capital, Inc.
Page 22
Placement Agent or of the Company or of any person who controls the
Placement Agent or the Company, as the case may be, shall be entitled
to the benefit of such respective indemnity and contribution
agreements. The respective indemnity and contribution agreements by the
Company and the Placement Agent contained in subsections (a), (b) and
(c) of Section 6 and this Section 7 shall be in addition to any
liability which the Company and the Placement Agent may otherwise have.
8. Miscellaneous.
-------------
(a) Survival. Any termination of the Offering without consummation
--------
thereof shall be without obligation on the part of any party except
that the indemnification provided in Section 6 hereof and the
contribution provided in Section 7 hereof shall survive any termination
and shall survive the Closing for a period of five years.
(b) Representations, Warranties and Covenants to Survive Delivery.
--------------------------------------------------------------
The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company and the Placement Agent
as of the date hereof shall survive execution of this Agreement and
delivery of the Units and the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the sole
----------------------
and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or
corporation shall have any third-party beneficiary or other rights
hereunder.
(d) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the law of the State of New York without
regard to conflict of law provisions.
(e) Counterparts. This Agreement may be signed in counterparts with
------------
the same effect as if both parties had signed one and the same
instrument.
(f) Notices. Any communications specifically required hereunder
-------
to be in writing, if sent to the Placement Agent, will be mailed,
delivered and confirmed to it at Paramount Capital, 375 Park Avenue,
Suite 1501, New York, New York, 10023, Att: Michael S. Weiss and if
sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at Sparta Pharmaceuticals, Inc., Westpark Corporate
Center, Suite 110, 4364 S. Alston Ave., Durham, NC, 27713, Att: Chief
Executive Officer, with a copy to Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., One Financial Center, Boston, MA, 02111, Att:
Elizabeth P. Knauss, Esq.
<PAGE>
Paramount Capital, Inc.
Page 23
(g) Termination. Subject to the general survival provisions of
-----------
Sections 8(a) and 8(b), this Agreement may be terminated by either
party prior to any Closing upon written notice to the other party.
(h) Entire Agreement. This Agreement constitutes the entire
----------------
agreement of the parties with respect to the matters herein referred
and supersedes all prior agreements and understandings, written and
oral, between the parties with respect to the subject matter hereof.
Except as this Agreement pertains to the Offering, the Letter of Intent
dated January 10, 1996 between the parties, including without
limitation, paragraph 15, is not superseded. Neither this Agreement nor
any term hereof may be changed, waived or terminated orally, but only
by an instrument in writing signed by the party against which
enforcement of the change, waiver or termination is sought.
(i) Nothing contained herein or otherwise shall create a
partnership or join venture between you and the Company.
(j) The headings and captions of the various subdivisions of
this Agreement are for convenience or reference only and shall in no
way modify or affect the meaning or construction of any of the terms or
provisions hereof.
<PAGE>
Paramount Capital, Inc.
Page 24
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement
between us.
Very truly yours,
SPARTA PHARMACEUTICALS, INC.
By: /s/ William M. Sullivan
------------------------------------
Name: William M. Sullivan
Its: Chief Executive Officer
Agreed to by:
PARAMOUNT CAPITAL, INC.
By: /s/ Lindsay A. Rosenwald, M.D.
--------------------------------
Name: Lindsay A. Rosenwald, M.D.
Its: Chairman
<PAGE>
Paramount Capital, Inc.
Page 25
Schedule I
1. William M. Sullivan
2. Lindsay A. Rosenwald
Exhibit 11.1
<TABLE><CAPTION>
Sparta Pharmaceuticals, Inc.
(A Development Stage Company)
Computation of Earnings Per Share
Period From
For the three months June 12, 1990
ended March 31 (Inception) to
----------------------- March 31, 1996
1996 1995 --------------
---- ----
<S> <C> <C> <C>
Net loss $3,649,561 $(574,163) $(13,667,017)
=========== ========== =============
Historical weighted average number of shares
used in per share calculations(1) 6,559,557 6,142,372 3,494,946
Convertible Preferrred Stock and Convertible 1,434,598
----------
Notes
Supplemental weighted average shares 4,929,544
==========
Historical Net Loss per share $ (.56) $ (0.09) $ (3.91)
========== ========== ----------
Supplemental Net Loss per share $ (2.77)
==========
(1) Historical weighted average shares outstanding include the following:
Common Stock outstanding for the period based
on a daily weighted average 6,559,557 6,142,372 3,445,120
Common Stock issued within one year of the
initial filing used the treasury stock method* 4,232
Common Stock Options* 725
Common Stock Warrants* 44,869
--------- --------- ---------
Historical weighted average number of shares 6,559,557 6,142,372 3,494,946
outstanding ========= ========= =========
*Included as outstanding pursuant to SAB 83. See Note 2 of Notes to Financial Statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Sparta Pharmaceuticals, Inc.
This schedule contains summary financial information extracted from
the Financial Statements included in the Company's March 31, 1996 report on
Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,697,862
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,845,393
<PP&E> 623,445
<DEPRECIATION> 43,420
<TOTAL-ASSETS> 3,731,553
<CURRENT-LIABILITIES> 393,433
<BONDS> 0
0
300
<COMMON> 8,186
<OTHER-SE> 3,329,634
<TOTAL-LIABILITY-AND-EQUITY> 3,731,553
<SALES> 0
<TOTAL-REVENUES> 18,713
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,668,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,649,561)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,649,561)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,649,561)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
