SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 quarter ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27324
SYNAPTIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2859704
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
215 College Road
Paramus, NJ 07652
(Address of principal executive offices) (Zip Code)
(201) 261-1331
(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 November 5, 1997, there were 10,525,585 shares of the registrant's Common
Stock outstanding.
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SYNAPTIC PHARMACEUTICAL CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,1997
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements 1
Balance Sheets at September 30, 1997 and December 31, 1996 1
Statements of Operations for the three months ended
September 30, 1997 and 1996, and for the nine months ended
September 30, 1997 and 1996 2
Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 9
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
(i)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYNAPTIC PHARMACEUTICAL CORPORATION
BALANCE SHEETS
(in thousands, except share information)
ASSETS
September 30, December 31,
1997 1996
------------ -----------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 4,599 $ 4,589
Restricted cash 712 --
Marketable securities--current maturities 18,025 21,418
Revenue receivable under collaborative agreement 77 192
Restricted security -- 712
Other current assets 702 458
------- -------
Total current assets 24,115 27,369
Property and equipment, net 4,135 2,664
Marketable securities 8,285 8,677
Patent and patent application costs,
net of accumulated amortization 1,391 1,645
------- -------
$37,926 $40,355
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 32 $ 106
Accounts payable 415 639
Accrued liabilities 568 189
Accrued compensation 306 380
Deferred revenue 1,137 --
------- -------
Total current liabilities 2,458 1,314
Stockholders' equity:
Preferred Stock, $.01 par value; authorized--
1,000,000 shares; issued--none -- --
Common Stock, $.01 par value; authorized--
25,000,000 shares; issued and outstanding--7,649,997
shares in 1997 and 7,633,543 shares in 1996 76 76
Additional paid-in capital 63,249 63,231
Net unrealized gains (losses) on securities 29 (1)
Deferred compensation (188) (296)
Accumulated deficit (27,698) (23,969)
------- -------
Total stockholders' equity 35,468 39,041
------- -------
$37,926 $40,355
======= =======
See notes to financial statements.
1
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
(Unaudited)
For the three months For the nine months
ended September 30, ended September 30,
1997 1996 1997 1996
------- ------- ------- -------
Revenues:
Contract revenue $ 2,267 $ 1,711 $ 7,577 $ 5,133
License Revenue -- 2,000 -- 2,000
Grant revenue 140 258 382 398
------- ------- ------- -------
Total revenues 2,407 3,969 7,959 7,531
Expenses:
Research and development 3,529 3,008 10,220 8,492
General and administrative 998 714 2,920 2,078
------- ------- ------- -------
Total expenses 4,527 3,722 13,140 10,570
------- ------- ------- -------
(Loss) income from
operations (2,120) 247 (5,181) (3,039)
Other income, net:
Interest income 487 487 1,457 1,413
Interest expense (1) (5) (5) (16)
Gain on sale of securities -- -- -- 212
------- ------- ------- -------
Other income, net 486 482 1,452 1,609
------- ------- ------- -------
Net (loss) income $(1,634) $ 729 $(3,729) $(1,430)
======= ======= ======= =======
Net (loss) income per share $(0.21) $0.09 $(0.49) $(0.19)
====== ====== ====== ======
Shares used in computation
of net (loss) income
per share 7,648,249 7,912,061 7,643,081 7,559,352
========= ========= ========= =========
See notes to financial statements.
2
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the nine months
ended September 30,
1997 1996
------- -------
Operating activities:
Net loss $(3,729) $(1,430)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 897 716
Amortization of (discounts)/ premiums on securities (95) (10)
Amortization of deferred compensation 97 142
Gain on sale of securities -- (212)
Changes in operating assets and liabilities:
(Increase) in other current assets (956) (343)
Increase (decrease) in accounts payable, accrued
liabilities and accrued compensation 82 (281)
Decrease (increase) in collaborative agreement
revenue receivable 115 (1,871)
Increase (decrease) in deferred revenue 1,137 (562)
------- -------
Net cash used in operating activities (2,452) (3,851)
Investing activities:
Sale or maturity of investments 17,150 8,210
Purchase of investments (12,527) (32,239)
Purchases of property and equipment (2,116) (638)
Increase in patent and patent application costs -- (509)
------- -------
Net cash provided by (used in) investing activities 2,507 (25,176)
Financing activities:
Issuance of common stock, net of repurchases 29 2,972
Payments on capital lease (74) (102)
Payments on notes receivable from stockholders -- 6
------- -------
Net cash (used in) provided by financing activities (45) 2,876
------- -------
Net increase (decrease) in cash and cash equivalents 10 (26,151)
Cash and cash equivalents at beginning of period 4,589 27,681
------- -------
Cash and cash equivalents at end of period $ 4,599 $ 1,530
======= =======
See notes to financial statements.
3
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SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
Note 1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and may not include all
information and footnotes required for a presentation in accordance with
generally accepted accounting principles. In the opinion of the management of
Synaptic Pharmaceutical Corporation (the "Company"), these financial statements
include all normal and recurring adjustments necessary for a fair presentation
of the financial position and the results of operations and cash flows of the
Company for the interim periods presented. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements for the fiscal year ended December 31, 1996, and
notes thereto included in the Company's 1996 Annual Report on Form 10-K. The
results of operations for the interim periods ended September 30, 1997, are not
necessarily indicative of the results of operations to be expected for the full
year.
Note 2. Subsequent Event
On October 30, 1997, the Company sold 2,500,000 shares of common stock
at $12.625 per share (the "Offering".) On November 5, 1997, the underwriters
exercised an over-allotment option (the "Over-allotment"), granted to them in
connection with the Offering, in which the Company sold an additional 375,000
shares at $12.625. Proceeds to the Company, from the sale of the shares sold in
the Offering and the shares sold pursuant to the Over-allotment, are $34,141,000
after deducting underwriting commissions.
4
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Synaptic Pharmaceutical Corporation is a biotechnology company engaged
in the development of a broad platform of enabling technology which it calls
"human receptor-targeted drug design technology." It is utilizing this
technology both to discover and clone the genes that code for human receptor
subtypes associated with specific disorders and to design compounds that can
potentially be developed as drugs for treating these disorders. The Company is
engaged in collaborations with four pharmaceutical companies: Eli Lilly and
Company ("Lilly"), Merck & Co., Inc. ("Merck"), Novartis Pharma A.G.
("Novartis"), and Warner-Lambert Company ("Warner-Lambert"). Since inception,
the Company has financed its operations primarily through the sale of stock and
through funds provided by three of its collaborative partners, Lilly, Merck and
Novartis, under collaborative agreements. The Company entered into its
collaboration with Warner-Lambert in July 1997. The Company also has licensed
certain of its technology to The DuPont Merck Pharmaceutical Company ("DuPont
Merck").
Under its collaborative agreements, the Company may receive one or two
types of revenue from its collaborative partners: contract revenue and license
revenue. Contract revenue includes research funding to support a specified
number of the Company's scientists and payments upon the achievement of
specified research and development milestones. Research funding revenue is
recognized ratably over the period of the agreement to which it relates and is
based upon predetermined funding requirements. Research milestone payment
revenue is recognized when the related research milestone is achieved. License
revenue represents non-refundable payments for licenses to the Company's
technology and drug discovery systems. Non-refundable payments for licenses are
recognized at such time as they are received or, if earlier, become guaranteed.
In addition to contract revenue and license revenue, if a drug is developed as a
result of any of the collaborative agreements between the Company and its
collaborative partners, the Company is entitled to receive royalty payments
based upon the sale of such drugs. The Company also receives revenues from
government grants under the Small Business Innovative Research ("SBIR") program
of the National Institutes of Health.
To date, the Company's expenditures have been for research and
development related expenses, general and administrative related expenses, fixed
asset purchases and various patent related expenditures incurred in protecting
the Company's technologies. The Company has been historically unprofitable and
had an accumulated deficit of $27,698,000 at September 30, 1997. The Company
expects to continue to incur operating losses for a significant number of years
and may not become profitable, if at all, until it begins to receive royalty
revenue. To date, the Company has not received any royalty revenue and does not
expect to receive such revenue for a significant number of years, if at all.
Results of Operations
Comparison of the Three Months Ended September 30, 1997 and 1996
Revenues. The Company recognized revenue of $2,407,000 and $3,969,000
for the three months ended September 30, 1997 and 1996, respectively. The
decrease of $1,562,000 was attributable primarily to: the recognition during the
third quarter of 1996 of $2,000,000 of non-recurring license revenue under the
terms of one of the Company's license and collaboration agreements and a
decrease in grant revenue of $118,000; both of which were offset by an increase
in contract revenue of $556,000 which was primarily due to the expansion of the
Company's collaborative arrangement with Lilly.
5
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Research and Development Expenses. The Company incurred research and
development expenses of $3,529,000, and $3,008,000 for the three months ended
September 30, 1997 and 1996, respectively. The increase of $521,000, or 17%, in
research and development expenses was attributable primarily to: an increase of
$325,000 in compensation expense resulting from a net average headcount increase
of 26 research personnel, annual salary increases for the scientific staff and
an associated increase in fringe benefit expenses; an increase of $207,000 in
research supply costs; an increase of $131,000 in facility related costs; all of
which was offset by a reduction in grant equipment expense of $175,000.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $998,000 and $714,000 for the three months ended
September 30, 1997 and 1996, respectively. The increase of $284,000, or 40%, was
attributable primarily to $251,000 in patent and patent related expenses for the
quarter ended September 30, 1997 resulting from the expensing of all patent and
patent application costs as incurred, effective October 1, 1996.
Other Income, Net. The Company recorded other income, net of interest
expense, of $486,000 and $482,000 for the three months ended September 30, 1997
and 1996, respectively.
Net (Loss) Income and Net (Loss) Income Per Share. The Company incurred
a net loss of $1,634,000, ($0.21 per share), and had net income of $729,000,
($0.09 per share), for the three months ended September 30, 1997, and September
30, 1996, respectively. The increase of $2,363,000 in net loss was primarily
attributable to the recognition during the third quarter of 1996 of $2,000,000
of non-recurring license revenue.
Comparison of the Nine Months Ended September 30, 1997 and 1996
Revenues. The Company recognized revenue of $7,959,000 and $7,531,000
for the nine months ended September 30, 1997 and 1996, respectively. The
increase of $428,000 was attributable primarily to: an increase in contract
revenue of $2,444,000 resulting from the expansion of the Company's
collaborative arrangement with Lilly and increases in rates charged per
full-time equivalent scientist under collaborative arrangements from which the
Company is receiving funding partially offset by a decrease of $2,000,000 of
non-recurring license revenue under the terms of one of the Company's license
and collaboration agreements during the third quarter of 1996.
Research and Development Expenses. The Company incurred research and
development expenses of $10,220,000, and $8,492,000 for the nine months ended
September 30, 1997 and 1996, respectively. The increase of $1,728,000, or 20%,
in research and development expenses was attributable primarily to: an increase
of $891,000 in compensation expense resulting from a net average headcount
increase of 22 research personnel, annual salary increases for the scientific
staff and an associated increase in fringe benefit expenses; an increase of
$606,000 in research supply costs; an increase of $324,000 in facility related
costs; all of which was offset by a reduction in grant equipment expense of
$175,000.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $2,920,000 and $2,078,000 for the nine months ended
September 30, 1997 and 1996, respectively. The increase of $842,000, or 41%, was
attributable primarily to $729,000 in patent and patent related expenses for the
nine months ended September 30, 1997 resulting from the expensing of all patent
and patent application costs as incurred, effective October 1, 1996.
Other Income, Net. The Company recorded other income, net of interest
expense, of $1,452,000 and $1,609,000 for the nine months ended September 30,
1997 and 1996, respectively. The decrease of $157,000 was primarily attributable
to the recognition of gain on sale of securities.
6
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Net Loss and Net Loss Per Share. The net loss incurred by the Company
was $3,729,000 ($0.49 per share), and $1,430,000 ($0.19 per share) for the nine
months ended September 30, 1997 and 1996, respectively. The increase of
$2,299,000 in net loss was primarily attributable to the recognition during the
third quarter of 1996 of $2,000,000 of non-recurring license revenue.
The Company does not believe that inflation has had a material impact
on its results of operations for either the three month period or the nine month
period which ended September 30, 1997.
Liquidity and Capital Resources
At September 30, 1997 and December 31, 1996, cash, cash equivalents and
marketable securities were in the aggregate $30,909,000 and $34,684,000,
respectively. The decrease of $3,775,000 was attributable primarily to the net
loss for the nine months of $3,729,000 and the purchase of capital equipment and
leasehold improvements of $2,116,000 offset by the receipt in the third quarter
of $1,137,000 in quarterly contract research funding which will be recognized in
the fourth quarter and depreciation and amortization expense of $899,000
recorded in its statement of operations for the nine months ended September 30,
1997. On October 30, 1997, the Company sold 2,500,000 shares of common stock at
$12.625 per share. On November 5, 1997, the underwriters exercised an
Over-allotment option, granted to them in connection with the Offering, in which
the Company sold an additional 375,000 shares at $12.625. Proceeds to the
Company from the sale of the shares sold in the Offering and the shares sold
pursuant to the Over-allotment are $34,141,000 after deducting underwriting
commissions. In addition to the cash, cash equivalents and marketable securities
described above, the Company had $712,000 in restricted cash recorded in its
balance sheet at September 30, 1997. This restricted cash is held in one of the
Company's investment accounts and secures lease payments to the Company's
landlord for one full year and secures the outstanding balance due on an
equipment lease.
To date, the Company has met its cash requirements through the sale of
its stock, through licensing fees, research funding and milestone payments
received under the collaborative agreements with Lilly, Merck and Novartis,
through SBIR grants and through interest earned on its investments. As of
September 30, 1997, the Company had received: approximately $62,000,000 from the
sale of its stock; approximately $46,000,000 in licensing fees, research funding
and milestone payments under its collaborative arrangements; approximately
$3,200,000 in SBIR grants; and approximately $5,900,000 in other income, net. To
date, the portion of these funds that has been expended by the Company has been
used principally to fund research and development, to purchase fixed assets used
primarily in its research activities, to create its patent estate and to pay
general and administrative support costs.
At September 30, 1997, the Company was involved in collaborative
arrangements with Lilly, Merck, Novartis and Warner-Lambert. Lilly, Merck and
Novartis are providing research funding to the Company during 1997 and Lilly and
Novartis are expected to provide research funding to the Company during 1998.
The aggregate amount of research funding under these arrangements which the
Company expects to receive during the remainder of 1997 and during 1998 is
approximately $1,107,000 and $6,678,000, respectively. Warner-Lambert does not
currently provide research funding to the Company and the Company does not
expect that such funding will be provided, if at all, until 1999. Research
funding under the Lilly agreement is scheduled to expire on December 31, 1998.
Research funding under the Merck agreement is scheduled to expire on November
30, 1997. Research funding under the Novartis agreements is scheduled to expire
on August 3, 1998.
At September 30, 1997, the Company had invested an aggregate of
$7,675,000 in property and equipment. During the first nine months of 1997, the
Company spent approximately $2,116,000 on capital improvements. Of this amount,
approximately $1,400,000 related to the expansion of laboratory space
7
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and improvements to the Company's assay screening systems. In addition, the
Company continues to convert currently underutilized space into laboratory
facilities beyond the level which existed at September 30, 1997.
The Company leases laboratory and office facilities under an agreement
expiring on December 31, 1999. The minimum annual payment under the lease is
$691,000.
At September 30, 1997 the Company had available funds of $30,909,000.
The Company believes that its cash and marketable securities on hand, funds it
will receive from its collaborative partners and under SBIR grants and interest
income, together with the net proceeds received from the Offering and from the
shares sold pursuant to the Over-allotment, will be sufficient to fund an
increased operating expense level through the year 2000. The Company expects to
continue to incur operating losses for a significant number of years.
As of December 31, 1996, the Company had net operating loss
carryforwards of approximately $21,000,000 for Federal income tax purposes that
will expire principally in the years 2002 through 2011. In addition, the Company
had research and development credit carryforwards which will expire principally
in 2002 through 2009. For financial reporting purposes, a valuation allowance
has been recognized to offset the deferred tax assets related to these
carryforwards. Due to limitations imposed by the Tax Reform Act of 1986, and as
a result of a significant change in the company's ownership in 1993, the
utilization of approximately $6,000,000 of net operating loss carryforwards is
subject to annual limitation. The utilization of the research and development
credits is similarly limited. A further limitation of the net operating losses
and research and development credit carryforwards may occur if there is a
further change in ownership in connection with the Offering mentioned above.
This management discussion and analysis of financial condition and
results of operations includes "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward looking statements
include, but are not limited to, those relating to future cash and spending
plans, amounts of future research funding, and any other statements regarding
future growth, future cash needs, future operations, business plans and
financial results, and any other statements which are not historical facts. When
used in this document, the words "expect," "may," "believes," and similar
expressions are intended to be among the words that identify forward looking
statements. Such forward looking statements involve risks and uncertainties,
including, but not limited to those risks and uncertainties and other factors
set forth as "Cautionary Statements" in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 or detailed from time to time in filings
that the company makes with the Securities and Exchange Commission. The forward
looking statements included herein are qualified in their entirety by the
Cautionary Statements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary from those indicated. Although the Company believes that the
expectations reflected in the forward looking statements contained herein are
reasonable, it can give no assurance that such expectations will prove to be
correct.
8
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PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Securities Act Rule 229.463 ("Rule 463") required issuers to report on
Form SR their use of proceeds, following an initial public offering, within ten
days of the first three months following the effective date of the registration
statement, and every six months thereafter, until the application of all such
proceeds was complete. Effective September 2, 1997, pursuant to Release No.
34-38850, the Securities and Exchange Commission ("SEC") amended Rule 463 to
eliminate Form SR and now requires a first-time registrant to report the
application of proceeds in each of its periodic Exchange Act reports until the
application of such proceeds is complete. Prior to September 2, 1997, the
Company utilized Form SR to report the application of proceeds received by the
Company following its initial public offering.
The information provided below represents a reasonable estimate of the
cumulative application, through September 30, 1997, of the net proceeds of
$25,194,000 which were received following the Company's initial public offering
on December 13, 1995:
Construction of plant, building and facilities $ 208,000
Purchase and installation of machinery and equipment $ 2,554,000
Working capital $11,580,000
Except for payments described in the following sentence, the cumulative
application of the net offering proceeds listed above represent direct payments
to others. No payments were made to directors or officers or to their associates
except for payments made in the ordinary course of business which include, but
may not be limited to, the payment of officer salaries, fringe benefits, and
expense reimbursements or compensation paid to directors for their attendance at
board meetings or for their services provided to the Company under consulting
arrangements, if any.
At September 30, 1997, the status of proceeds pending final application
are as follows:
Temporary investment of proceeds in marketable securities $10,852,000
9
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
- ------- -----------
* 10.1 Collaborative Research and License Agreement between Synaptic
Pharmaceutical Corporation and Warner-Lambert Company
11 Statement Regarding Computation of Per Share Earnings (Loss)
27 Financial Data Schedule
* Portions of this Exhibit have been omitted and filed separately with the
Secretary of the Securities and Exchange Commission pursuant to the
Registrant's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the fiscal
quarter ended September 30, 1997.
10
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SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) 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.
SYNAPTIC PHARMACEUTICAL CORPORATION
(Registrant)
Date: November 7, 1997 By:/s/ Kathleen P. Mullinix
-----------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President &
Chief Executive Officer
By:/s/ Robert L. Spence
-----------------------------
Name: Robert L. Spence
Title: Senior Vice President,
Chief Financial Officer &
Treasurer
11
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COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
between
Synaptic Pharmaceutical Corporation
and
Warner-Lambert Company
July 28, 1997
<PAGE>
TABLE OF CONTENTS
RECITALS....................................................................-1-
ARTICLE I...................................................................-2-
Definitions.........................................................-2-
ARTICLE II..................................................................-5-
Scope and Structure of Project.............................................-5-
2.0 Scope of Project............................................-5-
2.1 Structure of Project........................................-5-
(a) General..............................................-5-
(b) Duration of Stage 1..................................-5-
(c) Duration of Stage 2..................................-5-
(d) Suspension of Stage 2 Commencement Date..............-5-
ARTICLE III.................................................................-6-
Management and Planning of Project; Reports and Exchange of Information....-6-
3.0 Steering Committee; Management Committee....................-6-
3.1 Research Committee..........................................-7-
3.2 Meetings....................................................-7-
3.3 Personnel and Resources.....................................-7-
3.4 Modification of Research Plan...............................-7-
3.5 Conduct of Studies..........................................-7-
3.6 Research with Third Parties; Third Party Technologies.......-8-
(a) No Research with Third Parties within Project Scope..-8-
(b) Research with Third Parties Outside Project Scope....-8-
(c) Acquiring Third Party Technologies...................-8-
3.7 Written Reports.............................................-8-
3.8 Disclosure of Technology....................................-9-
3.9 Samples.....................................................-9-
ARTICLE IV..................................................................-9-
Stage 1 of the Project.....................................................-9-
4.0 Principal Objectives........................................-9-
ARTICLE V...................................................................-9-
Stage 2 of the Project.....................................................-9-
5.0 Principal Objectives........................................-9-
5.1 Reconsideration of Research Plan............................-9-
(i)
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ARTICLE VI.................................................................-10-
Funding of Project and Equity Commitment..................................-10-
6.0 Stage 1 Funding............................................-10-
6.1 Stage 2 Funding............................................-10-
(a) Research Funding....................................-10-
(b) Other Amounts.......................................-10-
(c) Payment.............................................-10-
6.2 Stage 2 Equity Commitment..................................-11-
(a) Synaptic Put Option.................................-11-
(b) Conditions to Warner Stock Purchase Obligation......-11-
(c) Transfer Restrictions; Stock Registration...........-11-
ARTICLE VII................................................................-12-
License Grants and Commercialization Efforts..............................-12-
7.0 Grant by Synaptic..........................................-12-
(a) License Grant.......................................-12-
(b) Limited Sublicensing Rights.........................-12-
7.1 Grant by Warner............................................-12-
7.2 Efforts to Commercialize, Etc..............................-12-
(a) Development, Commercialization and Sales Efforts....-12-
(b) Lead Compound Development Team......................-12-
(c) Synaptic Participation in Post-NDA Filing Activities-13-
ARTICLE VIII...............................................................-13-
Royalties.................................................................-13-
8.0 General....................................................-13-
(a) Royalty Percentages.................................-13-
(b) Royalties on Unpatented Products....................-13-
(c) Cost of Goods Sold Limitation.......................-14-
(d) Annual Reconciliation of Royalty Payments Due.......-14-
(e) Term of Royalty Obligation..........................-14-
8.1 Currency of Payment........................................-15-
8.2 Payment and Reporting......................................-15-
8.3 Records....................................................-15-
8.4 Computation of Royalties...................................-15-
8.5 Taxes Withheld.............................................-16-
8.6 Licenses to Affiliates.....................................-16-
8.7 Restrictions on Payment....................................-16-
ARTICLE IX.................................................................-16-
Milestone Payments........................................................-16-
9.0 First Lead Compound Designated by End of Project Term......-16-
(a) Milestone Amounts...................................-16-
(ii)
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(b) Trigger Event................................-17-
(c) Exceptions to Payment Obligations............-17-
9.1 Second Lead Compound with Different Mechanism of
Action..............................................-17-
9.2 Third and Each Additional Lead Compound with Different
Mechanism of Action.................................-17-
9.3 Backup Compounds....................................-18-
9.4 Second Generation Compounds.........................-18-
9.5 Same Compound but Different Therapeutic Indication..-18-
ARTICLE X..................................................................-19-
Royalties and Milestones on Pre-Existing Compounds in Development.........-19-
10.1 Pre-Phase II Completion Other Compound.....................-19-
10.2 Post-Phase II Completion Other Compound....................-20-
ARTICLE XI.................................................................-20-
Patent Protection.........................................................-20-
11.0 Disclosure of Inventions...................................-20-
11.1 Ownership of Project Technology and Inventions.............-20-
11.2 Preparation, Filing and Prosecution of Patent Applications.-21-
(a) Responsible Party...................................-21-
(b) Assistance..........................................-21-
(c) Abandonment.........................................-21-
(d) Costs...............................................-21-
11.3 Third Party Infringement...................................-22-
11.4 Allegations of Infringement by Third Parties...............-22-
(a) Licenses Under Third Parties' Patents...............-22-
(b) Defense of Suits by Third Parties Relating to
Products............................................-23-
(c) Defense of Suits by Third Parties Relating to
Research Activities.................................-23-
(d) Pre-Existing Infringement Claims....................-23-
ARTICLE XII................................................................-23-
Confidentiality...........................................................-23-
12.0 Obligations................................................-23-
12.1 Waiver of Confidentiality Obligation.......................-23-
12.2 Disclosure of Agreement....................................-23-
12.3 Publicity..................................................-24-
12.4 Scientific Publications....................................-24-
ARTICLE XIII...............................................................-24-
Term......................................................................-24-
ARTICLE XIV................................................................-24-
Termination and License Maintenance Payment Options.......................-24-
(iii)
<PAGE>
14.0 Material Default...........................................-24-
14.1 Insolvency, Etc............................................-24-
14.2 No Chemical Lead and No Novel Galanin Receptor During
First Twelve Months........................................-24-
14.3 No Chemical Lead but Novel Galanin Receptor During First
Twelve Months..............................................-25-
(a) Synaptic's Limited Termination Right................-25-
(b) Synaptic's Further Termination Right; Warner's Right
to Override Termination and Enter Stage 2...........-25-
(c) Grant of Nonexclusive License Relating to Previously
Terminated Rights...................................-25-
14.4 No BACL by Eighteen-Month Anniversary of Stage 1
Commencement Date..........................................-26-
(a) Warner's Termination Right..........................-26-
(b) Warner's Right to Partial Termination...............-26-
(c) Warner's Further Termination Right..................-26-
14.5 No BACL and No Lead Compound by End of Project Term;
BACL or Lead Compound for Some but Not For All Galanin
Receptors..................................................-26-
(a) Termination Right at End of Project Term............-26-
(b) Synaptic's Limited Termination Right................-26-
14.6 BACLs Still Being Pursued but No Lead Compound by End
of Project Term............................................-27-
(a) First BACL..........................................-27-
(b) Additional BACLs....................................-28-
14.7 Lead Compound by End of Project Term.......................-31-
(a) First Lead Compound.................................-31-
(b) Additional Lead Compounds...........................-32-
14.8 Two Targeted Galanin Receptors for Single BACL or Lead
Compound...................................................-34-
ARTICLE XV.................................................................-34-
Effect of Termination.....................................................-34-
15.0 Termination Pursuant to Section 14.0 or Section 14.1.......-34-
(a) Rights and Obligations..............................-34-
(b) Survival of Certain Provisions......................-35-
15.1 Termination Pursuant to Section 14.2.......................-35-
(a) Rights and Obligations..............................-35-
(b) Survival of Certain Provisions......................-35-
15.2 Termination Pursuant to Section 14.3(b), Section 14.4(a),
Section 14.4(c), Section 14.5(a) or Section 14.6(a)(ii)....-35-
(a) Rights and Obligations..............................-35-
(b) Survival of Certain Provisions......................-36-
15.3 Partial Termination Pursuant to Section 14.3(a) or
Section 14.4(b)............................................-36-
(iv)
<PAGE>
(a) Restrictive Covenant................................-36-
(b) Survival of Certain Provisions......................-36-
15.4 Partial Termination Pursuant to Section 14.5(b)............-37-
(a) Restrictive Covenant................................-37-
(b) Survival of Certain Provisions......................-37-
15.5 Partial Termination Pursuant to Section 14.6 or
Section 14.7...............................................-37-
(a) Restrictive Covenant................................-37-
(b) Survival of Certain Provisions......................-38-
15.6 Option to Acquire License; Payments to Warner..............-38-
15.7 Survival of Accrued Rights.................................-38-
ARTICLE XVI................................................................-39-
Representations and Warranties............................................-39-
16.1 Synaptic Prohibition Against Certain Third Party Licenses..-39-
16.2 Warner Limitations on Certain Development Activities.......-39-
16.3 Cost of Goods Sold Experience..............................-39-
ARTICLE XVII...............................................................-39-
Miscellaneous Provisions..................................................-39-
17.0 No Agency..................................................-39-
17.1 Governing Law..............................................-39-
17.2 Notices....................................................-39-
17.3 Force Majeure..............................................-40-
17.4 Amendment; Waiver..........................................-40-
17.5 Indemnification............................................-41-
17.6 Assignment.................................................-41-
17.7 No Strict Construction.....................................-42-
17.8 Counterparts...............................................-42-
17.9 Entire Agreement...........................................-42-
17.10 Headings...................................................-42-
Schedule I.................................................................-43-
In Vivo Models.....................................................-43-
Schedule II................................................................-44-
Specifications for Cells...........................................-44-
A. Cell Membranes......................................-44-
B. Cells for Signal Transduction Assays................-44-
Schedule III...............................................................-45-
Research Plan......................................................-45-
Schedule IV................................................................-46-
(v)
<PAGE>
Responsibilities of the Parties....................................-46-
A. Responsibilities of Synaptic........................-46-
B. Responsibilities of Warner..........................-46-
(vi)
<PAGE>
COLLABORATIVE RESEARCH AND LICENSE AGREEMENT
This Agreement is made as of the 28th day of July, 1997 (the "Effective
Date"), between Synaptic Pharmaceutical Corporation, a Delaware corporation
having a principal place of business at 215 College Road, Paramus, New Jersey
07652-1410 ("Synaptic"), and Warner-Lambert Company, a Delaware corporation
having a principal place of business at 201 Tabor Road, Morris Plains, New
Jersey 07950 ("Warner").
RECITALS
1. Synaptic and Warner are each actively conducting research directed
at discovering and developing compounds useful for treating a variety of
disorders through the modulation of Galanin Receptors (as defined below).
2. Synaptic has expertise in the discovery and cloning of receptor
genes, the development of binding and signal transduction assays that employ
cloned receptor genes for use in drug discovery programs, and the design and
discovery of compounds that modulate the receptors of interest.
3. Synaptic has utilized its expertise to discover and clone genes that
code for Galanin Receptors, to develop binding and signal transduction assays
that employ such genes and to design and discover Galanin Receptor-selective
compounds, and Synaptic is continuing to utilize its expertise to attempt to
discover and clone genes that code for additional Galanin Receptors, to develop
additional binding and signal transduction assays that employ such genes and to
design and discover Galanin Receptor-selective compounds.
4. Warner has compound libraries that it would like to screen at
Galanin Receptors cloned by Synaptic and has expertise in optimizing candidate
compounds and in evaluating them in in vivo model systems.
5. Warner has expertise in preclinical and clinical testing and in
commercializing pharmaceutical products.
6. Synaptic and Warner have expressed a mutual interest in utilizing
their complementary skills and resources in a collaborative effort to discover
and develop agonists and antagonists of Galanin Receptors for human therapeutic
indications.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties agree as follows:
-1-
<PAGE>
ARTICLE I
Definitions
When used in this Agreement, each of the following terms shall have the
meaning set forth below:
1.1 "Affiliate" means, with respect to Warner or Synaptic, any other
entity directly or indirectly controlling, controlled by or under common control
with such entity, but only for so long as such control exists. One entity shall
be deemed to control another entity if it holds at least 50% of the voting stock
or income interest of such other entity.
1.2 "Biologically Active Chemical Lead" or "BACL" means a Chemical Lead
or a chemical entity derived from a Chemical Lead that has exhibited preliminary
evidence of therapeutic utility, as judged by the Steering Committee, in one or
more In Vivo Models, and is an agonist or an antagonist of a Galanin Receptor.
1.3 "Chemical Lead" means any chemical entity which binds to a Galanin
Receptor either (a) at a concentration of [**] or less and to which synthetic
chemistry resources are committed for the purpose of obtaining a BACL or (b) has
been approved by both parties for testing in an In Vivo Model.
1.4 "Cost of Goods Sold" means, with respect to any Product, the cost
of goods sold, as computed in accordance with United States Generally Accepted
Accounting Standards and in a manner consistent with the way in which Warner
computes the cost of goods sold with respect to its other products generally.
Subject to the preceding sentence, such cost may include, for example,
formulation, filling, finishing, labeling and packaging (in accordance with Good
Manufacturing Practice) of bulk drug for commercial therapeutic sales of a
product, with no markup if internally produced, including the cost of all raw
material, and the net cost of any value-added taxes actually paid or utilized in
respect of the subject good.
1.5 "FDA" means the United States Food and Drug Administration.
1.6 "FTE" means a researcher employed by Synaptic or Warner and
assigned to work on the Project with such time and effort to constitute one
scientist working on the Project on a full time basis consistent with normal
business and scientific practice (i.e., at least forty hours per week of
dedicated effort for at least [**] weeks per year).
1.7 "Galanin Receptor" means any G protein-coupled, membrane-bound
receptor which binds galanin at ten nanomolar or lower concentration and with an
affinity that is at least 100-fold higher than the affinity with which such
receptor binds neuropeptide Y, norepinephrine and serotonin.
-2-
[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
1.8 "IND" means an investigational new drug application filed with the
FDA, or any comparable application filed with a foreign equivalent of the FDA in
a Major Market Country other than the United States.
1.9 "In Vivo Model" means any of the tests for evaluating compounds set
forth on Schedule I attached hereto and any other in vivo tests for evaluating
the potential therapeutic utility of compounds.
1.10 "Lead Compound" means any chemical entity which is or is derived
from a Chemical Lead that has an affinity for each Galanin Receptor of which it
is an agonist or an antagonist that is more than ten times greater than its
affinity for any alpha adrenergic, neuropeptide Y or serotonin receptor and
which Warner approves for the commencement of toxicology studies in accordance
with Good Laboratory Practices, as defined in regulations promulgated by the FDA
and in effect from time to time ("GLP").
1.11 "Lead Compound Development Team" shall have the meaning set forth
in Section 7.2(b).
1.12 "Major Market Country" means any of the United States, France,
Germany, Great Britain, Italy, Japan or Spain.
1.13 "Management Committee" means the management committee formed
pursuant to Section 3.0.
1.14 "Net Sales" means, with respect to any Product, the gross amount
invoiced to non-affiliated customers for sales of such Product in each calendar
year, after deduction for the following items: (i) trade, quantity and cash
discounts or rebates actually allowed to such customers, including, without
limitation, payments made in connection with government-sponsored insurance
programs; (ii) credits, rebates, charge-back rebates, reimbursements or similar
payments actually granted or given to such customers for Products previously
sold; (iii) any tax, tariff, duty or other governmental charge (other than
income tax) levied on the sale, transportation or delivery of such Product and
borne by the seller thereof ; (iv) any charge for freight or insurance actually
borne by the customer; and (v) allowances for bad debt expense, in each case as
determined in accordance with Warner's normal accounting procedures.
1.15 "Novel Galanin Receptor" means, as of any date, a human Galanin
Receptor which had not been cloned by Synaptic prior to such date.
1.16 "Patent Rights" means patents and patent applications owned or
controlled by Synaptic or Warner relating to Products, and all divisions,
continuations, continuations-in-part, reissues, extensions and foreign
counterparts thereof.
-3-
<PAGE>
1.17 "Product" means any pharmaceutical product which includes as an
active ingredient a chemical entity which is an agonist or an antagonist of a
Galanin Receptor which is included within Synaptic Background Technology or
Project Technology, and which is made, used or sold for a Project Use.
1.18 "Project" shall have the meaning set forth in Section 2.0.
1.19 "Project Technology" means all know-how, trade secrets, assays,
inventions, experimental data, experimental procedures, technology, biological,
chemical and other materials and other proprietary information of Synaptic or
Warner which relate to the Project and which are developed as part of the
Project during the Project Term.
1.20 "Project Term" means the period commencing as of the Effective
Date and ending on the third anniversary of the Stage 2 Commencement Date.
1.21 "Project Use" means any pharmaceutical use of an agonist or an
antagonist of a Galanin Receptor in humans.
1.22 "Research Committee" means the joint research committee formed
pursuant to Section 3.1.
1.23 "Research Plan" shall have the meaning set forth in Section 3.0.
1.24 "Six-Month Extension Date" shall have the meaning set forth in
Section 2.1(d).
1.25 "Stage 1 Commencement Date" shall have the meaning set forth in
Section 2.1(b).
1.26 "Stage 2 Commencement Date" shall have the meaning set forth in
Section 2.1(c).
1.27 "Steering Committee" means the joint steering committee formed
pursuant to Section 3.0.
1.28 "Synaptic Background Technology" shall mean all technology,
inventions, information, data, know-how, and materials (whether or not patented
or patentable) that (i) are related to Galanin Receptors (including cloned
Galanin Receptors, transfected cells expressing Galanin Receptors, assays
utilizing Galanin Receptors, and chemical entities identified as selective
agonists or antagonists of Galanin Receptors), (ii) are owned or controlled by
Synaptic and (iii) existed as of the Effective Date.
1.29 "Targeted Galanin Receptor" means, with respect to any chemical
entity, the Galanin Receptor which is the primary receptor target of such
chemical entity.
1.30 "Trigger Event" shall have the meaning set forth in Section
9.0(b).
-4-
<PAGE>
1.31 "Warner Library" means Warner's proprietary compound library.
ARTICLE II
Scope and Structure of Project
2.0 Scope of Project. During the Project Term, the parties shall engage
in a collaborative research and development program to identify and develop Lead
Compounds for Project Uses (the "Project"). The Project shall be conducted in
accordance with the terms of this Agreement.
2.1 Structure of Project.
(a) General. The Project shall be conducted in two stages:
Stage 1 and Stage 2.
(b) Duration of Stage 1. Stage 1 of the Project shall commence
upon the date of the delivery to Warner of the cell membranes described in Part
A of Schedule II (the "Stage 1 Commencement Date"). Unless this Agreement is
terminated earlier pursuant to Article XIV, Stage 1 of the Project shall end as
of the earliest of (i) the eighteen-month anniversary of the Stage 1
Commencement Date, (ii) the date on which a BACL shall have been identified or
(iii) if Warner shall have delivered the written notice contemplated by and in
accordance with Section 14.3(b), the twelve-month anniversary of the delivery by
Synaptic to Warner of the Novel Galanin Receptor referred to therein.
(c) Duration of Stage 2. Unless this Agreement is terminated
earlier pursuant to Article XIV and subject to Section 2.1(d), Stage 2 of the
Project shall commence on the fifteenth day following the conclusion of Stage 1
(the "Stage 2 Commencement Date"). Stage 2 of the Project shall end on the third
anniversary of the Stage 2 Commencement Date.
(d) Suspension of Stage 2 Commencement Date. In the event that
(i) Synaptic discovers and clones, at any time during the period commencing on
the twelve-month anniversary of the Stage 1 Commencement Date and ending on the
eighteen-month anniversary thereof, a Novel Galanin Receptor and (ii) Warner
terminates this Agreement in part pursuant to Section 14.4(b) due to its failure
to have identified a BACL prior to such eighteen-month anniversary, Warner shall
have the right, at its option, to suspend the Stage 2 Commencement Date until
the six-month anniversary (the "Six-Month Extension Date") of the date as of
which Synaptic shall have provided to Warner transfected cells or cell membranes
which express the Novel Galanin Receptor. Such right shall be exercised, if at
all, upon written notice to Synaptic no later than the fifteenth day following
such eighteen-month anniversary. If Warner exercises its right pursuant to this
Section 2.1(d), the Stage 2 Commencement Date shall, unless this Agreement is
subsequently terminated pursuant to Section 14.4(c), occur automatically and
without any action on the part of the parties, on the Six-Month Extension Date.
-5-
<PAGE>
ARTICLE III
Management and Planning of Project;
Reports and Exchange of Information
3.0 Steering Committee; Management Committee. The Steering Committee
shall be formed promptly following the Effective Date, but in no event later
than thirty days thereafter. Each party shall be entitled to appoint three
members of its staff to act as its representatives on the Steering Committee.
Each party may from time to time change its representation on the Steering
Committee, but shall notify the other party promptly in writing of any such
change.
The Steering Committee shall be responsible for (a) monitoring and
directing the activities of the Research Committee and resolving any issues
which cannot be resolved by the Research Committee, (b) determining the overall
direction of the Project (within the terms of this Agreement) and (c)
recommending to each party for its approval the personnel, facilities, expertise
and other resources to be used by each party in the performance of the Project.
In addition, the Steering Committee shall have such other responsibilities as
are set forth herein or contemplated hereby.
The Steering Committee shall meet promptly following the Effective
Date, but in no event later than thirty days thereafter, to (a) prepare such
procedures and mechanisms as may be necessary for the Steering Committee and the
Research Committee to operate in a manner which will ensure the efficient
conduct of the Project and (b) devise, in collaboration with the Research
Committee and for review and approval by each party, an initial research plan
setting forth the principal goals to be achieved during Stage 1 of the Project,
the relative priorities of the parties and the proposed timetables for achieving
these goals (such initial research plan, as the same may be modified from time
to time during the Project Term in accordance with this Agreement, being
referred to herein as the "Research Plan"). Once approved by both parties, the
initial Research Plan shall be attached to this Agreement as Schedule III. Such
initial Research Plan, as the same may be modified from time to time in
accordance with this Agreement, shall thereafter be deemed incorporated into and
constitute a part of this Agreement. The Steering Committee shall meet at least
quarterly and shall prepare agendas and minutes for each of its meetings.
All actions taken and decisions made by the Steering Committee shall be
by unanimous agreement.
Any issues which cannot be resolved by the Steering Committee shall be
referred to a Management Committee, comprising one individual from Synaptic and
one individual from Warner, for resolution. The members of the Management
Committee are currently, from Synaptic: Kathleen P. Mullinix, Chairman,
President and Chief Executive Officer; and from Warner: Senior Vice President,
Research: Parke-Davis Pharmaceutical Division. Each of Synaptic and Warner may
from time to time change its representation on the Management Committee, but
shall notify the other party promptly in writing of any such change. The sole
responsibilities of the Management Committee will be to resolve issues which
cannot be resolved by the Steering Committee and to address infringement issues
as contemplated by Section 11.3.
-6-
<PAGE>
3.1 Research Committee. The Research Committee shall be formed promptly
following the Effective Date, but in no event later than thirty days thereafter.
Each party shall be entitled to appoint three members of its staff to act as its
representatives on the Research Committee. Each party may from time to time
change its representation on the Research Committee, but shall notify the other
party promptly of any such change. The Research Committee shall report to and
operate under the overall direction of the Steering Committee.
The Research Committee shall be responsible for (a) monitoring and
directing the activities of the scientists working on the Project, (b)
elaborating and coordinating action plans, (c) the economic use of capacities
and (d) the fulfillment of the Research Plan. In addition, the Research
Committee shall have such other responsibilities as are set forth herein or
contemplated hereby.
The Research Committee shall meet promptly following the Effective
Date, but in no event later than thirty days thereafter, to devise, in
collaboration with the Steering Committee, the initial Research Plan.
Thereafter, the Research Committee shall meet at least quarterly. The Research
Committee shall prepare agendas and minutes for each of its meetings. All
actions taken and decisions made by the Research Committee shall be by unanimous
agreement. Any issues which cannot be resolved by the Research Committee shall
be referred to the Steering Committee.
3.2 Meetings. The Steering Committee, the Management Committee and the
Research Committee may meet by telephone or in person, as determined by the
respective members of such committees; provided, however, that at least two
meetings of the Research Committee shall be held in person each year. Attendance
at meetings shall be at the respective expenses of the participating parties.
The parties shall alternate the right to determine the location of each meeting,
with Warner determining the location of the first meeting of each committee.
3.3 Personnel and Resources. Each party shall commit such personnel,
facilities, expertise and other resources to the Project as it may determine to
be necessary to perform its obligations under this Agreement; provided, however,
that each party shall devote a minimum of six FTEs per year to the Project
during Stage 1 of the Project; provided further, however, that neither party
warrants that the Project shall achieve any of the research objectives
contemplated by the parties.
3.4 Modification of Research Plan. The Steering Committee will review
the Research Plan at least quarterly and propose, for review and approval by
each party, any changes thereto that are determined to be appropriate in light
of changing priorities of the Project or experience or knowledge gained in the
course of the Project. In addition, the Research Plan shall be modified in
accordance with Section 5.1. In implementing the Research Plan, the Research
Committee shall endeavor to assign specific tasks to Synaptic and Warner so as
to maximize progress of the Project and to avoid any duplication of research
efforts.
3.5 Conduct of Studies. All studies done in connection with the Project
shall be carried out in strict compliance with all applicable laws, regulations
and guidelines governing the conduct of
-7-
<PAGE>
research at the site where such studies are being conducted. Synaptic and Warner
shall both comply with all laws and regulations applicable to the care and use
of experimental animals at the site where the studies are conducted.
3.6 Research with Third Parties; Third Party Technologies.
(a) No Research with Third Parties within Project Scope.
Without the approval of the Steering Committee, neither party shall at any time
during the Project Term conduct, by itself or with a third party, any research
to identify and/or develop for a Project Use compounds the mechanism of action
of which involves a Galanin Receptor with respect to which Warner has at such
time an exclusive license from Synaptic hereunder. Any third party for or with
which such research is to be conducted shall agree in advance to be bound by
obligations of confidentiality no less stringent than those set forth in this
Agreement, and shall be obliged to disclose the results of its research to the
parties to this Agreement and, at a minimum, to grant to both parties a
royalty-free license to use any technology, data or results arising out of such
research within the scope of the Project.
(b) Research with Third Parties Outside Project Scope. In the
event that either party desires to enter into a collaboration or other project
with a third party the focus of which would be research relating to Galanin
Receptors but which would not seek to develop agonists or antagonists of Galanin
Receptors, such party (the "Proposing Party") shall notify the other party (the
"Receiving Party") and provide the Receiving Party with a right of first
negotiation with respect to such collaboration or project. The Receiving Party
shall have thirty days within which to exercise such right and ninety days
within which to conclude an agreement relating thereto. If the Receiving Party
fails to exercise its right of first negotiation or to conclude an agreement
within the aforementioned time periods, the Proposing Party shall be free to
pursue such collaboration or project with a third party on terms no more
favorable to such third party than the Receiving Party indicated it was willing
to accept during such ninety-day period. Anything contained in this Agreement to
the contrary notwithstanding, this Section 3.6(b) shall apply for only so long
as Warner has an exclusive license from Synaptic hereunder with respect to at
least one Galanin Receptor.
(c) Acquiring Third Party Technologies. In the event the
parties become aware of technology of a third party relating to Galanin
Receptors at any time during the Project Term, the Steering Committee shall
determine whether such technology should be brought into the Project. [**]
3.7 Written Reports. The Research Committee shall prepare or
cause to be prepared, at least once every six months during the Project Term,
confidential written reports. These reports
-8-
[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
shall summarize the progress of the Project, the development of Project
Technology, Chemical Leads and Lead Compounds by code number, the manpower
utilization and the future direction of the Project, and shall be distributed to
the members of the Steering Committee.
3.8 Disclosure of Technology. Synaptic shall disclose to Warner on an
ongoing basis Synaptic Background Technology to the extent necessary for
purposes of the Project and Synaptic and Warner shall each disclose to the other
on an ongoing basis all Project Technology. Such disclosure may include limited
visits by Synaptic and Warner to the facilities of the other to permit
discussion and observation of Synaptic Background Technology and Project
Technology, any such visits to be with a frequency and duration to be agreed
upon by the Research Committee.
3.9 Samples. During the Project Term, Synaptic and Warner shall provide
each other with samples of materials which embody Synaptic Background Technology
and Project Technology, and may also provide each other with such other samples
for use in the Project as may be reasonably requested and approved by the
Research Committee. Any such samples shall be cared for by the receiving party
in accordance with Article XII.
ARTICLE IV
Stage 1 of the Project
4.0 Principal Objectives. The principal objectives of Stage 1 of the
Project will be (i) to identify at least one BACL and (ii) to discover and clone
genes that code for human and rat Galanin Receptors (in addition to GalR1, GalR2
and GalR3). Toward these objectives, Synaptic and Warner shall have during Stage
1 of the Project the responsibilities set forth on Schedule IV attached hereto,
as the same may be modified from time to time by the Research Plan.
ARTICLE V
Stage 2 of the Project
5.0 Principal Objectives. The principal objectives of Stage 2 of the
Project will be (a) to develop Lead Compounds based on BACLs identified during
Stage 1 of the Project, (b) to identify and develop additional BACLs as
potential backups for the BACLs referred to in the foregoing clause (a), (c) to
identify and develop additional BACLs for Project Uses, (d) to discover and
clone genes for human and rat Galanin Receptors that have not theretofore been
cloned and (e) to continue, to the extent determined by the Steering Committee
to be appropriate, to perform the activities which were undertaken as part of
Stage 1.
5.1 Reconsideration of Research Plan. Promptly following the Stage 2
Commencement Date, but in no event later than thirty days thereafter, the
Steering Committee shall meet to reconsider and revise the Research Plan based
upon its determination of the specific objectives and priorities of
-9-
<PAGE>
the Project at the time and the number of FTEs and other resources to be
dedicated to the Project by each party, and shall submit such revised Research
Plan to each party for review and approval.
ARTICLE VI
Funding of Project and Equity Commitment
6.0 Stage 1 Funding. During Stage 1 of the Project, each party shall
bear the costs and expenses of any work done by it at its laboratories as part
of the Project pursuant to this Agreement.
6.1 Stage 2 Funding.
(a) Research Funding. In consideration for the research
performed and to be performed by Synaptic as part of the Project, Warner shall
provide research funding to Synaptic to support that number of FTEs assigned
from time to time to work on the Project during the period beginning on the
Stage 2 Commencement Date and ending on the last day of Stage 2 of the Project.
The amount of such research funding shall be calculated at the rate (the "Rate")
of [**] per annum per Synaptic FTE. The Rate shall be subject to
adjustment on the Stage 2 Commencement Date for inflation during the period from
the Effective Date to the Stage 2 Commencement Date, such adjustment to be made
pursuant to the Bureau of Labor Statistics Consumer Price Index for Urban
Consumers, New York, N.E. New Jersey Metropolitan Region Price Index (the
"CPI"). The Rate, as adjusted in accordance with the immediately preceding
sentence, shall thereafter be subject to adjustment for inflation pursuant to
the CPI on each anniversary of the Stage 2 Commencement Date.
(b) Other Amounts. In addition to the research funding to be
provided pursuant to Section 6.1(a), Warner shall, to the extent approved by the
Steering Committee, reimburse Synaptic for its out-of-pocket, third party costs
incurred in the direct performance of its obligations under the Research Plan
during Stage 2 of the Project.
(c) Payment. The research funding referred to in Section
6.1(a) shall be paid to Synaptic by Warner in substantially equal quarterly
payments on or before the first day of each calendar quarter during the term of
this Agreement; provided, however, that the first payment of research funding
shall be made within forty-five days following the Stage 2 Commencement Date and
if the Stage 2 Commencement Date is not the first day of a calendar quarter,
such payment shall be equal to a pro-rated portion of the quarterly payment
(based on the number of days between the Stage 2 Commencement Date and the
beginning of the first complete calendar quarter following such date).
Reimbursements pursuant to Section 6.1(b) shall be made promptly upon (and in no
event later than thirty days following) presentation by Synaptic to Warner of
invoices received from such third parties for the related expenditures.
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6.2 Stage 2 Equity Commitment.
(a) Synaptic Put Option. During the period beginning on the
Stage 2 Commencement Date and ending on the fifth anniversary thereof, Synaptic
shall have the right, at its option, to require Warner, and Warner hereby agrees
upon the exercise of such right by Synaptic in accordance with this Section 6.2,
to invest [**] in shares of Common Stock, $.01 par value (the "Common
Stock"), of Synaptic. Synaptic's right under this Section 6.2 shall be
exercisable upon the giving by Synaptic to Warner of written notice stating that
Synaptic is exercising its right under Section 6.2 of this Agreement. Warner
shall select a date on which to consummate the purchase (the "closing date") and
shall notify Synaptic of such date at least three business days prior thereto.
The closing date shall be not more than thirty days following Warner's receipt
of the exercise notice from Synaptic. The specific number of shares of Common
Stock to be purchased by Warner shall equal such number of whole shares of
Common Stock as results from the quotient of [**] divided by [**] of
the average last sale price of Common Stock, as reported by The Nasdaq Stock
Market, for the twenty trading days of the Common Stock preceding the closing
date.
No fractional shares shall be issued.
(b) Conditions to Warner Stock Purchase Obligation. Warner's
obligation to purchase the Common Stock pursuant to this Section 6.2 shall be
conditioned on: (i) Synaptic not being in breach or default of its material
obligations under this Agreement as of the closing date; and (ii) Synaptic
representing as of the closing date that: (A) it is solvent; and (B) the
information contained in all annual and quarterly reports and filings made to
the United States Securities and Exchange Commission for the period from the
date of this Agreement through the closing date was true and accurate in all
material respects at the time of submission and no changes have occurred since
the date of any such submission which were required to have been disclosed prior
to the closing date but which were not disclosed and which would materially
adversely affect Synaptic's business as a whole.
(c) Transfer Restrictions; Stock Registration. The shares of
Common Stock acquired by Warner pursuant to this Section 6.2 shall not be
transferable by Warner until the first anniversary of the closing date. Synaptic
shall register the shares of Common Stock acquired by Warner pursuant to this
Section 6.2 under the Securities Act of 1933, as amended, by such first
anniversary. In connection with such registration, Warner shall furnish to
Synaptic such information regarding Warner as Synaptic may reasonably request.
In addition, Warner shall indemnify Synaptic against any claims, losses, damages
and liabilities arising out of any untrue statement of a material fact or
omission thereof in a registration statement covering the shares acquired by
Warner, but only to the extent that such statement or omission is made in the
registration statement in reasonable reliance upon and accurately incorporates
the written information provided by Warner to Synaptic. Warner shall bear up to
the first $25,000 of the fees and expenses incurred by Synaptic in connection
with the registration of the shares of Common Stock acquired by it (including,
without limitation, the costs of preparing, reviewing and filing any
registration statement covering such shares), as well as all of its own fees and
expenses incurred in connection with any such registration.
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ARTICLE VII
License Grants and Commercialization Efforts
7.0 Grant by Synaptic.
(a) License Grant. Synaptic hereby grants to Warner an
exclusive, worldwide license to use, for the sole purpose of discovering,
developing, manufacturing, having manufactured, using and selling Products for
Project Uses, all Synaptic Background Technology, all Synaptic Project
Technology and all Synaptic Patent Rights, subject to the reservation in favor
of Synaptic of the right to use all Synaptic Background Technology, all Synaptic
Project Technology and all Synaptic Patent Rights for the purposes of carrying
out its obligations under this Agreement and for all other purposes not falling
within the scope of the license hereby granted.
(b) Limited Sublicensing Rights. The licenses granted pursuant
to Section 7.0(a) above shall not be sublicensable by Warner except to the
extent necessary to enable Products to be manufactured, used or sold by Warner's
Affiliates and/or sold by third parties ("permitted sublicensees").
7.1 Grant by Warner. Warner hereby grants to Synaptic, a nonexclusive,
worldwide, royalty-free license to use solely for the purposes of carrying out
its obligations under this Agreement, all Warner Project Technology and all
Warner Patent Rights.
7.2 Efforts to Commercialize, Etc.
(a) Development, Commercialization and Sales Efforts. With
respect to each Lead Compound, Warner shall exercise reasonably diligent efforts
toward developing and commercializing such Lead Compound as a Product and
optimizing the sales thereof. [**]
(b) Lead Compound Development Team. Promptly after a BACL is
designated a Lead Compound, Warner shall form a lead compound development team
which shall oversee the pre-clinical and clinical development of such Lead
Compound through the filing of an NDA on a
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Product arising from such Lead Compound (the "Lead Compound Development Team").
At the time that Warner appoints the Lead Compound Development Team, it shall
promptly inform Synaptic and Synaptic shall have the authority to appoint one of
its employees to such team. Such Synaptic representative shall be provided with
(i) reasonable advance notice of and an opportunity to attend all meetings of
the Lead Compound Development Team and (ii) copies of all documentation and
minutes prepared for such Lead Compound Development Team's review and approval.
All actions taken and decisions made by the Lead Compound Development Team shall
be under the direction and control of Warner and all meetings thereof shall be
held in Ann Arbor, Michigan, or such other location as Warner shall determine.
Synaptic shall be responsible for paying all travel costs and expenses incurred
by its representative in attending such meetings. A party may change any of its
appointments to the Lead Compound Development Team at any time upon giving
written notice to the other party.
(c) Synaptic Participation in Post-NDA Filing Activities.
Following the filing of an NDA on a Product arising from a Lead Compound, Warner
shall keep Synaptic fully informed concerning the status of the regulatory
approval process as it relates to such Product and its plans, strategies and
activities with respect to the commercialization of such Product. Warner shall
give reasonable consideration to Synaptic's comments and suggestions concerning
the foregoing. Synaptic shall be responsible for paying all costs and expenses
incurred by it in connection with its participation in the foregoing.
ARTICLE VIII
Royalties
8.0 General.
(a) Royalty Percentages. In further consideration of the
licenses granted to Warner hereunder, Warner shall pay to Synaptic a royalty on
Net Sales of each Product as follows:
[**]
(b) Royalties on Unpatented Products. In the case of Net Sales
of any Product in a country in which the manufacture, use or sale of such
Product is not covered by a claim of the
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Patent Rights (an "Unpatented Product"), the rate of the royalty payable in
respect of such Net Sales shall be reduced to one-half of the royalty rate
payable pursuant to Section 8.0(a).
(c) Cost of Goods Sold Limitation. Notwithstanding anything
contained herein to the contrary, the percentage royalty payable in any calendar
quarter with respect to Net Sales of each Product pursuant to the provisions of
this Section 8.0 shall be reduced by the number of percentage points by which
the Cost of Goods Sold for such Product in such quarter exceeds[**] of the Net
Sales of such Product in such quarter.
(d) Annual Reconciliation of Royalty Payments Due. If, with
respect to any Product, the aggregate Net Sales in any calendar year should
exceed any of the thresholds set forth in Section 8(a), then sales of each
category of the Product (i.e., Unpatented Products and Products covered by a
claim of the Patent Rights ("Patented Products")) shall be deemed to have taken
place in the same proportion throughout the calendar year and the parties will
reconcile the payments made by Warner with respect to such calendar year within
ninety days following the end of any such calendar year. (For example, if Net
Sales of Products in any Year totalled $750 million of which $500 million (i.e.,
2/3) were of Patented Products and $250 million (i.e., 1/3) were of Unpatented
Products, the royalties due on such sales would be calculated as follows:
Patented Products:
$250 million x 2/3 at [**]
$250 million x 2/3 at [**]
$250 million x 2/3 at [**]
Unpatented Products:
$250 million x 1/3 at [**]
$250 million x 1/3 at [**]
$250 million x 1/3 at [**]
Total royalties = [**]
(e) Term of Royalty Obligation. Warner's obligation to pay
Synaptic royalties under this Agreement shall commence as of the date of the
first commercial sale of a Product for a Project Use and, subject to the last
sentence of this Section 8.0(e), shall continue (i) for Patented Products, until
the expiration of the last to expire of the Patent Rights relating to each such
Product and (ii) for Unpatented Products, until the tenth anniversary of such
date of first commercial sale, in each case on a country-by-country basis. Only
one royalty will be due on the sale of a specific Product, regardless of the
number of patent claims covering such Product. If the Patent Rights relating to
a Patented Product expire, lapse or are revoked before the expiration of ten
years from the launch date in any country, the Product shall be treated as an
Unpatented Product until (A) if no generic form of the Product is being sold in
such country, the end of the ten-year period and (B) if
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a generic form of the Product is being sold in such country, the second
anniversary of the later of (x) the first commercial sale of such generic form
of the Product in such country and (y) the date of such expiration, lapse or
revocation and thereafter, no royalty shall be payable on such Product in such
country.
8.1 Currency of Payment. All payments to be made to Synaptic under this
Agreement shall be made in United States dollars in the United States to a bank
account designated by Synaptic. Royalties earned shall first be determined in
the currency of the country in which they are earned and then converted to their
equivalent in United States currency. The buying rates of exchange for the
currencies involved into the currency of the United States quoted by Citibank
(or its successor in interest) in New York, New York at the close of business on
the last business day of the quarterly period in which the royalties were earned
shall be used to determine any such conversion.
8.2 Payment and Reporting. The royalties earned under Section 8.0
during any calendar quarter shall be paid within sixty days after the close of
such quarter. With each such quarterly payment, Warner shall furnish Synaptic
with a royalty statement (the "Royalty Statement"), setting forth on a
country-by-country basis the total number of units of each Product made, used
and/or sold during the calendar quarter with respect to which the royalty
payment is being made.
8.3 Records. Warner shall keep, and shall require its Affiliates and
permitted sublicensees to keep, accurate books and accounts of record in
connection with the manufacture, use and/or sale by or for it of the Products in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalty obligations set forth in this Article VIII. Such records
shall be maintained for a period of three years from the end of each year in
which sales occurred. Synaptic, at its expense, through a nationally recognized
certified public accountant, shall have the right to access such books and
records for the sole purpose of verifying the Royalty Statements, such access to
be conducted after reasonable prior notice by Synaptic to Warner during Warner's
ordinary business hours and not more frequent than once during each calendar
year. Synaptics' certified public accountant shall not disclose to Synaptic or
any other party any information other than information that should properly be
contained in a royalty report required under this Agreement and shall sign an
agreement to that effect. If, as a result of such accounting, it is determined
that Synaptic received at least 5% less than it was properly due in respect of
any quarter, then Warner shall pay to Synaptic, in addition to the amount of the
discrepancy, (a) interest accrued thereon during the period from the date as of
which such amount was originally due to the date of payment, such interest to be
computed at the average prime rate announced by Citibank N.A. during such period
plus 2%, and (b) an amount equal to the costs reasonably incurred by Synaptic in
conducting the accounting (including the fees and expenses of Synaptic's
certified public accountant).
8.4 Computation of Royalties. Sales of Products among Warner and its
Affiliates and permitted sublicensees shall not be subject to royalties under
this Article VIII, but in such instances royalties shall be payable upon
Warner's, its Affiliates' and its permitted sublicensees' sales to independent
third parties. Nothing contained herein shall obligate Warner to pay Synaptic
more than one royalty on any unit of a Product.
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8.5 Taxes Withheld. Any income or other tax that Warner, its Affiliates
or sublicensees is required to withhold (the "Withholding Party") and pay on
behalf of Synaptic hereunder (the "Withheld Party") with respect to the
royalties payable under this Agreement shall be deducted from and offset against
said royalties prior to remittance to the Withheld Party; provided, however,
that in regard to any tax so deducted, the Withholding Party shall give or cause
to be given to the Withheld Party such assistance as may reasonably be necessary
to enable the Withheld Party to claim exemption therefrom or credit therefor,
and in each case shall furnish the Withheld Party proper evidence of the taxes
paid on its behalf.
8.6 Licenses to Affiliates. Each party shall, at the other party's
request, sign license and/or royalty agreements directly with the other party's
Affiliates and permitted sublicensees in those situations where such agreements
would not decrease the amount of royalties which would be owed hereunder. Such
agreements shall contain the same language as contained herein with appropriate
changes in parties and territory. No such license and/or royalty agreement will
relieve Warner of its obligations hereunder, and Warner will guarantee the
obligations of its Affiliate or sublicensee in any such agreement. Royalties
received directly from Warner's Affiliates and sublicensees shall be credited
towards Warner's royalty obligations under Section 8.0.
8.7 Restrictions on Payment. The obligation to pay royalties under this
Agreement shall be waived and excused to the extent that statutes, laws, codes
or government regulations in a particular country prevent such royalty payments
by the seller of Products, provided, however, that if legally permissible, the
seller of Products shall pay the royalties owed to the other party hereto by
depositing such amounts in a bank account in such country that has been
designated by the party owed such royalties.
ARTICLE IX
Milestone Payments
In addition to the other amounts which Warner is required to pay to
Synaptic hereunder and in consideration for the rights and licenses granted by
Synaptic to Warner hereunder:
9.0 First Lead Compound Designated by End of Project Term.
(a) Milestone Amounts. Subject to the provisions of Article
XIV, with respect to the first Lead Compound designated by Warner as such prior
to the end of the Project Term, Warner shall become obligated to pay Synaptic:
(i) [**] upon the designation of such Compound as a
Lead Compound;
(ii) [**] upon the acceptance for filing of the
first IND covering such Lead Compound;
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(iii) [**] upon the commencement of Phase II
clinical trials;
(iv) [**] upon the commencement of Phase III
clinical trials;
(v) [**] upon the sixtieth day following the
submission of an NDA covering such Lead Compound with the FDA or a
comparable submission in another Major Market Country, provided that
Warner has not received written notice from the FDA or an equivalent
foreign agency during such sixty-day period stating that the NDA has
not been accepted for filing;
(vi) [**] upon the approval of an NDA covering such
Lead Compound by the FDA or approval of a comparable submission in
another Major Market Country; and
(vii) [**] upon the approval for marketing of such
Lead Compound in a Major Market Country; provided, however, that such
[**] milestone payment shall not be payable unless and until an
NDA covering such Lead Compound or a comparable submission in Japan
shall have been approved.
(b) Trigger Event. For convenience of reference, each of the
events described in clauses (i) through (vii) above is referred to herein as a
"Trigger Event." Each of the payments described in clauses (i) through (vii)
above shall be due not later than thirty days following the Trigger Date
described therein.
(c) Exceptions to Payment Obligations. Notwithstanding
anything contained herein to the contrary, with respect to any Lead Compound for
which Warner becomes obligated to make a milestone payment under any of Sections
9.1 through 9.5, no payment obligation shall arise under Section 9.0(a).
9.1 Second Lead Compound with Different Mechanism of Action. With
respect to any Lead Compound the mechanism of action of which involves a
different Targeted Galanin Receptor than any Lead Compound with respect to which
Warner has previously made the milestone payments referred to in each of clauses
(i) through (vii) of Section 9.0(a), Warner shall become obligated to make
milestone payments to Synaptic in the amounts and upon the occurrence of the
Trigger Events described in clauses (i) through (vii) of Section 9.0(a);
provided, however, that the amount of the milestone payment which Warner shall
become obligated to make pursuant to clause (i) shall be reduced to [**].
9.2 Third and Each Additional Lead Compound with Different Mechanism of
Action. With respect to any Lead Compound the mechanism of action of which
involves a different Targeted Galanin Receptor than does (a) the mechanism of
action of any Lead Compound with respect to which Warner has previously become
obligated under Section 9.0(a) to make the milestone payments referred to in
each of clauses (i) through (vii) thereof and (b) the mechanism of action of
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any Lead Compound with respect to which Warner has previously become obligated
under Section 9.1 to make the milestone payments referred to in each of clauses
(i) through (vii) of Section 9.0(a), Warner shall become obligated, upon the
occurrence of the Trigger Events described in clauses (i) through (vii) of
Section 9.0(a), to make milestone payments to Synaptic equal to [**] of the
respective amounts set forth in such clauses; provided, however, that the amount
of the milestone payment which Warner shall be obligated to make upon the
occurrence of the Trigger Event described in clause (i) shall be [**] instead
of [**].
9.3 Backup Compounds. With respect to any Lead Compound that is a
backup compound (the "Backup Compound") for a Lead Compound with respect to
which Warner has previously become obligated under Sections 9.0, 9.1 or 9.2 to
make any of the milestone payments referred to in such sections (the "Replaced
Compound"), Warner shall become obligated, upon the occurrence of each Trigger
Event with respect to such Backup Compound, to make the corresponding milestone
payment under such sections to Synaptic; provided, however, that no such payment
obligation shall arise upon the occurrence of any Trigger Event if such Trigger
Event (a) would not have triggered a payment obligation with respect to the
Replaced Compound or (b) had previously occurred with respect to the Replaced
Compound.
9.4 Second Generation Compounds. With respect to any Lead Compound (a
"Second Generation Compound") that is a second generation compound of a Lead
Compound with respect to which Warner has previously become obligated under
Sections 9.0, 9.1, 9.2 or 9.3 to make all of the milestone payments referred to
in such sections, Warner shall become obligated, upon the occurrence of each
Trigger Event referred to in clauses [**] of Section 9.0(a) with
respect to such Second Generation Compound, to make the corresponding milestone
payment under such sections to Synaptic, but only to the extent of [**] thereof.
9.5 Same Compound but Different Therapeutic Indication. In the event
that any Lead Compound (an "Additional Indication Compound") with respect to
which Warner has previously become obligated under Sections 9.0, 9.1, 9.2, 9.3
or 9.4 to make any of the milestone payments referred to in such sections is
pursued for a therapeutic indication which is different from the therapeutic
indication that was its focus at the time that any such payment obligation
arose, Warner shall become obligated, upon the occurrence of each Trigger Event
referred to in clauses (i) through (vii) of Section 9.0(a) with respect to such
Additional Indication Compound, to make the corresponding milestone payment
under such sections to Synaptic; provided, however, that no such payment
obligation shall arise upon the occurrence of the Trigger Event referred to in
[**] if such Trigger Event had previously occurred with respect to such
Compound.
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ARTICLE X
Royalties and Milestones on Pre-Existing
Compounds in Development
In lieu of the provisions contained in Section 8.0 and Article IX, the
following provisions of this Article X shall apply to any chemical entity with
respect to which GLP toxicology studies have either commenced or been completed
as of the Effective Date (any such chemical entity being referred to herein as
an "Other Compound"):
Section 10.1 Pre-Phase II Completion Other Compound. In the case of any
Other Compound which (a) Warner is developing for a particular therapeutic
indication (the "Original Indication"), (b) has not undergone clinical testing
beyond Phase II clinical trials (or comparable trials outside the United States)
and (c) is determined to have activity measured at one or more Galanin Receptors
included within Synaptic Background Technology or Project Technology, Warner
shall pay Synaptic royalties and milestones as follows:
(i) If Warner continues to develop the Other Compound for the
Original Indication and does not utilize the information relating to
the Other Compound's galanin activity in any way, including, without
limitation, in its FDA (or comparable foreign) registration package or
its promotional or other marketing activities relating to such
Compound, then Warner shall not be required to pay Synaptic any
royalties or milestones with respect to such Compound;
(ii) If Warner continues to develop the Other Compound for the
Original Indication (and not for a new therapeutic indication), but
utilizes the information relating to the Other Compound's galanin
activity either (A) in its development of such Other Compound and the
Original Indication involves the diagnosis, treatment or prevention of
the condition implicated by the galanin activity or (B) in its FDA (or
comparable foreign) registration package or its promotional or other
marketing activities relating to such Compound, then Warner shall be
required to pay Synaptic [**] of the royalties payable under Article
VIII and [**] of any milestones payable under Article IX; provided,
however, that such milestones shall be payable only with respect to
Trigger Events which as of the time the information was generated had
not previously occurred; and
(iii) If Warner develops the Other Compound for a new
therapeutic indication in addition to or in lieu of the Original
Indication and utilizes the information relating to the Other
Compound's galanin activity either (A) to develop such Other Compound
for such new indication or (B) in its FDA (or comparable foreign)
registration package or its promotional or other marketing activities
relating to such Compound, then Warner shall be required to pay
Synaptic [**] of the royalties payable under Article VIII and [**] of
any milestones payable under Article IX; provided, however, that
such milestones shall be payable only with respect to Trigger Events
which as of the time the information was generated had not
previously occurred.
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Section 10.2 Post-Phase II Completion Other Compound. In the case of
any Other Compound (a) with respect to which Phase II clinical trials (or
comparable trials outside the United States) have been successfully completed
for an Original Indication and (b) which is determined to have activity measured
at one or more Galanin Receptors included within Synaptic Background Technology
or Project Technology, Warner shall pay Synaptic royalties and milestones as
follows:
(i) If Warner continues to develop the Other Compound for the
Original Indication and does not utilize the information relating to
the Other Compound's galanin activity in any way, then Warner shall not
be required to pay Synaptic any royalties or milestones with respect to
such Compound;
(ii) If Warner continues to develop the Other Compound for the
Original Indication (and not for a new therapeutic indication), but
utilizes the information relating to the Other Compound's galanin
activity either (A) in its development of such Other Compound and the
Original Indication involves the diagnosis, treatment or prevention of
the condition implicated by the galanin activity or (B) in its FDA (or
comparable foreign) registration package or its promotional or other
marketing activities relating to such Compound, then Warner shall be
required to pay Synaptic [**] of the royalties payable under Article
VIII and [**] of any milestones payable under Article IX; provided,
however, that such milestones shall be payable only with respect to
Trigger Events which as of the time the information was generated had
not previously occurred; and
(iii) If Warner develops the Other Compound for a new
therapeutic indication in addition to or in lieu of the Original
Indication and utilizes the information relating to the Other
Compound's galanin activity either (A) to develop such Other Compound
for such new indication or (B) in its FDA (or comparable foreign)
registration package or its promotional or other marketing activities
relating to such Compound, then Warner shall be required to pay
Synaptic [**]of the royalties payable under Article VIII and [**]of any
milestones payable under Article IX; provided, however, that such
milestones shall be payable only with respect to Trigger Events which
as of the time the information was generated had not previously
occurred.
ARTICLE XI
Patent Protection
11.0 Disclosure of Inventions. In the event that a patentable invention
is conceived or reduced to practice in the course of and within the scope of the
Project by employees of Synaptic and/or Warner, the party whose employees made
the invention shall promptly inform the other party.
11.1 Ownership of Project Technology and Inventions. All Project
Technology shall be owned as follows: (a) by Synaptic if and to the extent such
Project Technology concerns Galanin Receptors, assays incorporating Galanin
Receptors, uses of Galanin Receptors, and uses of Galanin
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Receptor agonists or antagonists defined not by chemical structures but by the
nature of their interaction with Galanin Receptors; and (b) by Warner if and to
the extent such Project Technology concerns chemical entities defined by
chemical structures, processes for making such chemical entities, compositions
incorporating such chemical entities, and methods of using such chemical
entities and compositions. All patentable inventions encompassed within Project
Technology on which patent applications are filed shall identify as inventors
all persons determined to be inventors in accordance with United States laws of
inventorship. In the event that a Synaptic employee is an inventor of Project
Technology to be owned by Warner or a Warner employee is an inventor of Project
Technology to be assigned to Synaptic, Synaptic or Warner, whichever is
applicable, shall be responsible for having an assignment to it of such
employee's rights and for assigning such rights to the other party.
11.2 Preparation, Filing and Prosecution of Patent Applications.
(a) Responsible Party. Synaptic shall be responsible for the
preparation, filing, prosecution, and maintenance of patents and patent
applications included within Synaptic Background Technology and within Patent
Rights owned or controlled by Synaptic. Warner shall be responsible for the
preparation, filing, prosecution, and maintenance of patents and patent
applications included within Patent Rights owned or controlled by Warner.
Whichever of Synaptic or Warner is the responsible party shall keep the other
party fully informed concerning its activities pursuant to this Section 11.2(a)
and shall provide the other party with a reasonable opportunity to review and
comment on all substantive actions which could materially affect the scope or
validity of the patent coverage which may result in advance of taking such
action. All review and comment by the non-responsible party shall be carried out
promptly.
(b) Assistance. If so requested by the responsible party, the
other party shall provide reasonable assistance to the responsible party in
order to obtain the optimum patent protection for any invention covered by a
claim of a patent or patent application prepared, filed, prosecuted or
maintained pursuant to Section 11.2(a).
(c) Abandonment. If at any time the responsible party
determines not to prepare, file, prosecute, or maintain a patent or patent
application for which it is responsible to do so, such responsible party will
promptly notify the other party of its determination within a time frame that
insures no loss of potential patent protection. If the other party then wishes
to pursue any such patent or patent application the responsible party shall
assign its rights to the other party subject to the grant back to it by such
other party of a royalty-free nonexclusive license under any such patent or
patent application. The other party shall thereafter be the responsible party
pursuant to Section 11.2(a) and the initial responsible party shall fully
cooperate with the other party in its pursuit of such patent or patent
application.
(d) [**]
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[**]
11.3 Third Party Infringement. In the event Synaptic or Warner becomes
aware of any actual or threatened infringement of any Patent Right of either
party which claims an invention, that party shall promptly notify the other and
the Management Committee shall promptly discuss how to proceed in connection
with such actual or threatened infringement. In the conduct of any legal action
pursuant to this Section 11.3, (i) if one party proceeds, the actual costs and
expenses of such action shall be reimbursed first to such party and then to the
other party out of any damages or other monetary awards recovered therein in
favor of Warner or Synaptic or (ii) if both parties proceed, the actual costs
and expenses of such action shall be reimbursed proportionally between the
parties out of any damages or other monetary awards recovered therein in favor
or Warner or Synaptic, based on the actual costs and expenses incurred by each
party in connection with such action. Any remaining damages or other monetary
recovery shall be divided as follows: (a) under case (i) [**] to the party which
proceeds and [**]to the party which does not proceed; and (b) under case (ii) in
the same proportion as is applicable to the actual costs and expenses incurred
by each party in connection with such action. If either party commences any
actions or proceedings (legal or otherwise) pursuant to this Section 11.3, it
shall prosecute the same vigorously at its expense and shall not abandon or
compromise them or fail to exercise any rights of appeal without giving the
other party the right to take over the prosecuting party's conduct at such other
party's own expense.
11.4 Allegations of Infringement by Third Parties.
(a) Licenses Under Third Parties' Patents. If Warner should be
of the opinion that it cannot commercially reasonably make, import, use, market
and/or sell a Product without infringing a third party's patent or other
intellectual property rights, it shall notify Synaptic and may endeavor to
secure a license from the third party on terms that are acceptable to Warner. If
such a license is secured, then [**]of any payments payable by Warner thereunder
shall be deducted from royalty payments due to Synaptic pursuant to this
Agreement with respect to such Product in such country; [**]
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(b) Defense of Suits by Third Parties Relating to Products.
Warner shall be solely responsible for any threatened or actual claims for third
party patent infringement or other third party intellectual property right
arising out of the manufacture, use, sale or importation of a Product. Upon
receiving notice of such actual or threatened claims, Warner shall promptly meet
with Synaptic to discuss the course of action to be taken to resolve or defend
any such infringement litigation. [**]
(c) Defense of Suits by Third Parties Relating to Research
Activities. Each party shall be solely responsible for any threatened or actual
claims for third party infringement or other third party intellectual property
right arising out of its own research activities in the course of carrying out
the Project.
(d) Pre-Existing Infringement Claims. Notwithstanding the
foregoing, each party will pay 100% of any costs and expenses and damages or
other consideration resulting from a third party patent infringement action if
it relates solely to allegations of infringement made against such party prior
to the Effective Date.
ARTICLE XII
Confidentiality
12.0 Obligations. Until the tenth anniversary of the Effective Date,
each of Synaptic and Warner shall use its best efforts to retain in confidence
and not use, except as provided in this Agreement, all Project Technology
received from the other party. Such information may, however, be disclosed in
order to allow either party to defend against litigation with a third party
(subject, where possible, to adequate safeguards for confidentiality), in
connection with either party's filing and prosecution of patent applications and
in order to enable either party to comply with laws and governmental
regulations.
12.1 Waiver of Confidentiality Obligation. The obligation of
confidentiality set forth in Section 12.0 shall be deemed waived as to
information which (a) is in the public domain, (b) comes into the public domain
through no fault of the party claiming waiver, (c) the party claiming waiver can
show by written records was known by it prior to disclosure hereunder, (d) is
disclosed to the party claiming waiver without obligation of confidentiality by
a third party having a legal right to make such disclosure or (e) is required to
be disclosed by law.
12.2 Disclosure of Agreement. Except as required by law, neither party
shall release to any third person or publish in any way any non-public
information relating to the terms of this Agreement or to the Project,
including, without limitation, the provisions of Article XIV, without the prior
written consent of the other party, which consent shall not be unreasonably
withheld.
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12.3 Publicity. The text of any press release relating to this
Agreement or the transactions contemplated hereby shall be reviewed in advance
by both parties and may not, except as required by law, be published without the
prior written approval of both parties.
12.4 Scientific Publications. During the Project Term, neither party
shall make any scientific publication concerning the results of its studies
carried out under this Agreement without the prior written approval of the other
party. During such period, each party shall provide the other party with the
opportunity to review any proposed manuscripts or abstracts which relate to the
Project at least thirty days prior to their intended submission to any
scientific publisher and not to submit any such manuscript or abstract without
the written authorization of the reviewing party.
ARTICLE XIII
Term
This Agreement shall become effective on the Effective Date and shall,
unless terminated earlier pursuant to Article XIV, remain in effect until the
last expiration of any royalty obligation pursuant to this Agreement.
ARTICLE XIV
Termination and License Maintenance Payment Options
This Agreement may be terminated, in whole or in part, in accordance
with any of the following provisions.
14.0 Material Default. If either party (the "Defaulting Party") shall
be in default of any of its material obligations under this Agreement and shall
fail to cure such default within sixty days following receipt of written notice
thereof from the other party (the "Nondefaulting Party"), the Nondefaulting
Party shall have the option of terminating this Agreement by giving written
notice of termination to the Defaulting Party.
14.1 Insolvency, Etc. Either party shall have the right, at its option,
to terminate this Agreement upon written notice to the other party if such other
party shall become insolvent or involved in dissolution, bankruptcy or
receivership proceedings affecting the operation of such other party's business
to such an extent as to render it incapable of fulfilling its obligations
hereunder; provided, however, that if such proceeding is an involuntary
bankruptcy filing against either party, such party shall have sixty days to cure
the situation before this Agreement may be terminated pursuant to this Section
14.1.
14.2 No Chemical Lead and No Novel Galanin Receptor During First Twelve
Months. If neither a Chemical Lead shall have been identified nor a Novel
Galanin Receptor shall have been cloned by Synaptic prior to the twelve-month
anniversary of the Stage 1 Commencement Date, then
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Synaptic shall have the right, at its option, to terminate this Agreement,
effective upon such anniversary date. Such right shall be exercised, if at all,
by written notice to Warner no later than thirty days following such anniversary
date.
14.3 No Chemical Lead but Novel Galanin Receptor During First
Twelve Months.
(a) Synaptic's Limited Termination Right. If a Chemical Lead
shall not have been identified prior to the twelve-month anniversary of the
Stage 1 Commencement Date but a Novel Galanin Receptor shall have been cloned by
Synaptic prior to such anniversary date, then Synaptic shall have the right, at
its option, to terminate all rights and licenses granted to Warner under this
Agreement which relate to the use of Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent Rights to discover, develop, manufacture,
have manufactured, use and sell Products the mechanism of action of which
involves one or more of the Galanin Receptors included within Synaptic
Background Technology or Synaptic Project Technology (other than the Novel
Galanin Receptor). Any such termination shall be effective upon the twelve-month
anniversary of the Stage 1 Commencement Date. Such right shall be exercised, if
at all, by written notice to Warner no later than thirty days following such
anniversary date.
(b) Synaptic's Further Termination Right; Warner's Right to
Override Termination and Enter Stage 2. If Synaptic shall have exercised its
termination right pursuant to Section 14.3(a) and a BACL, the mechanism of
action of which involves the Novel Galanin Receptor, shall not have been
identified prior to the earlier of the eighteen-month anniversary of the Stage 1
Commencement Date and the twelve-month anniversary of the delivery to Warner of
such Receptor, then subject to the last sentence of this Section 14.3(b),
Synaptic shall have the further right, at its option, to terminate this
Agreement, effective upon such earlier anniversary date. Such right shall be
exercised, if at all, by written notice to Warner no later than fifteen days
following such anniversary date. Notwithstanding the foregoing, Warner shall
have the right, at its option, to prevent or override any termination of this
Agreement by Synaptic pursuant to this Section 14.3(b) by providing to Synaptic,
no later than the fifteenth day following the earlier of the eighteen-month
anniversary of the Stage 1 Commencement Date and the twelve-month anniversary of
the delivery to Warner of the Novel Galanin Receptor, written notice stating its
desire to continue the Agreement and enter Stage 2.
(c) Grant of Nonexclusive License Relating to Previously
Terminated Rights. If Synaptic shall have exercised its termination right
pursuant to Section 14.3(a) and either a BACL the mechanism of action of which
involves the Novel Galanin Receptor shall have been identified prior to the
earlier of the eighteen-month anniversary of the Stage 1 Commencement Date and
the twelve-month anniversary of the delivery to Warner of such Receptor or
Warner shall have provided to Synaptic the notice contemplated by Section
14.3(b) by such earlier anniversary date, then Warner shall be granted a
nonexclusive license to use Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights with respect to which Warner's rights and
licenses had previously been terminated pursuant to Section 14.3(a) for the sole
purpose of discovering, developing, manufacturing, having manufactured, using
and selling Products.
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14.4 No BACL by Eighteen-Month Anniversary of Stage 1
Commencement Date.
(a) Warner's Termination Right. Subject to Section 14.4(b),
Warner shall have the right, at its option, to terminate this Agreement,
effective upon the eighteen-month anniversary of the Stage 1 Commencement Date,
if a BACL shall not have been identified prior to such anniversary date. Such
right shall be exercised, if at all, by written notice to Synaptic no later than
the fifteenth day following the eighteen-month anniversary of the Stage 1
Commencement Date.
(b) Warner's Right to Partial Termination. If a BACL shall not
have been identified prior to the eighteen-month anniversary of the Stage 1
Commencement Date but Synaptic shall have cloned a Novel Galanin Receptor during
the period commencing on the twelve-month anniversary of the Stage 1
Commencement Date and ending on the eighteen-month anniversary of such Date,
then Warner shall have the right, at its option, in lieu of terminating this
Agreement pursuant to Section 14.4(a), (i) to terminate all rights and licenses
granted to Warner under this Agreement which relate to the use of Synaptic
Background Technology, Synaptic Project Technology and Synaptic Patent Rights to
discover, develop, manufacture, have manufactured, use and sell Products the
mechanism of action of which involves any Galanin Receptor other than the Novel
Galanin Receptor and (ii) to suspend the Stage 2 Commencement Date as provided
in Section 2.1. Such right shall be exercised, if at all, by written notice to
Synaptic no later than the fifteenth day following the eighteen-month
anniversary of the Stage 1 Commencement Date.
(c) Warner's Further Termination Right. In the event that
Warner shall have terminated this Agreement in part in accordance with Section
14.4(b), Warner shall then have the further right, at its option, to terminate
this Agreement, effective upon the Six-Month Extension Date, if a BACL shall not
have been identified prior to such Date. Such right shall be exercised, if at
all, by written notice to the non-terminating party no later than the Six-Month
Extension Date.
14.5 No BACL and No Lead Compound by End of Project Term; BACL or Lead
Compound for Some but Not For All Galanin Receptors.
(a) Termination Right at End of Project Term. If Warner is not
diligently pursuing at least one BACL as a Lead Compound candidate or at least
one Lead Compound as of the end of the Project Term, then either party shall
have the right, at its option, to terminate this Agreement, effective upon the
last day of the Project Term. Such right shall be exercised, if at all, by
written notice to the non-terminating party no later than the last day of the
Project Term.
(b) Synaptic's Limited Termination Right. As of the last day
of the Project Term, Synaptic shall have the right, at its option, to terminate
the exclusive license to use Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights granted to Warner pursuant to Section 7.0,
but only to the extent that such license conveys the right to use Synaptic
Background Technology, Synaptic Project Technology and Synaptic Patent Rights
for the purpose of discovering, developing, manufacturing, having manufactured,
using and selling Products the mechanism of action of which involves a Galanin
Receptor that is not the Targeted Galanin Receptor
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<PAGE>
of a BACL or a Lead Compound which Warner is still diligently pursuing at such
time. Such right shall be exercised, if at all, by written notice to Warner no
later than the last day of the Project Term.
14.6 BACLs Still Being Pursued but No Lead Compound by End of Project
Term. If Warner is still diligently pursuing one or more BACLs as Lead Compound
candidates as of the last day of the Project Term but has not designated at
least one Lead Compound prior to the last day of the Project Term, the following
shall apply:
(a) First BACL. Warner shall identify to Synaptic in writing
prior to the last day of the Project Term the BACL subject to this
Section 14.6(a), and with regard to such BACL and the Targeted Galanin
Receptor of such BACL, one of the following shall apply:
(i) Warner will make a [**] payment to Synaptic
prior to the last day of the Project Term, at which point the
exclusive license to use Synaptic Background Technology,
Synaptic Project Technology and Synaptic Patent Rights granted
to Warner pursuant to Section 7.0 will automatically convert
to a nonexclusive, worldwide license to use Synaptic
Background Technology, Synaptic Project Technology and
Synaptic Patent Rights for the sole purpose of discovering,
developing, manufacturing, having manufactured, using and
selling Products the mechanism of action of which involves the
Targeted Galanin Receptor of such BACL. At the end of the
twelve-month period following the last day of the Project
Term, one of the following shall apply:
(A) Warner will have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and paid
Synaptic, in lieu of the payment required by Section
9.0(a)(i), an additional [**] as a milestone
payment. Within eighteen months following such
designation of such Lead Compound, one of the
following shall apply:
(1) Warner will have filed an IND
and paid Synaptic the [**] milestone
required by Section 9.0(a)(ii);
(2) Warner will not have filed an
IND but will have made a [**] payment
to Synaptic to maintain its nonexclusive
license to use Synaptic Background
Technology, Synaptic Project Technology and
Synaptic Patent Rights, as described in
subparagraph (a)(i) above, with an
additional [**] milestone payment
being due pursuant to Section 9.0(a)(ii)
upon the ultimate filing of the IND; or
(3) Warner will not have filed an
IND and will have elected to do nothing, in
which event Synaptic will have the option to
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terminate Warner's nonexclusive license to
use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent
Rights, as described in subparagraph (a)(i)
above.
(B) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL but will
have elected to make a payment of an additional
[**] to Synaptic to maintain its nonexclusive
license to use Synaptic Background Technology,
Synaptic Project Technology and Synaptic Patent
Rights, as described in subparagraph (a)(i) above.
Within eighteen months following the end of the
above-mentioned twelve-month period, one of the
following shall apply:
(1) Warner will have filed an IND
and paid Synaptic the [**] milestone
required by Section 9.0(a)(ii);
(2) Warner will not have filed an
IND but will have made a [**] payment
to Synaptic to maintain its nonexclusive
license to use Synaptic Background
Technology, Synaptic Project Technology and
Synaptic Patent Rights, as described in
subparagraph (a)(i) above, with an
additional [**] milestone payment
being due pursuant to Section 9.0(a)(ii)
upon the ultimate filing of the IND; or
(3) Warner will not have filed an
IND and will have elected to do nothing, in
which event Synaptic will have the option to
terminate Warner's nonexclusive license to
use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent
Rights, as described in subparagraph (a)(i)
above.
(C) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and will
have elected to do nothing, in which event Synaptic
will have the option to terminate Warner's
nonexclusive license to use Synaptic Background
Technology, Synaptic Project Technology and Synaptic
Patent Rights, as described in subparagraph (a)(i)
above.
(ii) Warner will not make the [**] payment
referred to in subparagraph (a)(i) above, in which event
Synaptic will have the option to terminate this Agreement in
its entirety.
(b) Additional BACLs. With regard to each additional BACL
identified during the Project Term which Warner is still diligently
pursuing as a Lead Compound candidate as
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of the last day of the Project Term and with regard to the Targeted
Galanin Receptor of any such BACL, one of the following shall apply:
(i) Warner will make a [**] payment to Synaptic
prior to the last day of the Project Term, at which point
Warner will be granted a nonexclusive, worldwide license to
use Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights for the sole additional
purpose of discovering, developing, manufacturing, having
manufactured, using and selling Products the mechanism of
action of which involves the Targeted Galanin Receptor of such
BACL. Within three years following the identification of the
BACL, one of the following shall apply:
(A) Warner will have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and paid
Synaptic the [**] milestone payment required by
the proviso contained in Section 9.1. Within eighteen
months thereafter, one of the following will apply:
(1) Warner will have filed an IND
and paid Synaptic the [**] milestone
required by Section 9.1;
(2) Warner will not have filed an
IND but will have made a $[**] payment
to Synaptic to maintain its nonexclusive
license to use Synaptic Background
Technology, Synaptic Project Technology and
Synaptic Patent Rights, as described in
subparagraph (b)(i) above, with an
additional [**] milestone payment
being due pursuant to Section 9.1 upon the
ultimate filing of the IND; or
(3) Warner will not have filed an
IND and will have elected to do nothing, in
which event Synaptic will have the option to
terminate Warner's license to use Synaptic
Background Technology, Synaptic Project
Technology and Synaptic Patent Rights, as
described in subparagraph (b)(i) above.
(B) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL but will
have elected to make a payment of an additional
[**] to Synaptic to maintain its nonexclusive
license to use Synaptic Background Technology,
Synaptic Project Technology and Synaptic Patent
Rights, as described in subparagraph (b)(i) above,
for an additional twelve months. At the end of the
twelve-month period, one of the following shall
apply:
(1) Warner will have designated a
Lead Compound the mechanism of action of
which involves the Targeted Galanin Receptor
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of such BACL and paid Synaptic the [**]
milestone required by the proviso contained
in Section 9.1;
(2) Warner will not have designated
a Lead Compound the mechanism of action of
which involves the Targeted Galanin Receptor
of such BACL but will have paid Synaptic an
additional [**] to maintain its
nonexclusive license to use Synaptic
Background Technology, Synaptic Project
Technology and Synaptic Patent Rights, as
described in subparagraph (b)(i) above; or
(3) Warner will not have designated
a Lead Compound the mechanism of action of
which involves the Targeted Galanin Receptor
of such BACL and will have elected to do
nothing, in which event Synaptic will have
the option to terminate Warner's
nonexclusive license to use Synaptic
Background Technology, Synaptic Project
Technology and Synaptic Patent Rights, as
described in subparagraph (b)(i) above.
In the case of subparagraph (B)(l)
or (B)(2) above, within eighteen months
following the end of the twelve-month
period, one of the following will apply:
(x) Warner will have filed
an IND and paid Synaptic the [**]
milestone required by Section 9.1;
(y) Warner will not have
filed an IND but will have made a
[**] payment to Synaptic to
maintain its nonexclusive license to
use Synaptic Background Technology,
Synaptic Project Technology and
Synaptic Patent Rights, as described
in subparagraph (b)(i), with an
additional [**] milestone
payment being due pursuant to
Section 9.1 upon the ultimate filing
of the IND; or
(z) Warner will not have
filed an IND and will have elected
to do nothing, in which event
Synaptic will have the option to
terminate Warner's nonexclusive
license to use Synaptic Background
Technology, Synaptic Project
Technology and Synaptic Patent
Rights, as described in
subparagraph (b)(i).
(C) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and will
have elected to do nothing, in which event Synaptic
will have
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the option to terminate Warner's nonexclusive license
to use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent Rights, as
described in subparagraph (b)(i).
(ii) Warner will do nothing, in which event Synaptic
will have the option to terminate Warner's nonexclusive
license to use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent Rights, as described in
subparagraph (b)(i).
14.7 Lead Compound by End of Project Term. If Warner designates at
least one Lead Compound by the end of the Project Term and is diligently
pursuing such Compound as of the last day of the Project Term, the following
shall apply:
(a) First Lead Compound. Warner shall identify to Synaptic in
writing prior to the last day of the Project Term the Lead Compound
subject to this Section 14.7(a), and with regard to such Lead Compound
and the Targeted Galanin Receptor of such Lead Compound, within
eighteen months following the last day of the Project Term, one of the
following shall apply:
(i) Warner will have filed an IND and paid Synaptic
the [**] milestone required by Section 9.0(a)(ii).
(ii) Warner will not have filed an IND but will have
made a [**] payment to Synaptic to maintain for an
additional twelve months the exclusive license to use Synaptic
Background Technology, Synaptic Project Technology and
Synaptic Patent Rights granted to Warner pursuant to Section
7.0 and then in effect to the extent that such license conveys
the right to use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent Rights for the purpose
of discovering, developing, manufacturing, having
manufactured, using and selling Products the mechanism of
action of which involves the Targeted Galanin Receptor of such
Lead Compound. At the end of the twelve-month period, one of
the following shall apply:
(A) Warner will have filed an IND and paid
Synaptic the [**] milestone required by Section
9.0(a)(ii).
(B) Warner will not have filed an IND but
will have made a [**] payment to Synaptic to
maintain its exclusive license to use Synaptic
Background Technology, Synaptic Project Technology
and Synaptic Patent Rights, as described in
subparagraph (a)(ii) above, with no further milestone
payment being due pursuant to Section 9.0(a)(ii) upon
the ultimate
filing of the IND.
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(C) Warner will not have filed an IND but
will have elected to convert its exclusive license,
as described in subparagraph (a)(ii) above, into a
nonexclusive license without making any payment to
Synaptic at the time, but with a [**] milestone
payment being due pursuant to Section 9.0(a)(ii) upon
the ultimate filing of the IND.
(iii) Warner will not have filed an IND but will have
elected to convert its exclusive license, as described in
subparagraph (a)(ii) above, into a nonexclusive license
without making any payment to Synaptic at the time, but with a
[**] milestone payment being due pursuant to Section
9.0(a)(ii) upon the ultimate filing of the IND.
(b) Additional Lead Compounds. Within three years following
the identification during the Project Term of a BACL the Targeted
Galanin Receptor of which is different from the Targeted Galanin
Receptor of the first Lead Compound referred to in Section 14.7(a)
above, one of the following shall apply:
(i) Warner will have designated a Lead Compound the
mechanism of action of which involves the Targeted Galanin
Receptor of such BACL and paid Synaptic the [**] milestone
payment required by the proviso contained in Section 9.1.
(ii) Warner will not have designated a Lead Compound
the mechanism of action of which involves the Targeted Galanin
Receptor of such BACL but will have elected to make a payment
of [**] to Synaptic to maintain for an additional twelve
months the exclusive license to use Synaptic Background
Technology, Synaptic Project Technology and Synaptic Patent
Rights granted to Warner pursuant to Section 7.0 and then in
effect to the extent such license conveys the right to use
such Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights for the purpose of
discovering, developing, manufacturing, having manufactured,
using and selling Products the mechanism of action of which
involves the Targeted Galanin Receptor of such BACL. At the
end of the twelve-month period, one of the following will
apply:
(A) Warner will have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and paid
Synaptic the [**] milestone payment required by
the proviso contained in Section 9.1.
(B) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL but will
have made a payment of an additional [**] to
Synaptic, whereupon its exclusive license to use
Synaptic Background Technology,
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Synaptic Project Technology and Synaptic Patent
Rights, as described in subparagraph (b)(ii) above,
will be converted into a nonexclusive license. Within
eighteen months following the end of the
above-mentioned twelve-month period, one of the
following shall apply:
(1) Warner will have filed an IND
and paid Synaptic the [**] milestone
required by Section 9.0(a)(ii).
(2) Warner will not have filed an
IND but will have made a [**] payment
to Synaptic to maintain its nonexclusive
license to use Synaptic Background
Technology, Synaptic Project Technology and
Synaptic Patent Rights, as described in
subparagraph (b)(ii) above, with an
additional [**] milestone payment
being due pursuant to Section 9.1 upon the
ultimate filing of the IND.
(3) Warner will not have filed an
IND and have elected to do nothing, in which
event Synaptic will have the option to
terminate Warner's license to use Synaptic
Background Technology, Synaptic Project
Technology and Synaptic Patent Rights, as
described in
subparagraph (b)(ii) above.
(C) Warner will not have designated a Lead
Compound the mechanism of action of which involves
the Targeted Galanin Receptor of such BACL and will
have elected to do nothing, in which event Synaptic
will have the option to terminate Warner's license to
use Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights, as
described in subparagraph (b)(ii) above.
(iii) Warner will not have designated a Lead Compound the
mechanism of action of which involves the Targeted Galanin Receptor of
such BACL and will have elected to do nothing, in which event Synaptic
will have the option to terminate Warner's license to use Synaptic
Background Technology, Synaptic Project Technology and Synaptic Patent
Rights, as described in subparagraph (b)(ii) above.
Within eighteen months following the designation of a Lead
Compound pursuant to subparagraph (b)(i) or (b)(ii)(A) above, one of
the following will apply:
(x) Warner will have filed an IND and paid Synaptic
the [**] milestone required by Section 9.1.
(y) Warner will not have filed an IND but will have
made a payment of [**] to Synaptic to maintain its
exclusive license to use Synaptic Background Technology,
Synaptic Project Technology and Synaptic Patent Rights, as
described
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<PAGE>
in subparagraph (b)(ii) above, with an additional [**]
milestone payment being due upon the ultimate filing of the
IND.
(z) Warner will not have filed an IND but will have
elected to convert its exclusive license to use Synaptic
Background Technology, Synaptic Project Technology and
Synaptic Patent Rights, as described in subparagraph (b)(ii)
above, into a nonexclusive license without making any payment
to Synaptic at the time, but with a [**] milestone
payment being due pursuant to Section 9.1 upon the ultimate
filing of the IND.
14.8 Two Targeted Galanin Receptors for Single BACL or Lead Compound.
For so long as it has not been determined whether the mechanism of action of a
BACL or a Lead Compound referred to in this Article XIV involves a single
Galanin Receptor or multiple Galanin Receptors, then all references to the
Targeted Galanin Receptor of any such BACL or Lead Compound shall be deemed to
include all such Galanin Receptors, and any payments which Warner is required to
make pursuant to this Article XIV in order to maintain its license to use
Synaptic Background Technology, Synaptic Project Technology and Synaptic Patent
Rights for the purpose of discovering, developing, manufacturing, having
manufactured, using and selling Products based on such BACL or Lead Compound
shall be paid only once; provided, however, that in the event it is at any time
subsequently determined that the mechanism of action of such BACL or Lead
Compound does not require activity at all such Galanin Receptors, Warner's
license with respect to all such other Galanin Receptors shall, to the extent
that it is exclusive at such time, automatically be converted into a
nonexclusive license.
ARTICLE XV
Effect of Termination
15.0 Termination Pursuant to Section 14.0 or Section 14.1.
(a) Rights and Obligations. Upon the occurrence of any
termination pursuant to Section 14.0 or Section 14.1, (i) the terminating party
shall have a license to use all of the non-terminating party's Project
Technology (including, without limitation, chemical entities and any data
relating to SAR activity thereof and any data relating to preclinical and
clinical trials with respect to such chemical entities) and (ii) the
non-terminating party shall return to the terminating party all of the
terminating party's Project Technology (including, without limitation, all
biological and chemical materials) and transfer to the terminating party all
data relating to the non-terminating party's Project Technology (including,
without limitation, all Project Technology referred to in clause (i)); provided,
however, that the terminating party shall not have the right to use, and the
non-terminating party shall not be required to transfer, any Project Technology
which relates to rights or licenses previously held by the terminating party but
terminated by the non-terminating party. In addition, if Synaptic is the
non-terminating party, Synaptic will transfer to Warner all Synaptic Background
Technology and will be prohibited from attempting to discover, develop,
manufacture, use or sell any pharmaceutical
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product the mechanism of action of which involves one or more Galanin Receptors
included in Synaptic Background Technology or Synaptic Project Technology
transferred to Warner pursuant to this Section 15.0 and if Warner is the
non-terminating party, then, except for Other Compounds described in Sections
10.1 and 10.2, Warner will be prohibited, for three years commencing on the
effective date of such termination, from attempting to discover, develop,
manufacture, have manufactured, use or sell any pharmaceutical product the
mechanism of action of which involves one or more Galanin Receptors not included
in Synaptic Background Technology or Synaptic Project Technology and for five
years commencing on such date from attempting to discover, develop, manufacture,
have manufactured, use or sell any pharmaceutical product the mechanism of
action of which involves one or more Galanin Receptors included in Synaptic
Project Technology.
(b) Survival of Certain Provisions. In the case of a
termination pursuant to Section 14.0, Article I; Section 6.2; Article X; Article
XI; the obligations of the non-terminating party under Section 12.0; this
Article XV; and Article XVII shall survive any such termination until the last
expiration of any royalty obligation thereunder. In the case of a termination
pursuant to Section 14.1, all of the provisions referred to in the preceding
sentence, as well as Articles VIII and IX, shall survive any such termination
until the last expiration of any royalty obligation thereunder.
15.1 Termination Pursuant to Section 14.2.
(a) Rights and Obligations. Upon the occurrence of any
termination by Warner or Synaptic pursuant to Section 14.2, each party shall
return to the other party or destroy all of the other party's Project Technology
(including, without limitation, all biological and chemical materials). In
addition, Warner shall return to Synaptic or destroy all Synaptic Background
Technology and shall be prohibited, for a period of [**] years commencing on the
effective date of such termination, from attempting to discover, develop,
manufacture, have manufactured, use or sell any pharmaceutical product the
mechanism of action of which involves one or more Galanin Receptors that were
included in Synaptic Background Technology or Synaptic Project Technology.
(b) Survival of Certain Provisions. In the case of a
termination pursuant to Section 14.2, Article I; Article X; Article XII; this
Article XV; and Article XVII shall survive any such termination until the last
expiration of any royalty obligation thereunder.
15.2 Termination Pursuant to Section 14.3(b), Section 14.4(a),
Section 14.4(c), Section 14.5(a) or Section 14.6(a)(ii).
(a) Rights and Obligations. Upon the occurrence of any
termination by Warner or Synaptic pursuant to Section 14.3(b), Section 14.4(a),
Section 14.4(c), Section 14.5(a) or Section 14.6(a)(ii), (i) Synaptic shall have
the right to use all Warner Project Technology (excluding chemical entities but
including, without limitation, data relating to chemical entities and SAR
activity thereof and any data relating to preclinical and clinical trials with
respect to such chemical entities) to discover, develop, manufacture, have
manufactured, use and sell pharmaceutical products the mechanism of action of
which involves one or more Galanin Receptors and (ii) Warner shall (A)
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<PAGE>
return to Synaptic all Synaptic Background Technology and Synaptic Project
Technology (including, without limitation, all biological and chemical
materials), (B) transfer to Synaptic all data relating to Warner Project
Technology (including, without limitation, all Project Technology referred to in
the foregoing clause (i)) and (c) be prohibited, for a period of [**] years
commencing on the effective date of such termination, from attempting to
discover, develop, manufacture, have manufactured, use or sell any
pharmaceutical product the mechanism of action of which is one or more Galanin
Receptors that were included in Synaptic Background Technology or Synaptic
Project Technology.
(b) Survival of Certain Provisions. In the case of a
termination pursuant to Section 14.3(b), Section 14.4(a), Section 14.4(c),
Section 14.5(a) or Section 14.6(a)(ii), Article I; Section 6.2; Article X;
Article XI; Article XII; this Article XV; and Article XVII shall survive any
such termination until the last expiration of any royalty obligation thereunder.
15.3 Partial Termination Pursuant to Section 14.3(a) or
Section 14.4(b).
(a) Restrictive Covenant. Upon the occurrence of any partial
termination by Synaptic pursuant to Section 14.3(a) or by Warner pursuant to
Section 14.4(b), (i) Synaptic shall have the right to use all Warner Project
Technology (excluding chemical entities but including, without limitation, data
relating to chemical entities and SAR activity thereof and any data relating to
preclinical and clinical trials with respect to such chemical entities) to
discover, develop, manufacture, have manufactured, use and sell pharmaceutical
products the mechanism of action of which involves the Galanin Receptor with
respect to which Warner's rights were terminated pursuant to such sections and
(ii) Warner shall be prohibited, for a period of [**] years commencing on the
effective date of such termination, from attempting to discover, develop,
manufacture, have manufactured, use or sell any pharmaceutical product the
mechanism of action of which involves any Galanin Receptor that is included
within Synaptic Background Technology or Synaptic Project Technology but that is
not the Novel Galanin Receptor referred to in Section 14.3(a) or Section
14.4(b), as applicable.
(b) Survival of Certain Provisions. In the case of a
termination by Synaptic pursuant to Section 14.3(a) or by Warner pursuant to
Section 14.4(b), the license grant set forth in Section 7.0 shall, to the extent
that it covers the use of Synaptic Background Technology, Synaptic Project
Technology and Synaptic Patent Rights for the purpose of discovering,
developing, manufacturing, having manufactured, using and selling, for Project
Uses, Products the mechanism of action of which involves any Galanin Receptor
other than the Novel Galanin Receptor that is the subject of Section 14.3(a) or
Section 14.4(b), terminate; and all other provisions of this Agreement shall,
except to the extent inconsistent with Section 15.3(a) and unless terminated
pursuant to another provision of this Article XV, survive any such termination
until the last expiration of any royalty obligation pursuant to Article VIII or
Article X.
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<PAGE>
15.4 Partial Termination Pursuant to Section 14.5(b).
(a) Restrictive Covenant. Upon the occurrence of any partial
termination by Synaptic pursuant to Section 14.5(b), (i) Synaptic shall have the
right to use all Warner Project Technology (excluding chemical entities but
including, without limitation, data relating to chemical entities and SAR
activity thereof and any data relating to preclinical and clinical trials with
respect to such chemical entities) to discover, develop, manufacture, have
manufactured, use and sell pharmaceutical products the mechanism of action of
which involves the Galanin Receptor with respect to which Warner's rights were
terminated pursuant to such section and (ii) Warner shall be prohibited, for a
period of [**] years commencing on the effective date of such termination, from
attempting to discover, develop, manufacture, use, have manufactured, use or
sell any pharmaceutical product the mechanism of action of which involves any
Galanin Receptor that is included within Synaptic Background Technology or
Synaptic Project Technology but that is not the Targeted Galanin Receptor of a
BACL or a Lead Compound referred to in Section 14.5(b).
(b) Survival of Certain Provisions. In the case of a
termination by Synaptic pursuant to Section 14.5(b), the license grant set forth
in Section 7.0 shall, to the extent that it covers the use of Synaptic
Background Technology, Synaptic Project Technology and Synaptic Patent Rights
for the purpose of discovering, developing, manufacturing, having manufactured,
using and selling, for Project Uses, Products the mechanism of action of which
involves any Galanin Receptor other than the Targeted Galanin Receptor(s)
referred to in Section 14.5(b), terminate; and all other provisions of this
Agreement shall, except to the extent inconsistent with Section 15.4(a) and
unless terminated pursuant to another provision of this Article XV, survive any
such termination until the last expiration of any royalty obligation pursuant to
Article VIII or Article X.
15.5 Partial Termination Pursuant to Section 14.6 or Section 14.7.
(a) Restrictive Covenant. Upon the occurrence of any
termination by Synaptic pursuant to Section 14.6 or Section 14.7 of Warner's
license under this Agreement to use Synaptic Background Technology, Synaptic
Project Technology and Synaptic Patent Rights for the purpose of discovering,
developing, manufacturing, having manufactured, using and selling Products the
mechanism of action of which involves a particular Targeted Galanin Receptor,
(i) Synaptic shall have the right to use all Warner Project Technology
(excluding chemical entities but including, without limitation, data relating to
chemical entities and SAR activity thereof and any data relating to preclinical
and clinical trials with respect to such chemical entities) to discover,
develop, manufacture, have manufactured, use and sell pharmaceutical products
the mechanism of action of which involves the Galanin Receptor with respect to
which Warner's rights were terminated pursuant to such section and (ii) Warner
shall be prohibited, for a period of [**] years commencing on the effective date
of such termination, from attempting to discover, develop, manufacture, have
manufactured, use or sell any pharmaceutical product the mechanism of action of
which involves such Targeted Galanin Receptor.
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(b) Survival of Certain Provisions. In the case of a
termination by Synaptic pursuant to Section 14.6 or Section 14.7, the license
grant set forth in Section 7.0 shall, to the extent that it covers the use of
Synaptic Background Technology, Synaptic Project Technology and Synaptic Patent
Rights for the purpose of discovering, developing, manufacturing, having
manufactured, using and selling, for Project Uses, Products the mechanism of
action of which involves the Targeted Galanin Receptor(s) referred to in Section
14.6 or Section 14.7, terminate; and all other provisions of this Agreement
shall, except to the extent inconsistent with Section 15.5(a) and unless
terminated pursuant to another provision of this Article XV, survive any such
termination until the last expiration of any royalty obligation pursuant to
Article VIII or Article X.
15.6 Option to Acquire License; Payments to Warner. Subsequent to the
designation of a Lead Compound, in the event of a termination pursuant to
Section 14.6 or Section 14.7 with respect to such Lead Compound, Synaptic shall
have an option to obtain an exclusive license with the right to grant
sublicenses under any Warner Patent Right covering such Lead Compound. If
Synaptic exercises such option and develops and markets the Lead Compound, it
shall pay Warner the same percentage royalties on the net sales of such Lead
Compound that Warner would have been required to pay Synaptic had it marketed
such Lead Compound. If Synaptic exercises such option and sublicenses its rights
under any such Patent Right to a third party, then Synaptic shall pay Warner
compensation based upon the stage of development of such Lead Compound at the
time of the termination pursuant to Section 14.6 or 14.7. Such compensation will
be in an amount equal to a percentage of any development milestone payments
which Synaptic receives from such third party licensee in respect of such Lead
Compound and a percentage of any royalties which Synaptic receives from such
third party in respect of such Lead Compound, as follows:
If the Termination Occurs: Applicable Percentage
(i) Prior to completion of Phase II [**]
(ii) After completion of Phase II but [**]
prior to completion of Phase III
(iii) After completion of Phase III but [**]
prior to NDA approval
(iv) After NDA approval [**]
15.7 Survival of Accrued Rights. Notwithstanding anything contained
herein to the contrary, termination of this Agreement, in whole or in part, in
accordance with this Article XV shall be without prejudice to the rights of
either party against the other party accrued or accruing under this Agreement
prior to the termination, including the obligation to pay royalties pursuant to
the terms hereof.
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<PAGE>
ARTICLE XVI
Representations and Warranties
16.1 Synaptic Prohibition Against Certain Third Party Licenses.
Synaptic agrees that it will not at any time grant to any third party a license
to use its technology to develop compounds that bind G protein-coupled receptors
other than Galanin Receptors with an affinity which is less than ten times
greater than their affinity for any Galanin Receptor with respect to which
Warner has an exclusive license at such time.
16.2 Warner Limitations on Certain Development Activities. Warner
acknowledges that Synaptic has licensed its technology relating to alpha
adrenergic, neuropeptide Y and serotonin receptors to third parties and
understands and agrees that it is not receiving any right or license to use such
technology hereunder and may not develop or commercialize any compound which is
an agonist or antagonist of a Galanin Receptor included in Synaptic Background
Technology or Project Technology unless the affinity of any such compound for
any such receptor is at least ten-fold less than its affinity for any such
Galanin Receptor.
16.3 Cost of Goods Sold Experience. Warner hereby represents and
warrants that not more than [**] of the pharmaceutical products currently being
promoted by Warner have Cost of Goods Sold which exceed [**]of the Net Sales of
such products, as computed on a product-by-product basis.
ARTICLE XVII
Miscellaneous Provisions
17.0 No Agency. It is understood and agreed that Synaptic and Warner
shall each have the status of an independent contractor under this Agreement and
that nothing in this Agreement shall be construed as authorization for either
party to act as agent for the other party.
17.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey (without regard to
principles of conflicts of laws).
17.2 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be sent by first class certified or
registered mail, postage prepaid, or by express courier services, addressed to
the party to be notified at its address shown below or such other address as may
have been furnished in writing to the notifying party.
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<PAGE>
If to Synaptic:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: Kathleen P. Mullinix
Chairman, President and CEO
If to Warner:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: President, Parke-Davis Pharmaceutical Division
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Vice President and General Counsel
Any notice hereunder shall be deemed given as of the actual date of
receipt by Synaptic or Warner.
17.3 Force Majeure. No failure or omission by either party in the
performance of any obligation of this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall have arisen from any cause
or causes beyond the control of the party, including, without limitation, any of
the following: an act of God; acts or omissions of any government; any rules,
regulations or orders issued by any governmental authority or by any officer,
department, agency or instrumentality thereof; a fire; a storm; a flood; an
earthquake; an accident; a war; a rebellion; an insurrection; a riot; an
invasion; a strike; and a lockout, provided, in each case, that such failure or
omission is cured as soon as is practicable following the occurrence of such
event.
17.4 Amendment; Waiver. This Agreement may not be amended, supplemented
or otherwise modified, except by a written instrument signed by both parties.
Any obligation of either party may be waived by a written instrument signed by
the other party. Any delay or omission on the part of any party in the exercise
of its rights hereunder will not impair such rights, nor will it constitute a
renunciation or waiver of such rights. The waiver by either party of any term or
condition of this Agreement in any one instance shall not be deemed or construed
to be a waiver of such term or condition for any other instance in the future
(whether similar or dissimilar) or of any subsequent breach thereof.
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<PAGE>
17.5 Indemnification. Warner agrees to indemnify and hold harmless
Synaptic and its affiliates and their respective employees, agents, officers,
directors and permitted assigns from and against any claims by a third party,
and any resulting judgments, expenses (including reasonable attorney's fees),
losses, liabilities, damages and awards arising out of or resulting from (a) its
negligence or willful misconduct, (b) a breach of any of its obligations,
representations or warranties hereunder or (c) its performance of its
obligations hereunder, including, without limitation, its testing, manufacture,
use or sale of any Product or other chemical entity, except to the extent that
such claim results from any negligence or willful misconduct of any such person
seeking to be indemnified hereunder.
Synaptic shall indemnify and hold harmless Warner and its affiliates
and their respective employees, agents, officers, directors and permitted
assigns from and against any claims by a third party, and any resulting
judgments, expenses (including reasonable attorney's fees), losses, liabilities,
damages and awards arising out of or resulting from (a) its negligence or
willful misconduct, (b) a breach of any of its obligations, representations or
warranties hereunder or (c) its performance of its obligations hereunder, except
to the extent that such claim results from any negligence or willful misconduct
of any such person seeking to be indemnified hereunder.
Whenever any person seeking to be indemnified hereunder has information
from which it may reasonably conclude an incident has occurred which could give
rise to a claim for indemnification under this Section 17.5, such person shall
promptly give notice to the indemnifying party of all pertinent data surrounding
such incident and, in the event a claim is made or suit is brought, all persons
seeking indemnification shall assist the indemnifying party and cooperate in the
gathering of information with respect to the time, place and circumstances of
such incident and in obtaining the names and addresses of any injured parties
and available witnesses. If the indemnifying party has accepted responsibility
for indemnifying the person seeking indemnification hereunder by providing
prompt written notice to such person, and such indemnifying party is diligently
defending or attempting to settle the subject claim, then (i) the person seeking
indemnification shall not voluntarily make any payment or incur any expense in
connection with any such claim without the prior written consent of such
indemnifying party and (ii) the indemnifying party shall have sole control over
the defense and settlement of any claim with respect to which it may be
obligated to provide indemnification hereunder. If the indemnifying party fails
to diligently defend or settle any claim, then the person seeking
indemnification shall have the right to assume control over the defense and
settlement of such claim at the expense of the indemnifying party.
17.6 Assignment. Neither party may assign its rights and obligations
under this Agreement without the prior written consent of the other party;
provided, however, that either party may assign this Agreement in connection
with the sale of all or substantially all of its assets; provided further,
however, that Warner may assign this Agreement to a wholly-owned subsidiary of
Warner in connection with a reorganization of Warner involving all or
substantially all of its research and development assets.
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<PAGE>
17.7 No Strict Construction. This Agreement has been prepared jointly
and shall not be strictly construed against either party.
17.8 Counterparts. This Agreement may be executed in one or two
counterparts, each of which shall be an original, but both of which together
shall constitute one and the same instrument.
17.9 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements, understandings and arrangements, whether oral or written,
of the parties with respect thereto.
17.10 Headings. The headings of the sections of this Agreement are for
general information and reference only, and this Agreement shall not be
construed by reference to such headings.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the Effective Date.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinix
--------------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President and
Chief Executive Officer
WARNER-LAMBERT COMPANY
By:/s/ Ronald Cresswell
--------------------------------
Name: Dr. Ronald M. Cresswell
Title: Vice President, Warner Lambert
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<PAGE>
Schedule I
In Vivo Models
1. Antiobesity: Antagonism of ICV galanin-stimulated feeding in rats
Inhibition of feeding/body weight gain in Zucker obese rats
2. Analgesia: Rat tail flick
Rat formalin paw pressure hyperalgesia
3. Anxiolytic: Rat elevated X maze
Rat Vogel conflict test
4. Antidepressant: Rat behavioral despair test
5. Cognition: Antagonism of galanin-inhibited acetylcholine release by
intracerebral microdyalysis
Antagonism of galanin-induced impairment of rat swim maze
performance
6. Diabetes: Effects on glucose-stimulated insulin secretion in isolated
islets
Effects on insulin secretion in Zucker diabetic rats
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<PAGE>
Schedule II
Specifications for Cells
A. Cell Membranes [**]
B. Cells for Signal Transduction Assays [**]
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Schedule III
Initial Research Plan
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
- - [**]
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Schedule IV
Responsibilities of the Parties
A. Responsibilities of Synaptic. [**]
(i) [**]
(ii) [**]
(iii) [**]
(iv) [**]
(v) [**]
B. Responsibilities of Warner. [**]
(i) [**]
(ii) [**]
(iii) [**]
(iv) [**]
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<PAGE>
[**]
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<PAGE>
EXHIBIT 11
SYNAPTIC PHARMACEUTICAL CORPORATION
Computation of Primary Net Loss Per Share
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Weighted average common
shares outstanding 7,648,249 7,608,049 7,643,081 7,559,352
Shares underlying common
stock options outstanding
considered exercised,
based on the treasury
stock method -- 285,473 -- --
Shares underlying 1993
Warrants outstanding
considered exercised,
based on the treasury
stock method -- 18,539 -- --
---------- ---------- ---------- ----------
7,648,249 7,912,061 7,643,081 7,559,352
========== ========== ========== ==========
Net loss ($1,634,000) $729,000 ($3,729,000) ($1,430,000)
========== ========== ========== ==========
Net loss per share $(0.21) $0.09 $(0.49) ($0.19)
==== ==== ==== =====
<PAGE>
<PAGE>
EXHIBIT 11
SYNAPTIC PHARMACEUTICAL CORPORATION
Computation of Fully Diluted Net Loss Per Share
Three Months Nine Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
Weighted average common
shares outstanding 7,648,249 7,608,049 7,643,081 7,559,352
Shares underlying common
stock options outstanding
considered exercised,
based on the treasury
stock method 285,643 288,183 285,642 302,975
Shares underlying 1993
Warrants outstanding
considered exercised,
based on the treasury
stock method 46,359 23,792 43,163 59,344
---------- ---------- ---------- ----------
Shares used in computation
of net loss per share 7,980,251 7,920,024 7,971,886 7,921,671
========== ========== ========== ==========
Net loss ($1,634,000) $729,000 ($3,729,000) ($1,430,000)
========== ========== ========== ==========
Net loss per share ($0.20) $0.09 ($0.47) ($0.18)
===== ===== ===== =====
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,599,000
<SECURITIES> 26,310,000
<RECEIVABLES> 77,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,115,000
<PP&E> 7,675,000
<DEPRECIATION> 3,540,000
<TOTAL-ASSETS> 37,926,000
<CURRENT-LIABILITIES> 2,458,000
<BONDS> 0
0
0
<COMMON> 76,000
<OTHER-SE> 35,392,000
<TOTAL-LIABILITY-AND-EQUITY> 37,926,000
<SALES> 0
<TOTAL-REVENUES> 7,959,000
<CGS> 0
<TOTAL-COSTS> 13,140,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,000
<INCOME-PRETAX> (3,729,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,729,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,729,000)
<EPS-PRIMARY> (0.49)
<EPS-DILUTED> 0
</TABLE>
