SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Mark One:
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-27324
SYNAPTIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
215 College Road
Paramus, NJ
(Address of principal executive offices)
22-2859704
(I.R.S. Employer Identification No.)
07652
(Zip Code)
(201) 261-1331
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of
the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Rights to Purchase Series A Junior Convertible Preferred Stock,
par value $.01 per share
(Title of Class)
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, as amended (the "Exchange Act"), 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The approximate aggregate market value of the voting and non voting
common equity held by non-affiliates of the registrant was approximately
$142,600,000 as of March 2, 1998, based upon the closing price of the Common
Stock as reported on The Nasdaq Stock Market on such date. For purposes of this
calculation, shares of Common Stock held by directors, officers and stockholders
whose ownership in the registrant is known by the registrant to exceed five
percent have been excluded. This number is provided only for purposes of this
report and does not represent an admission by either the registrant or any such
person as to the status of such person.
As of March 2, 1998, there were 10,674,945 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Synaptic Pharmaceutical Corporation Proxy Statement, to
be filed not later than 120 days after December 31, 1997, in connection with the
registrant's 1998 Annual Meeting of Stockholders, referred to herein as the
"Proxy Statement," are incorporated by reference into Part III of this Report on
Form 10-K.
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
INDEX TO REPORT ON FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 1997
Part I Page
----
Item 1. Business........................................................... 1
Item 2. Properties......................................................... 30
Item 3. Legal Proceedings.................................................. 30
Item 4. Submission of Matters to a Vote of Securityholders................. 30
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters........................................................... 31
Item 6. Selected Financial Data............................................ 33
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 33
Item 8. Financial Statements............................................... 43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................. 64
Part III
Item 10. Directors and Executive Officers of the Registrant................. 65
Item 11. Executive Compensation............................................. 65
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 65
Item 13. Certain Relationships and Related Transactions..................... 65
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.... 66
(i)
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Part I
Item 1. Business
Overview
Synaptic Pharmaceutical Corporation ("Synaptic" or the "Company") is a
biotechnology company engaged in the development of a broad platform of enabling
technology which it calls "human receptor-targeted drug design technology." The
Company is utilizing this technology to discover and clone the genes that code
for human receptor subtypes associated with specific disorders and is working
both independently and together with its collaborative partners to design
compounds that can potentially be developed as drugs for treating these
disorders. In addition to conducting several internal programs, the Company is
currently collaborating with Eli Lilly and Company ("Lilly"), Merck & Co., Inc.
("Merck"), Novartis Pharma AG ("Novartis"), the Warner- Lambert Company
("Warner-Lambert") and Grunenthal GmbH ("Grunenthal") on more than twelve
separate drug discovery programs covering ten therapeutic areas.
Synaptic's human receptor-targeted drug design technology is the result
of an integrated approach to four life science fields: molecular biology; cell
biology; pharmacology; and chemistry, including medicinal, combinatorial and
computer-assisted chemistry. This technology allows chemists to focus their drug
discovery efforts on a specific human receptor subtype target. The Company
believes that its technology provides three distinct advantages over the
traditional approach to drug discovery in which compounds are screened against
animal tissues containing many different receptor subtypes. First, by having an
isolated receptor subtype as a target, chemists are better able to design
compounds that interact with only the target of interest and not with other
receptors that may be responsible for side effects. Second, the Company believes
that using human receptor subtypes as drug design targets will substantially
reduce the number of problems that often arise during the drug development
process as a result of differences in a compound's activity in humans compared
to its activity in animal tissues. Third, Synaptic believes that its technology
may be more cost-effective than traditional drug discovery because the Company
and its collaborative partners can eliminate or redesign compounds that react
poorly with human receptor targets prior to initiating the costly activities
related to preclinical testing and clinical trials.
Synaptic focuses its receptor and drug discovery efforts on members of
a receptor superfamily known as "G protein-coupled receptors." The Company
selected this receptor family for two principal reasons. First, many G
protein-coupled receptors have been shown to be effective drug targets, as
evidenced by the commercial availability of drugs for a wide variety of
therapeutic applications that work by means of their interactions with G
protein-coupled receptors. Second, the G protein-coupled receptor superfamily is
extremely large and diverse and, based on several estimates, exceeds 1,000
receptors, with its members being involved in the mediation of a broad array of
physiological functions. Accordingly, the Company believes that there are
substantial opportunities to use many members of the G protein-coupled receptor
superfamily as targets for novel drugs.
The Company and Lilly have been collaborating since 1991 to develop
drugs for a variety of therapeutic applications. One of their drug discovery
programs, focused on the development of a drug for the treatment of migraine, is
in Phase II clinical trials in Europe. Two other programs that are the subject
of the collaboration, which are focused on the development of drugs for the
prophylactic treatment of migraine and for the treatment of depression, are in
the late preclinical stage of development. In addition, two programs that are
the subject of the collaboration, which are focused on the development of drugs
for the treatment of smoking cessation and obesity, are in the early preclinical
stage of development. The Company and Merck have been collaborating since
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1993 on a program focused on the development of a drug for the treatment of
benign prostatic hyperplasia ("BPH"). This program is in the late preclinical
stage of testing. The Company and Novartis have been collaborating since 1994 on
a program focused on the development of a drug for the treatment of obesity.
This program is in the early preclinical stage of development. In July 1997, the
Company entered into a collaborative arrangement with Warner-Lambert focused on
multiple therapeutic applications, including obesity, diabetes, Alzheimer's
Disease, depression and pain. Finally, in January 1998, the Company entered into
a collaborative arrangement with Grunenthal. Unlike the Company's other
collaborations which are focused on a single receptor family but which may
result in drugs for multiple therapeutic applications, the Grunenthal
collaboration is focused on the development of drugs for a single therapeutic
application--pain--but may involve multiple receptor families.
Three of the Company's collaborative partners, Lilly, Merck and
Novartis, provide the Company with financial support for research. In addition,
as part of its collaboration with the Company, Warner-Lambert is required upon
the occurrence of certain events to provide the Company with financial support
for research and, at the Company's option, to purchase equity in the Company.
Each of these four collaborative partners is responsible for all development
costs and is required to make payments to the Company upon the achievement of
certain milestones and to pay royalties to the Company based upon net sales of
any drugs resulting from its collaboration with the Company. With respect to the
Grunenthal collaboration, the Company and Grunenthal are responsible for their
own expenses incurred during the research stage of any project undertaken as
part of the collaboration but will each be responsible for 50% of all
development costs incurred as part of the project with respect to any resulting
drug candidates up to the commencement of Phase III clinical trials. Synaptic
will retain manufacturing and marketing rights in the United States, Canada and
Mexico with respect to any drug candidates resulting from the collaboration,
while Grunenthal will retain manufacturing and marketing rights in Europe,
Central America (other than Mexico) and South America with respect to any such
candidates. The two companies will share these rights in all other countries.
With respect to each country in its own territories and in the shared
territories in which it desires to market a drug candidate, each of Synaptic and
Grunenthal will be responsible for conducting Phase III clinical trials, if
required, for obtaining any necessary regulatory approval and for all associated
costs.
In March 1998, the Company entered into an Option and License Agreement
(the "Glaxo Agreement") with Glaxo Group Limited ("Glaxo") pursuant to which the
Company granted Glaxo a license under its patent rights, as well as an option to
obtain an additional license under its patent rights, relating to certain of the
Company's technology. In consideration for the license and option, Glaxo paid
the Company $2 million. In addition to the $2 million payment, Glaxo is required
to pay royalties to the Company based upon net sales of drugs covered by the
license. An additional payment is required in order for Glaxo to exercise the
option to obtain the additional license and, if Glaxo exercises the option, it
is required to pay to the Company royalties based upon net sales of drugs
covered by such additional license, as well as to make payments to the Company
upon the achievement of certain milestones. Unlike the agreements with Lilly,
Merck, Novartis, Warner-Lambert and Grunenthal, the Glaxo Agreement does not
provide for any collaboration between the Company and Glaxo.
In November 1997, the Company received net proceeds of $33,822,000,
after deducting offering expenses payable by the Company, from an underwritten
public offering of its Common Stock.
Certain discussions in this Report refer to various phases of
preclinical testing and clinical trials. For a description of such phases, see
the footnotes in the table entitled "Summary of Synaptic's Receptor and Drug
Discovery Programs" set forth under "--Receptor and Drug Discovery Programs:
Focus on G Protein-Coupled Receptor Superfamily."
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Business Strategy
Synaptic's business strategy is to develop, together with its
collaborative partners, a broad array of drugs based upon the Company's human
receptor-targeted drug design technology. This strategy consists of four
principal objectives, the first of which is to aggressively discover and clone G
protein-coupled receptor genes. As of March 2, 1998, Synaptic had received
United States patents relating to eleven of these receptor genes and related
drug discovery systems and several United States patent applications relating to
the Company's receptor gene discoveries were pending. In addition, several
corresponding patents had been issued in other countries and additional
corresponding patent applications had been filed in other countries.
The Company's second objective is to efficiently discover and design
potential drugs through the use of its human receptor-targeted drug design
technology. The Company and its collaborative partners are using this technology
to design, synthesize and optimize compounds for further development. The
Company's two approaches to designing and synthesizing compounds include
traditional medicinal chemistry and the newer technology of combinatorial
chemistry, each of which is supported by the Company's expertise in
computer-assisted molecular modeling. With both approaches, the Company's
chemists and pharmacologists use their knowledge of the structures of targeted
receptor subtypes to design and synthesize initial chemical structures that are
then optimized. Synaptic's chemists are currently involved in six drug discovery
programs, three of which are being conducted in collaboration with the Company's
partners. The Company's partners may select compounds for testing in the
Company's drug discovery systems from the Company's existing libraries of
compounds, their own existing libraries of compounds or newly discovered or
designed compounds.
The Company's third objective is to leverage resources and generate
royalty-based revenues through collaborations and licensing arrangements with
pharmaceutical companies. Towards this objective, the Company to date has
focused most of its scientific resources on the discovery and design phases of
the drug development process and has entered into royalty-based collaborations
in which its pharmaceutical partners participate in the early phases of the drug
development process and assume principal responsibility for preclinical testing,
clinical trials and commercialization. In these types of arrangements, the
Company's collaborative partners are generally required to provide the Company
with financial support for research, milestone payments and royalties tied to
net sales of any drugs resulting from the collaborations. By pursuing this
objective, Synaptic gains access to the expertise and resources of its partners,
while simultaneously maintaining relatively low capital requirements. In
addition to these collaborations, the Company has licensed certain patent rights
to Glaxo under the Glaxo Agreement. Glaxo is conducting the research and
development activities relating to the license independently of Synaptic and is
required to pay Synaptic royalties tied to net sales of any drugs covered by the
license.
The Company's fourth objective is to retain ownership rights to certain
products developed through the use of its technology. The Company is seeking to
achieve this objective in a variety of manners, including the exploration of and
entry into collaborations with pharmaceutical companies in which the Company
increases its participation in and funding of drug development activities
conducted as part of such collaborations. Through such arrangements, the Company
believes that it may be able to gain access to additional chemistry, in vivo
pharmacology, preclinical and clinical expertise, as well as to retain a greater
portion of the downstream financial benefits associated with the
commercialization of any products resulting from such arrangements.
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Background
The Role of Receptors in Controlling Cellular Function
The human body coordinates its activities through communication among
its great variety of cells and tissues. One of the principal means of
communication occurs through chemical signaling, when one cell releases a
chemical messenger, called a "ligand," which ultimately binds to and activates a
protein molecule, called a "receptor," on the surface of another cell. The
activation of the receptor on the surface of the receiving cell triggers a
cascade of events in which the message received by the receptor is, in turn,
transmitted to the interior of the cell, thereby causing some aspect of the
behavior of the receiving cell to change. The nature of this change depends upon
a number of factors, including the specific ligand and receptor involved in the
communication.
Many different kinds of receptors involved in cellular communication
exist in the human body. Receptors are first classified into categories, called
"superfamilies," based upon similarities in their biochemical and structural
properties. There are four principal superfamilies of receptors: the G
protein-coupled receptor superfamily, the receptor protein-tyrosine kinase
superfamily, the ligand-gated ion channel superfamily and the intracellular
receptor superfamily. The receptors included within each superfamily are then
subcategorized into groups, called "families," based upon the specific ligands
with which they interact. Examples of receptor families within the G
protein-coupled receptor superfamily are the serotonin, adrenergic, neuropeptide
Y ("NPY") and galanin families of receptors. Each member of each family is
called a "receptor subtype."
Historically, it was believed that each family of receptors had only
one or two members. In recent years, however, scientists have discovered that
many families of receptors have more than two receptor subtypes. The number of
receptor subtypes within each family of receptors varies, with some families,
such as the serotonin family, comprising at least 14 known receptor subtypes,
and other families, such as the alpha adrenergic family, comprising at least six
known receptor subtypes.
In general, each receptor subtype is distributed differently throughout
the body and often controls physiological functions that are different from
those controlled by other receptor subtypes within the same family. By
interacting with all of its receptor subtypes that are located throughout the
body, a single ligand thus plays a role in numerous physiological functions. For
example, the ligand for adrenergic receptor subtypes, noradrenaline (also known
as norepinephrine), interacts with at least nine different receptor subtypes
(six alpha and three beta receptor subtypes), one of which has been shown to
contract the muscles surrounding the prostate and another of which has been
shown to regulate blood pressure. In some cases, the same receptor subtype is
found in different tissues of the human body. A compound designed to bind
selectively to a receptor subtype for treating a disorder in one tissue could,
therefore, potentially cause an adverse side effect in other tissues that
contain the same receptor subtype. The tissue affected by the disorder may,
however, have certain other characteristics that can be exploited to guide
receptor subtype-targeted compounds to that tissue.
Receptor-Based Drug Therapy--The Traditional Approach
Many illnesses arise because of abnormalities in intercellular
communication, and the concept of receptor-based drug therapy was developed to
address this problem. The goal of receptor-based drug therapy is to develop
drugs that will interact with the receptor believed to be associated with the
targeted abnormality, thereby inhibiting or enhancing the cascade of events that
is mediated by the receptor. A number of receptor- based drugs have been
developed and are currently being used. In general, however, these drugs do not
differentiate among receptor subtypes and, while they may indeed interact with
the targeted receptor subtypes,
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thereby having some therapeutic effect, they may also interact with other
receptor subtypes within the same family as the targeted receptor subtypes.
These other receptor subtypes may be associated with other physiological
functions, and interactions of these drugs with them often result in undesirable
side effects. In addition, many of these drugs have limited therapeutic utility
because they must be used in suboptimal doses in order to minimize these side
effects.
The reason that most of these currently available drugs are unable to
differentiate among receptor subtypes stems from the fact that they were
discovered through traditional drug discovery methods. The traditional approach
to drug discovery involves the screening of compounds against animal tissues
containing multiple receptor subtypes to determine their relevant biological
activity. This approach is limited in its ability to yield optimally effective
drugs because of inherent limitations in the use of animal tissues to test drugs
intended for humans. First, by using animal tissues containing multiple receptor
subtypes, it is usually difficult and often impossible both to measure with
precision the effect of a compound on the receptor subtype that is the target of
a drug discovery effort and to determine whether the compound is binding to
other receptor subtypes in the tissue that are not the intended drug target.
Second, due to differences in the receptor systems of various species of animals
as compared to humans, there are often significant differences between a drug's
activity in animals and the same drug's activity in humans. In fact, there are
several examples of drug development candidate failures in human clinical trials
that were due to differences in the properties of such candidates in humans as
compared to their properties in the animal tissues that were initially used for
drug discovery. As a consequence, compounds initially tested against animal
tissues often do not have the desired effects when they are ultimately
administered to humans in clinical trials.
Synaptic's Human Receptor-Targeted Drug Design Technology
Synaptic believes that its human receptor-targeted drug design
technology can overcome the limitations of the traditional approach to drug
discovery. This technology involves three steps: (i) the discovery and cloning
of the human genes that code for the targeted receptor subtypes; (ii) the use of
each of these genes to create a cell line that can be used to measure, or assay,
the pharmaceutical properties of compounds that bind to the targeted receptor
subtype and that are, therefore, candidates for drug development; and (iii) the
design, synthesis and optimization of compounds that are highly selective for
the targeted human receptor subtype. In the first step, the Company's molecular
biologists employ genetic engineering techniques to clone the gene that codes
for the receptor subtype of interest. In the second step, the Company's cell
biologists place the gene into a recipient cell which then expresses the human
receptor subtype on its surface. This recipient cell, which expresses a single
population of the targeted human receptor subtype and is devoid of all other
related receptor subtypes, is then propagated by the Company's cell biologists,
resulting in the establishment of a cell line. Finally, this cell line is used
as a drug discovery system by the Company's pharmacologists to evaluate
compounds synthesized by the Company's or its collaborative partners' chemists.
Since each of these cell lines expresses a single receptor subtype, it is
possible to design compounds with high affinity for the ultimate target of a
drug discovery program--the appropriate human receptor subtype--and low affinity
for those subtypes suspected of being associated with side effects.
The Company's technology makes it possible not only to clone receptor
subtypes previously believed or known to exist, but also to discover and clone
receptor subtypes which had previously been undetectable in animal tissues
because they were present in concentrations too low to detect using traditional
pharmacological techniques. Many of these newly discovered receptor subtypes may
provide opportunities for the design of novel drugs. In addition, the Company
believes that its ability to access and to use individual cloned human receptor
subtypes in its drug design efforts will yield safer and more effective drugs
than those currently available.
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Synaptic further believes that its technology may make the drug development
process more predictive and cost-effective than the traditional approach because
the Company and its collaborative partners eliminate or redesign
non-subtype-selective compounds and compounds that react poorly with human
targets at an early stage of the process rather than at the costly later stages
of preclinical testing and clinical trials. Finally, drugs developed through the
use of the Company's human receptor-targeted drug design technology will be
small molecule drugs which offer possibilities of avoiding specialized delivery
approaches and which may be delivered orally.
The Company also believes that its success in the discovery of receptor
subtypes will enable it to further refine the understanding of many disease
processes. There is increasing evidence to suggest that some disorders may
actually involve the malfunctioning of any one of a variety of receptor subtypes
included within different receptor families. For example, in the case of
obesity, there are pharmacological data indicating that an NPY receptor subtype
is involved in controlling appetite, while a galanin receptor subtype may be
involved in craving for fats in the diet. As a result, more than one drug could
be developed to treat obesity, but such drugs would work through different
biological mechanisms by exerting their therapeutic effects by interacting with
receptor subtypes belonging to different families. The Company believes that its
human receptor-targeted drug design technology may make it possible to discover
two or more separate drugs that could benefit distinct patient populations whose
symptoms (for example, obesity), while identical, stem from different
physiological disorders and therefore require different treatments.
Consequently, it has initiated several programs in which different receptor
subtypes are being used as drug targets for the same therapeutic application.
To date, the Company has not completed development of any drugs and
does not expect that drugs developed by it or its collaborative partners will be
commercially available for a number of years.
Receptor Gene Discovery and Cloning
The Company's principal receptor cloning projects to date have focused
on four families of receptors within the G protein-coupled superfamily of
receptors: the serotonin, alpha adrenergic, NPY and galanin receptor families.
Additional projects directed toward other receptor families are ongoing.
The Company's collection of cloned genes that code for receptors in the
G protein-coupled receptor superfamily comprises human genes, as well as genes
from various other mammalian species that correspond to the human genes. These
receptor genes include genes that were discovered by the Company and genes that
were discovered by others about which information is publicly available. In
general, the Company seeks to patent those cloned receptor genes and those drug
discovery systems that it has discovered or invented. As of March 2, 1998, the
Company had received United States patents relating to eleven receptor genes and
related drug discovery systems and several United States patent applications
relating to the Company's receptor gene discoveries were pending. In addition,
several corresponding patents had been issued in other countries and additional
corresponding patent applications had been filed in other countries. There can
be no assurance that the Company will be awarded patents in respect of any of
its pending patent applications.
Drug Discovery Systems
Once the Company clones the gene for a targeted receptor subtype, it
places the gene into a recipient cell which then expresses the targeted receptor
subtype on its surface. This cell, which expresses a single population of the
targeted human receptor subtype, is then propagated in the laboratory by the
Company's cell biologists, resulting in the establishment of a cell line. This
cell line, which constitutes a drug discovery system, is used in
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two different types of assays: binding assays and functional assays. In
Synaptic's binding assays, the Company's pharmacologists measure the affinity of
a compound for both the receptor subtype that is the target of a particular drug
discovery program and the other receptor subtypes that could be associated with
side effects. These measurements help to predict the potency of a compound, as
well as the degree of selectivity that the compound has for the targeted
receptor subtype over other receptor subtypes. The data obtained from binding
assays enable the chemists to design compounds toward or away from one or more
of the relevant subtypes, as appropriate, for optimal therapeutic efficacy. In
Synaptic's functional assays, the Company's pharmacologists determine the nature
of the response of the receptor subtype to the compound. Data from the
functional assays show whether the compound is acting to inhibit or enhance the
activity of the receptor subtype. By enabling the Company's pharmacologists to
evaluate compounds rapidly at their ultimate human receptor subtype targets, the
Company's proprietary drug discovery systems serve as tools that the Company's
and its partners' or licensees' chemists can use to rationally design drugs that
will be more effective and have fewer or substantially less severe side effects
than existing drugs. Although the Company believes that its drug discovery
systems accurately measure the properties of a compound's interaction with the
human receptor subtypes, there are many additional factors, such as the drug's
stability in the body or its ability to be administered orally, that impact the
ultimate pharmaceutical success of a compound.
Chemistry and Molecular Pharmacology
The Company employs two approaches to designing and synthesizing
receptor subtype-selective compounds, traditional medicinal chemistry and the
newer technology of combinatorial chemistry, both of which are supported by the
Company's expertise in computer-assisted molecular modeling. With both
approaches, the Company's chemists and pharmacologists use their knowledge of
the structures of the targeted receptor subtypes and known compounds to design
and synthesize structures that will have activity at these subtypes.
Combinatorial chemistry involves automated synthesis of a variety of
novel compounds by assembling them using different combinations of chemical
building blocks. The use of combinatorial chemistry greatly accelerates the
process of generating compounds. The resulting arrays of compounds are called
libraries and are used to screen for compounds ("lead compounds") that
demonstrate a sufficient level of activity at receptors of interest. The Company
is using combinatorial chemistry to synthesize "focused" libraries of compounds
anticipated to be highly biased toward the Company's drug discovery targets. The
Company's scientists have successfully generated lead compounds through the use
of these combinatorial chemistry techniques.
Once lead compounds are identified, whether through the use of
combinatorial chemistry or traditional medicinal chemistry, a variety of
analogues are prepared to facilitate an understanding of the relationship
between chemical structure and biological activity. These studies help define
structure activity relationships which can then be used to design drug
candidates with improved potency, selectivity and pharmacokinetic properties.
Combinatorial chemistry is used to rapidly generate a variety of structures for
lead optimization. Traditional medicinal chemistry, which involves the synthesis
of compounds one at a time, is also used for further refinement and to generate
compounds not accessible by automated techniques.
Receptor and Drug Discovery Programs: Focus on G Protein-Coupled
Receptor Superfamily
The superfamily of receptors to which the Company has chosen to apply
its human receptor-targeted drug design technology is the G protein-coupled
receptor superfamily, so called because the cascade of events that
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ensues within the receiving cell following the occurrence of the ligand-receptor
interaction is mediated by a class of proteins called "GTP-binding regulatory
proteins," or "G proteins," found within the cell.
The Company chose to focus on the G protein-coupled receptor
superfamily because it believes that this superfamily provides the optimum
opportunity for the exploitation of its human receptor-targeted drug design
technology. First, it is known that G protein-coupled receptors play a major
role in intercellular communication and that drugs that block ("antagonists") or
enhance ("agonists") their activity have therapeutic utility. Examples of such
drugs include: Zantac(R), a histamine receptor antagonist for the treatment of
ulcers; Claritin(R), a histamine receptor antagonist for the treatment of
allergy; Propulsid(R), a serotonin receptor agonist for the treatment of gastric
motility disorder; Imitrex(R), a serotonin receptor agonist for the treatment of
migraine headache; and Hytrin(R), an adrenergic receptor antagonist for the
treatment of hypertension and BPH. Second, there is a large body of knowledge
about some of the basic structural elements of drugs that interact with these
receptors that has accumulated over the years from which the Company and its
collaborative partners can draw in beginning their drug discovery programs.
Third, the G protein-coupled receptor superfamily is extremely large and, based
on several estimates, exceeds 1,000 receptor subtypes belonging to more than 40
known families and an unknown number of additional families the ligands of which
have not yet been identified. To the Company's knowledge, fewer than half of the
genes that code for these subtypes have been cloned.
The Company's primary drug discovery programs are focused on human
serotonin, adrenergic, NPY and galanin receptor subtypes. The serotonin programs
are being conducted by the Company in collaboration with Lilly. One of the alpha
adrenergic programs is being conducted by the Company in collaboration with
Merck and the other alpha adrenergic program is being conducted by the Company
in collaboration with Grunenthal. Of the Company's three NPY programs, one is
being conducted by the Company in collaboration with Novartis and two are being
conducted by the Company independently. The galanin program is being conducted
by the Company in collaboration with Warner-Lambert.
Total operating expenses incurred by the Company for each of the fiscal
years 1997, 1996 and 1995 were $17,853,000, $14,319,000 and $12,078,000,
respectively, of which approximately $9,785,000, $6,943,000 and $7,670,000,
respectively, was funded by the Company's collaborative partners. In 1996,
following the completion of its initial public offering in December 1995, the
Company increased its internal research and development spending. The Company
again increased internal research and development spending during 1997 and the
Company intends to further increase such spending during 1998.
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Certain of the Company's receptor and drug discovery programs are
summarized in the following table:
Summary of Synaptic's
Receptor and Drug Discovery Programs
Program(1) Receptor(s) Primary Indication(s) Status(2) Partner
- -------------- ------------ ---------------------- ----------------- ---------
Serotonin 1F Acute Migraine Phase II Clinical Eli Lilly
2B Migraine Prophylaxis Late Preclinical Eli Lilly
__(3) Depression Late Preclinical Eli Lilly
1A Smoking Cessation Early Preclinical Eli Lilly
2C Obesity Early Preclinical Eli Lilly
Alpha
Adrenergic 1a Benign Prostatic
Hyperplasia Late Preclinical Merck
2a, 2b or
2c (3) Pain Leads Identified Grunenthal
Neuropeptide Y Y5 Obesity Early Preclinical Novartis
Y2 Pain Discovery (4)
Y2 Anxiety and
Depression Leads Identified --
Galanin 1, 2, and 3 Obesity, Diabetes, Cloning and Warner-
Alzheimer's Disease, Discovery Lambert
Depression and Pain
(1) The Company is working on receptor and drug discovery programs in
addition to those programs referenced in the above table. In general,
the drug discovery and receptor discovery programs that are
specifically referenced in the above table are at more advanced stages
of development than those that are not specifically referenced in the
table.
(2) "Cloning" refers to the stage at which the Company is attempting to
discover, identify and clone the genes for specific receptor subtypes.
"Discovery" refers to the stage at which chemists are attempting to
identify receptor subtype-selective compounds through the use of the
Company's drug discovery systems.
"Leads Identified" refers to the stage at which receptor
subtype-selective compounds have been identified through the use of the
Company's drug discovery systems.
"Early Preclinical" refers to the stage at which one or more leads have
been identified and are being tested in in vitro or in vivo model
systems for one or more indications. In addition, at this stage lead
compounds may have been shown to be active in animal models for one or
more indications and preliminary toxicology and pharmacokinetics
studies will also have been concluded.
"Late Preclinical" refers to the stage preceding the Phase I Clinical
stage at which a clinical candidate has been selected, scale-up of such
candidate is underway or completed, and toxicology and pharmacokinetics
studies are planned or underway or have been concluded.
"Phase I Clinical" refers to the stage preceding the Phase II Clinical
stage at which a drug candidate is being or has been administered to a
small group of healthy human subjects for the purpose of testing for
safety (adverse effects), dose tolerance, absorption, bio-distribution,
metabolism, excretion and clinical pharmacology.
"Phase II Clinical" refers to the stage at which a drug candidate is
being or has been administered to a small sample of the actual intended
patient population to seek to assess the efficacy of the drug candidate
for the specific targeted indication, to determine dose tolerance and
the optimal dose range and to gather additional information relating to
safety and potential adverse effects.
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"Phase III Clinical" refers to the stage at which a drug candidate is
being or has been administered to a broader sample of the general
patient population at geographically dispersed study sites to establish
further clinical safety and efficacy of the drug candidates in order to
determine its overall risk-benefit ratio and to provide an adequate
basis for all physician labeling.
(3) The specific receptor subtype that is the focus of this program is
confidential to the Company and its collaborative partner.
(4) While Synaptic is currently conducting this program independently,
Synaptic has agreed to reserve the Y2 receptor as a potential target
for drugs for the alleviation of pain exclusively for its collaboration
with Grunenthal.
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Serotonin Programs
Serotonin is one of the major neurotransmitters, a type of ligand, of
the body. It affects mood, sleep rhythms, sexual functions, appetite,
temperature control, gastro-intestinal movement and the cardiovascular,
pulmonary and genito-urinary systems. Drugs that inhibit or enhance the actions
of serotonin have proven to be effective in the treatment of an array of
disorders, such as migraine headache, depression and anxiety. However, none of
the limited number of serotonergic drugs currently available was designed with
the use of cloned serotonin receptor subtype genes and some of these drugs have
undesirable side effect profiles. It is generally believed that the poor side
effect profiles stem from the interaction of these drugs with multiple serotonin
receptor subtypes. The serotonin family is extremely large, comprising at least
14 receptor subtypes. While each of these receptor subtypes may be implicated in
a physiological function distinct from the other subtypes, all of the receptor
subtypes respond to the neurotransmitter serotonin--and may be responding to
non-subtype-selective drugs. As a consequence, a non-subtype-selective drug
intended to exert its effects on one physiological function may in fact have the
unintended consequence of exerting its effects on other physiological functions,
thereby causing the undesirable side effects.
Of the 14 serotonin receptor subtype genes that have been discovered
and cloned, the Company believes that it is responsible for the discovery and
cloning of seven. The Company has been issued United States patents covering six
of these receptor genes and related drug discovery systems. A patent application
covering the seventh of these genes and the related drug discovery system and
additional patent applications relating to all of these genes have been filed in
the United States. In addition, several corresponding patent applications have
been filed in other countries. The Company has found, through the use of these
cloned receptor genes and related drug discovery systems, that the serotonin
system is significantly more complex than had previously been understood and
believes that the use of its technology to design serotonin receptor
subtype-selective drugs will result in new serotonergic drugs with improved
efficacy and side effect profiles, as well as serotonergic drugs for new
therapeutic applications. There can be no assurance, however, that the Company
will be successful in designing a serotonin receptor subtype-selective drug that
will achieve the foregoing desired effect.
The Company, in collaboration with Lilly, is currently conducting drug
discovery programs focused on a number of serotonin receptor subtypes and
therapeutic applications. As part of the collaboration, compounds supplied by
Lilly are assayed by the Company in its serotonin receptor subtype drug
discovery systems. To date, receptor subtype-selective compounds have been
identified for a number of serotonin programs. The program focused on the
discovery and development of a drug for the treatment of migraine headache is
currently in Phase II clinical trials in Europe and as of March 2, 1998, Lilly
confirmed that it expects to complete such trials and to begin analyzing the
data from the trials during the second quarter of 1998. In connection with the
collaboration, Lilly received an exclusive worldwide license to use all but two
of the Company's existing serotonin drug discovery systems for the development
and commercialization of serotonergic drugs. Certain of the serotonin programs
are described below.
Migraine Headache
Migraine headaches are periodic throbbing headaches often accompanied
by nausea and vomiting. One of the newer drugs available for the treatment of
migraine, Imitrex(R), is an agonist of certain serotonin receptor subtypes that
was discovered using the traditional approach to drug discovery. Although
effective in most patients, the drug has been associated with the tightening of
the coronary blood vessels. As a result, the drug is contraindicated both in
patients with ischemic heart disease and in patients with symptoms of ischemic
heart disease. In addition, because of the cardiovascular risks, it is
recommended that, in the case of any patient in
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whom unrecognized coronary disease is comparatively likely, the first dose of
the drug be administered in a physician's office. Finally, the drug is poorly
absorbed from the gastrointestinal tract. Therefore, to be most effective, it
must be given by injection or by nasal spray.
The Company and Lilly are focused on developing anti-migraine compounds
with increased efficacy and reduced side effects. Through the use of its
serotonin receptor subtype drug discovery systems, Synaptic scientists
discovered that Imitrex(R) reacted strongly with three serotonin receptor
subtypes, serotonin 1B and 1D, both of which were long thought to be the targets
for anti-migraine effects, as well as serotonin 1F. Synaptic scientists proposed
that the appropriate serotonin receptor subtype for the treatment of migraine is
the serotonin 1F receptor subtype. Together with scientists at Lilly, Synaptic
scientists identified compounds that are selective agonists of the serotonin 1F
receptor subtype. These compounds were tested in animal models at Lilly and
shown to be orally active and to have a long duration of action. The compounds
were also shown to be potent in an animal model that is thought by many
scientists in the field to be predictive of therapeutic utility for the
treatment of migraine. Furthermore, these compounds were inactive in
vasoconstriction assays at Lilly, thereby suggesting that the possible adverse
events reported for Imitrex(R) would not limit the treatment potential of a
1F-selective agonist for migraine. Lilly is currently conducting Phase II
clinical trials with one of these compounds in Europe. Synaptic has been issued
a United States patent covering the use of genetically engineered cells
expressing the human serotonin 1F receptor subtype to identify compounds that
bind to the receptor subtype, as well as a United States patent covering the
gene encoding the receptor subtype. In addition, Lilly has been issued a United
States patent covering the use of 1F agonists exhibiting minimal
vasoconstrictive effects for the treatment of migraine.
The Company and Lilly are also focused on the discovery of safer and
more efficacious drugs for the prophylactic treatment of migraine. Despite
significant progress in the development of therapies for the acute treatment of
migraine, much less progress has been made in the development of a prophylactic
treatment. Patients who regularly experience two to six migraines per month are,
according to criteria established by the International Headache Society,
considered to be candidates for such a treatment. Presently, two beta adrenergic
blockers, Inderal(R) and Blocadren(R), ergot alkaloids, such as Sansert(R), and
an anticonvulsant, Depakote(R), have been approved for the prophylaxis of
migraine. These drugs generally have limited efficacy due to their potential for
significant deleterious side effects. Inderal(R) and Blocadren(R) must be used
with caution in patients with certain pulmonary diseases because they can
produce bronchoconstriction and in patients with congestive heart failure
because they can cause coronary depression. Ergot alkaloids can cause
vasoconstriction leading to myocardial ischemia or gangrene in the extremities
and should not be used by pregnant women. Depakote(R) can cause fatal hepatic
failure and, like ergot alkaloids, should be avoided by pregnant women.
Through the use of Synaptic's serotonin receptor subtype drug discovery
systems, scientists at Synaptic and Lilly have discovered compounds that are
selective antagonists of the serotonin 2B receptor subtype, which is thought to
be a potential target for migraine prophylaxis. These compounds are active in an
animal model that is thought by many scientists in the field to be predictive of
therapeutic utility for the treatment of migraine and it is believed that such
compounds may provide safer and more effective prophylactic therapy for those
who suffer frequent migraine. One of these compounds has been selected by Lilly
for possible development and is undergoing late preclinical testing.
Smoking Cessation
There are more than 150 million smokers in major market countries, more
than 30 million of whom attempt each year to quit smoking. Chronic use of
tobacco is causally linked to a variety of serious diseases, including coronary
heart disease, cancer and emphysema. Nicotine patches and nicotine gum have been
used as
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smoking cessation aids, but have met with limited success. Recently,
Wellbutrin(R), which has been available for a number of years as an
antidepressant, was approved by the United States Food and Drug Administration
(the "FDA") for marketing in a sustained release formulation (Zyban(R)) for use
as an aid to smoking cessation. Clinical studies show that Zyban(R), either
alone or in combination with transdermal nicotine, increases the rate of smoking
cessation. However, the long-term response rate to Zyban(R) as an aid in smoking
cessation is low (about 20%). In addition, the active ingredient in Zyban(R) has
been reported to cause seizures in about 0.4% of patients, along with agitation
and insomnia.
The Company and Lilly are engaged in a program to identify and develop
serotonin 1A antagonists which ameliorate the withdrawal symptoms frequently
suffered in connection with smoking cessation. As part of the program, the
Company and Lilly have designed novel compounds which are highly selective for
and are potent antagonists of the serotonin 1A receptor subtype. These compounds
have been shown to be effective in an animal model of nicotine withdrawal and
may lead to drugs which are more effective as smoking cessation aids than those
currently available.
Obesity
Drug treatment for obesity has traditionally been used as a short-term
adjunct to diet and exercise. Most drugs approved for the treatment of obesity
act centrally through catecholaminergic and/or serotonergic pathways. Earlier
compounds, such as Benzedrine(R) and Dexedrine(R), were plagued by problems of
tolerance, abuse and cardiovascular side effects. More recently, Pondimin(R) and
Redux(R), which act by releasing the neurotransmitter serotonin, were widely
used, either alone or in combination with phentermine (Phen-Fen). However, both
of these drugs have been withdrawn from the market pursuant to a request by the
FDA because they appear to cause heart valve defects and pulmonary hypertension.
The mechanism by which Pondimin(R) and Redux(R) cause this cardiac and pulmonary
toxicity is unknown, but similar toxicity is not seen with other serotonergic
drugs, such as Prozac(R) and Zoloft(R), which are widely used as
antidepressants.
While it has been proven that serotonergic transmission can regulate
food intake, it has not been clear which of the serotonin receptor subtypes is
responsible for this action. Studies involving genetically altered mice which
lack serotonin 2C receptors indicate that this serotonin receptor subtype may
play a role. These mice are normal at birth but become obese as they get older,
and their obesity is associated with increases in food intake levels and insulin
resistance. A possible correlation in humans is provided by the observation that
patients treated with drugs such as clozapine, imipramine, and amitriptyline,
all of which have, in addition to their principal actions, substantial blockade
of the serotonin 2C receptors, are associated with weight gain.
The Company and scientists at Lilly are collaborating to identify and
develop compounds which are selective for the serotonin 2C receptor over other
serotonin receptor subtypes that may be responsible for undesirable side
effects. The Company's serotonin receptor subtype drug discovery systems have
made it possible to discover subtype-selective compounds that may be effective
treatments for obesity through this serotonin 2C mechanism. Subtype-selective
compounds which suppress food intake in animal models have been identified and
are under evaluation for their suitability as drug candidates.
Depression
A number of different pharmacologic strategies have been developed to
treat depression. The early drugs shown to be effective in the treatment of
depression, such as the tricyclic antidepressants, lithium and the
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monoamine oxidase inhibitors, have side effects associated with their use that
limit their effectiveness. Recently, selective serotonin reuptake inhibitors
(SSRI), such as Prozac(R), Zoloft(R) and Paxil(R), have been shown to be highly
effective in the treatment of many forms of depression. A number of SSRI
compounds are now approved for marketing, and these drugs have captured a
significant market share. However, all of these currently available drugs have
significant deleterious side effects in many patients which may limit their use.
In addition, these drugs have a lag time before their beneficial clinical
effects can be seen. This lag time can be a serious problem, especially in the
depressed suicidal patient. Furthermore, there are a significant number of
patients that do not adequately respond to any of the currently available drug
therapies.
Scientists at Synaptic and Lilly have identified novel serotonin
receptor subtype-selective compounds that may have rapid onset of efficacy in
the treatment of depression and that may also have better side effect profiles
than drugs currently available. One of these compounds has been selected by
Lilly for possible development and is undergoing late preclinical testing.
Other Serotonin Programs
The Company has cloned additional serotonin receptor subtypes that are
either not currently being pursued by it and Lilly as drug targets in their
collaborative drug discovery programs or are being so pursued but are focused on
therapeutic applications which are currently confidential to the Company and
Lilly. In addition, there is evidence to suggest that one or more serotonin
receptor subtypes that are the targets of the drug discovery programs currently
being conducted by the Company and Lilly may be relevant as targets for other
therapeutic applications. The Company expects that it and Lilly will establish
additional drug discovery programs focused on certain of these other serotonin
receptor subtypes or therapeutic applications in the future. There can be no
assurance, however, that the Company will establish additional drug discovery
programs with Lilly.
Alpha Adrenergic Programs
Alpha adrenergic receptors are activated by the neurotransmitter
norepinephrine (noradrenaline). The alpha adrenergic receptors serve a critical
control function in regulating involuntary physiological functions, such as
blood pressure, heart rate and smooth muscle tone, and thus may serve as
important tools in the management of many disorders, such as BPH.
Until 1982, only two alpha adrenergic receptors (alpha-1 and alpha-2)
were believed to exist. Since then, scientists have discovered that the alpha
adrenergic receptor family contains at least six subtypes (alpha-1a, 1b and 1d
and alpha-2a, 2b and 2c). The Company believes it was responsible for the
discovery of the genes that code for four of the six alpha adrenergic subtypes
in humans. The Company has received United States patents relating to two of
these genes and related drug discovery systems. Additional patent applications
relating to one of these genes have been filed both in the United States and in
other countries.
There are a number of adrenergic drugs on the market today which are
effective in the treatment of a variety of disorders. However, most of these
drugs were discovered in the 1970's prior to the discovery of the six alpha
adrenergic subtypes and are not selective for any one of these receptor
subtypes. The Company believes that many of the side effects associated with
these drugs may be traced to a lack of selectivity for the appropriate receptor
subtypes. The Company is using its alpha adrenergic drug discovery systems to
discover compounds with increased receptor subtype selectivity and is involved
in two programs involving alpha adrenergic receptor subtypes: the Alpha-1a
Antagonist Program and the Alpha-2 Adrenergic Program. There can be no assurance
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that the Company or any collaborative partner will be successful in designing an
alpha adrenergic receptor subtype-selective drug with improved efficacy and an
improved side effect profile.
The Company and Merck are collaborating on the Alpha-1a Antagonist
Program to develop drugs for the treatment of BPH. The Company and Grunenthal
are collaborating on the Alpha-2 Adrenergic Program to develop drugs for the
alleviation of pain. These programs are described below.
Benign Prostatic Hyperplasia
BPH is a pathology of the prostate, a walnut-sized gland in men that
surrounds the urethra as it exits the bladder. As men age, cells in the prostate
proliferate, causing growth in the prostatic tissue which in turn results in
pressure on the urethra. Common symptoms of BPH include urinary retention,
hesitancy or difficulty initiating the stream of urine, urinary frequency, a
sense of urgency and a sensation of incomplete emptying of the bladder. The
incomplete emptying of the bladder caused by BPH can also lead to urinary tract
infections and bladder damage. In severe cases, the flow of urine can become
completely blocked and lead to kidney failure.
There are several treatment options available for BPH. Transurethral
resection of the prostate (TURP) was used in approximately 180,000 men in the
United States in 1996. This surgical procedure results in significant benefit.
However, surgery is an unattractive alternative for many patients because of its
potential adverse consequences, and is not recommended for elderly patients due
to the potential for complications. Another surgical procedure, transurethral
needle ablation (TUNA), was recently approved by the FDA and may have the
advantage of possible use on an out-patient basis under local anesthesia.
However, initial results of a recent study comparing TURP to TUNA show a lower
level of efficacy in TUNA than in TURP with respect to increasing urinary flow.
Two different non-surgical alternatives for the treatment of BPH in
patients who either are not candidates for or elect not to have surgery are
currently available. The first alternative is a type of drug that acts by
inhibiting the enzyme 5 alpha reductase, which is responsible for the conversion
of testosterone to dihydrotestosterone in the prostate. By reducing levels of
dihydrotestosterone, which plays a role in growth of prostatic tissue, this type
of drug is intended to shrink the gland. An example of this type of drug is
Proscar(R). Although there is a rapid regression of the enlarged gland in most
patients, less than 50% of patients experience an increase in urine flow and
improvement of symptoms when treated with Proscar(R) for 12 months. A minimum of
six months' treatment may be necessary to determine whether an individual will
respond to the drug.
The second type of drug for the treatment of BPH involves the use of
alpha-1 adrenergic antagonists, such as Hytrin(R) and Cardura(R), that act by
blocking alpha adrenergic stimulation of the prostate. This blocking activity
causes a relaxation of the musculature of the prostate, thereby improving
urinary flow and providing other symptomatic relief of BPH. These drugs were
initially developed as antihypertensive agents in the mid-1970's prior to the
discovery that there existed three distinct subtypes of the alpha-1 receptor,
and are not selective for any particular alpha-1 subtype. While rapid
symptomatic improvement in approximately 70% of patients treated with this type
of drug has been observed, dose-dependent side effects, including hypotension
(which causes dizziness), headache, weakness, nasal congestion and peripheral
edema, are commonly associated with the treatment. The side effects limit the
recommended dose for these drugs. The most significant side effect, hypotension,
is particularly detrimental to elderly patients. Recently, another alpha
antagonist, Flomax(R), was approved for use in the treatment of BPH. Flomax(R)
is claimed to be "uroselective," but its labeling carries warnings of side
effects, such as postural hypotension, dizziness and vertigo, similar to those
of Hytrin(R).
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Through the use of its alpha adrenergic drug discovery systems and by
means of in vivo studies, Synaptic discovered that different receptor subtypes
are involved in the control of prostate musculature and blood pressure: the
alpha-1a receptor subtype is responsible for contraction of prostate musculature
and other alpha-1 subtypes are involved in the regulation of blood pressure.
This discovery confirmed the Company's hypothesis that many of the side effects
caused by alpha-1 adrenergic antagonists currently available for the treatment
of BPH stemmed from their lack of selectivity for the receptor subtype involved
in relaxation of prostate musculature. The Company has been issued United States
patents covering the use of selective alpha-1a antagonists for the treatment of
BPH (the "BPH use patents"). In addition, Synaptic has been issued a United
States patent covering the use of genetically engineered cells expressing the
human alpha-1a adrenergic receptor subtype to identify compounds that bind to
the receptor subtype, as well as a United States patent covering the gene
encoding the receptor subtype.
The Company, in collaboration with Merck, is using the Company's drug
discovery systems to design compounds that block the activity of the alpha-1a
receptor subtype, thereby producing the desired effects on the prostate, but
that have minimal affinity for alpha-1b and alpha-1d receptor subtypes, thereby
substantially reducing the cardiovascular effects seen with currently available
non-selective alpha-1 adrenergic antagonists. A compound selected by Merck is in
the late preclinical stage of testing. Other leads have also been identified and
are in the early or late preclinical stage of testing.
As part of the collaboration, Synaptic granted Merck a nonexclusive
worldwide license under certain of its patent rights, including the Company's
alpha adrenergic receptor patents and patent applications, to develop and
commercialize alpha-1a antagonists. Synaptic also granted Merck as part of
the collaboration an exclusive worldwide license to use Synaptic's alpha-1a
selective compounds and know-how, as well as an exclusive worldwide license
under certain of the Company's patent rights, including the BPH use patents
and related patent applications, for the same purposes. However,in March 1998,
Merck granted back to Synaptic such rights as were necessary to enable Synaptic
to grant to Glaxo pursuant to the Glaxo Agreement a limited license under the
BPH use patents and an option to obtain an additional license under the BPH
use patents.
Pain
Analgesic agents are used to relieve pain (analgesia). Analgesics most
commonly used for severe pain are narcotics. Although very effective, narcotic
analgesic agents carry the risk of depressing respiration and causing nausea and
vomiting, and their repeated use may lead to addiction. It is believed that
non-narcotic analgesics would be beneficial to many patient populations
suffering from severe pain.
Alpha-2 agonists have been broadly used and are highly effective as
veterinary analgesics. Animal data indicate that these agents do not cause
respiratory depression. In addition, their action can be reversed with
appropriate drugs. However, they cause both sedation and hypotension when
administered within the analgesic dose range. Alpha-2 agents have not yet been
developed as analgesics for human use, in part due to concerns regarding
potential deleterious side effects, such as sedation and hypotension. Synaptic
believes that its drug discovery systems for the three human alpha-2 adrenergic
receptor subtypes can be used to discover alpha-2 analgesics which have
significantly fewer deleterious side effects than currently available analgesics
and the effects of which may be rapidly reversed. The Company has identified
alpha-2 agonists with analgesic activity in laboratory animal models and
recently entered into a collaboration with Grunenthal in which this drug
discovery program is being pursued.
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Neuropeptide Y Programs
Neuropeptides are neurotransmitters. Unlike neurotransmitters that are
small molecules, such as norepinephrine and serotonin, neuropeptides are much
larger molecules. The mode of action of neuropeptides, however, resembles that
of small molecule neurotransmitters in that they function by means of an
interaction with specific families of receptors, including families within the G
protein-coupled receptor superfamily. Although current knowledge of
neuropeptides and their receptors is significantly less extensive than knowledge
of small molecule neurotransmitters and their receptors, subtypes have been
shown to exist for several families of neuropeptide receptors.
One focus of the Company in its receptor and drug discovery efforts in
this area has been on the NPY family of receptors. Although the natural ligand
for this family, NPY, is a large molecule, the goal of this drug discovery
program is, as is the case in all of the Company's other drug discovery
programs, to design a small molecule drug. Large peptide-like molecules would
not be stable in the body and thus would have short durations of action and
would not be orally available, thus requiring delivery by injection. To date,
there is evidence for the existence in humans of at least five NPY receptor
subtypes, named Y1, Y2, Y3, Y4 and Y5. However, the discovery and cloning of the
genes for only four of these subtypes have been reported. In 1996 and 1997, the
Company was awarded United States patents covering the genes that code for the
Y2, Y4 and Y5 receptor subtypes and related drug discovery systems. Synaptic has
filed additional patent applications relating to these discoveries in the United
States and in other countries.
The Company is currently conducting one NPY receptor and drug discovery
program in collaboration with Novartis focused on obesity. Another NPY drug
discovery program currently being conducted by the Company focused on pain is
contractually reserved for and may become a joint program as part of the
Company's collaboration with Grunenthal. The Company is seeking a collaborative
partner to work with the Company on its third NPY drug discovery program
involving anxiety and depression. There can be no assurance that the NPY drug
discovery program focused on pain will become a joint program as part of the
Grunenthal collaboration, that the Company will be successful in consummating a
collaborative arrangement with respect to its NPY drug discovery program focused
on anxiety and depression with another company or that the Company or any
collaborative partner will be successful in designing safe and effective NPY
receptor subtype-selective drugs.
Obesity
Animal studies have shown that NPY is the most potent stimulator of
food intake identified to date. As little as one billionth of a gram of NPY
injected directly into the hypothalamus, a key brain area that controls
appetite, causes well-fed, satiated rats to overeat. Repeated administration of
NPY causes continual overeating and obesity.
A Y5 receptor was initially isolated by the Company's scientists from
rat hypothalamus. In laboratory tests, the activity of NPY and related peptides
on the Y5 receptor mirrored the ability of these peptides to stimulate feeding
in animals. As part of its collaboration with the Company, Novartis then showed
that several peptides that activated the Y5 receptor preferentially over other
known NPY receptors increased food intake in rats. Additional studies by
Synaptic and Novartis showed that small molecules that selectively block the Y5
receptor significantly reduce food intake in rats. Based upon these studies,
Synaptic believes that the Y5 receptor is a "feeding" receptor, and that
compounds that are selective for this receptor subtype may lead to new
approaches to the treatment of obesity. The Company and Novartis are thus
focused on discovering and developing a potent and selective Y5 antagonist for
the treatment of obesity. As part of its collaboration with the
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Company, Novartis has an exclusive license to use the Company's NPY receptor
subtype drug discovery systems for the development and commercialization of Y5
antagonists, as well as any other NPY drugs, for the treatment of eating
disorders.
Pain
As part of its efforts to discover non-narcotic drugs for the
alleviation of pain, the Company is conducting a program focused on the design
and development of analgesics that stimulate the Y2 receptor subtype. Direct
injection of NPY into the spinal cord produces a high level of analgesia in
laboratory animals. This effect is believed to be related to NPY's ability to
stimulate Y2 receptors. These receptors control the release of chemical
messengers, such as Substance P, which mediate the transmission of pain
responses. Synaptic believes that orally active small molecule agonists which
would mimic the effects of NPY at the Y2 receptor may offer a new approach to
the alleviation of pain that would not result in the side effects typically
associated with narcotic analgesics. Although the Company and Grunenthal have
not yet initiated a joint program focused on the design and development of
Y2-selective compounds for the alleviation of pain, as part of its collaboration
with Grunenthal, Synaptic has agreed to reserve the Y2 receptor subtype as a
potential target for such drugs exclusively for the collaboration until the
expiration of the collaborative agreement. There can be no assurance, however,
that the Company and Grunenthal will establish a joint drug discovery program
focused on the Y2 receptor subtype.
Anxiety
Anxiety is a sense of irrational fear or dread and is one of the most
frequent psychiatric diagnoses in the United States. There is a variety of
pharmacologic treatments for anxiety, the most commonly used of which belong to
the class of compounds called benzodiazepines, an example of which is Valium(R).
This class of compounds, however, is associated with significant side effects,
including drowsiness, impairment of motor skills, memory loss and the
exacerbation of intoxication by alcohol. Another serious side effect associated
with the benzodiazepines is their potential to be addictive.
Behavioral studies have suggested that NPY can produce anxiety in rats
by activating the Y2 receptor subtype, raising the prospect that a small
molecule Y2 receptor antagonist may provide a novel treatment for anxiety devoid
of the side effects commonly associated with currently available anxiolytics.
Thus, the goal of this drug discovery program is to design compounds that
selectively block the Y2 receptor subtype.
Galanin Program
Galanin is a neurotransmitter which, like NPY, is a neuropeptide.
Galanin is widely distributed in the gastrointestinal tract and the brain.
Pharmacologic studies suggest the existence of multiple receptor subtypes for
this neuropeptide. There are a number of possible therapeutic applications for
drugs that modulate galanin receptors, including the treatment of obesity,
diabetes, Alzheimer's Disease, depression and pain. Most of the research done to
date with galanin has focused on its role in the control of food intake.
Injection of galanin into the brain has been shown to produce an increase in
food intake in satiated rats. As a result, galanin receptor antagonists might
result in a reduction of food intake and may thus be useful in the treatment of
obesity.
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The Company has discovered and cloned genes that code for galanin
receptor subtypes and has filed patent applications relating to these
discoveries. In July 1997, the Company entered into a collaboration with
Warner-Lambert to identify and develop galanin receptor subtype-selective
compounds for a variety of therapeutic applications. The Company and
Warner-Lambert are currently attempting to identify and characterize galanin
receptor subtype-selective compounds. There can be no assurance that the Company
or Warner-Lambert will be successful in identifying or developing any such
compound.
Other Programs
The Company is pursuing additional receptor discovery programs, the
identities of which have not yet been disclosed. These programs involve the use
of the Company's molecular biology resources to clone members of selected G
protein-coupled receptor families in a focused manner. In addition, the Company
is engaged in cloning other G protein-coupled receptors using a genomics
approach. This approach involves the sequencing of genes from various types of
tissues selected by the Company based upon their potential association with a
therapeutic application of interest to the Company. The Company is also
developing technology, and exploring in-licensing opportunities, for the purpose
of obtaining high throughput functional assays for its receptor discoveries. The
Company is also pursuing several drug discovery programs, the applications of
which have not yet been disclosed.
Collaborative and Licensing Arrangements
A key element of the Company's business strategy is to leverage
resources and to generate royalty-based revenues through collaborative and
licensing arrangements with pharmaceutical companies. The Company is currently
collaborating with five pharmaceutical companies pursuant to: (i) the Research,
Option and License Agreement dated as of January 25, 1991, as amended, with
Lilly (the "Lilly Agreement"); (ii) the Research Collaboration and License
Agreement dated as of November 30, 1993, as amended, with Merck (the "Merck
Agreement"); (iii) the Research and License Agreement dated as of August 4,
1994, as amended (the "First Novartis Agreement"), and the Research and License
Agreement dated as of May 31, 1996 (the "Second Novartis Agreement," and
together with the First Novartis Agreement, the "Novartis Agreements"), each
with Novartis; (iv) the Collaborative Research and License Agreement dated as of
July 28, 1997, with Warner-Lambert (the "Warner-Lambert Agreement"); and (v) the
Cooperation Agreement dated as of January 12, 1998, with Grunenthal (the
"Grunenthal Agreement," and together with the Lilly Agreement, the Merck
Agreement, the Novartis Agreements, and the Warner-Lambert Agreement, the
"Collaborative Agreements"). In addition to its collaborative arrangements, in
March 1998, the Company granted to Glaxo pursuant to the Glaxo Agreement a
license under its patent rights, and an option to obtain an additional license
under its patent rights, relating to certain of its technology.
While the Company evaluates on an ongoing basis potential collaborative
and licensing arrangements with pharmaceutical companies, there can be no
assurance that it will be able to enter into acceptable collaborative and
licensing arrangements in the future or that any such arrangement, whether
existing or future, will be successful.
The following summarizes the Company's existing collaborative and
licensing arrangements.
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Lilly Agreement
In January 1991, the Company and Lilly entered into the Lilly Agreement
to promote the discovery and development of serotonin receptor subtype-selective
drugs for the treatment of serotonin-related disorders. The collaboration was
extended in January 1995 for an additional four-year period expiring in December
1998. The Company and Lilly agreed to substantially increase the size of their
collaboration in October 1996.
During the initial four-year term of the collaboration, Lilly provided
the Company with an aggregate of approximately $9.3 million of funding to
support a specified number of the Company's scientists who conducted research as
part of the collaboration. The aggregate amount of research support to be
provided by Lilly during the second four-year period is expected to be
approximately $13.2 million. All development, manufacturing, marketing and sales
of drugs resulting from the collaboration will be conducted by Lilly.
The Company is also entitled to receive from Lilly payments upon the
achievement of certain drug development milestones and royalties on sales of all
drugs developed through the use of the Company's technology. Such royalties will
be payable in respect of sales in any country over the period commencing with
the date of the first commercial sale of a drug and ending with the expiration
of related patent rights in that country.
Lilly paid the Company a one-time fee of $2.5 million for an exclusive
worldwide license to use all but two of the Company's existing serotonin drug
discovery systems for the development and commercialization of drugs that affect
serotonergic transmission. The Company retains the unlimited right to use two of
its existing serotonin drug discovery systems and a limited right to use all of
its other serotonin drug discovery systems in furtherance of its collaboration
with Lilly and for cross-reactivity screening in its and its other
collaborators' non- serotonin drug discovery programs. As part of the
collaboration, Lilly was also granted certain exclusive rights under several of
the Company's patents and patent applications.
Lilly purchased $2.5 million of equity in Synaptic in June 1991, and in
December 1995, Lilly purchased an additional $2.5 million of equity in Synaptic
in its initial public offering pursuant to the terms of the 1995 extension.
Lilly has since sold all of such shares.
Merck Agreement
In November 1993, the Company and Merck entered into the Merck
Agreement pursuant to which they agreed to collaborate in the identification and
development of alpha-1a antagonists, principally for the treatment of BPH. The
initial term of the collaboration was three years. In October 1996, the term of
the collaboration was extended through November 1997 and in November 1997, the
term of the collaboration was again extended for an additional year through
November 1998.
As part of the collaboration, Synaptic granted Merck a nonexclusive
worldwide license under certain other patent rights, including the Company's
alpha adrenergic receptor patents and patent applications to develop and
commercialize alpha-1a antagonists. Synaptic also granted Merck as part of the
collaborationan exclusive worldwide license to use the Company's alpha-1a
selective compounds and know-how, as well as an exclusive worldwide license
under certain of the Company's patent rights, including its BPH use patents
and related patent applications, for the same purposes. However, in March 1998,
Merck granted back to Synaptic such rights as were necessary to enable Synaptic
to grant to Glaxo pursuant to the Glaxo Agreement a limited license under the
BPH use patents and an option to obtain an additional license under the BPH
use patents. The Company
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retained the right to use its alpha adrenergic technology for the development of
alpha adrenergic and other agents that are not alpha-1a antagonists.
In consideration for the licenses granted to Merck, Merck originally
agreed to provide the Company with up to $20.0 million in research funding,
license fees and milestone payments, as well as to pay the Company royalties on
product sales. This amount was subsequently increased by agreement of the
Company and Merck to $22.0 million.
Novartis Agreements
In August 1994, the Company and Novartis entered into the First
Novartis Agreement pursuant to which they agreed to collaborate in the
identification and development of NPY drugs for the treatment of obesity and
eating disorders, as well as cardiovascular disorders. In May 1996, the Company
and Novartis entered into the Second Novartis Agreement and an amendment to the
First Novartis Agreement pursuant to which the term of the collaboration was
extended by one year and the scope of the collaboration was expanded to provide
for research on additional targets for the design of drugs for the treatment of
obesity and eating disorders.
The term of the collaboration under the two Novartis Agreements expires
in August 1998. During the term, Novartis is required to provide the Company
with funding to support a specified number of the Company's scientists dedicated
to work on the collaboration. Through December 31, 1997, Novartis had provided
the Company with an aggregate of approximately $11.2 million in research
support. The aggregate amount of research support which the Company is entitled
to receive from Novartis for the period from January 1, 1998, through the
remainder of the collaboration is $2.0 million.
In July 1995, Novartis made a $1.0 million payment to the Company for
achieving a research milestone. Novartis is also required to make additional
payments to the Company upon the achievement by Novartis of certain drug
development milestones and, subject to certain limitations, to pay the Company
royalties on the sale of drugs developed through the use of the Company's
technology.
At the commencement of the Company's collaboration with Novartis,
Novartis made a $7.5 million equity investment in the Company. In December 1995,
as part of the Company's initial public offering, Novartis made an additional
$2.0 million equity investment in the Company. As of December 31, 1997, the
695,715 shares of Common Stock acquired by Novartis as a result of these
investments were held by Novartis Produkte AG, an affiliate of Novartis. Such
shares represented 6.6% of the outstanding shares of Common Stock of the Company
at that date.
As part of the collaboration, Synaptic granted Novartis an exclusive
worldwide license to use the Company's NPY receptor subtype drug discovery
systems for the development and commercialization of NPY receptor
subtype-selective drugs for the treatment of obesity and eating disorders, as
well as cardiovascular disorders. Synaptic also granted Novartis an exclusive
worldwide license to use any proprietary technology of the Company that relates
to the subject matter of the Second Novartis Agreement to design drugs for the
treatment of obesity and eating disorders. In addition, the Company granted
Novartis certain rights under several of the Company's patents and patent
applications. The Company retained the right to use its NPY receptor subtype
drug discovery systems and other technology for all other therapeutic
applications, although Novartis has a right of first negotiation in the event
the Company determines to seek a collaborative partner or licensee for any such
other indication. Novartis has declined its right of first negotiation with
respect to the use of the Company's NPY receptor subtype drug discovery systems
and other technology for the discovery and
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development of Y2 receptor subtype-selective drugs for the treatment of central
nervous system disorders and, as a result, the Company has the right to use the
technology, independently or with third parties, for such purpose.
Warner-Lambert Agreement
In July 1997, the Company and Warner-Lambert entered into the
Warner-Lambert Agreement pursuant to which they agreed to collaborate in the
identification and development of galanin drugs for a variety of therapeutic
applications. As part of the collaboration, Warner-Lambert received an exclusive
worldwide license to use the Company's galanin receptor subtype drug discovery
systems for the development and commercialization of galanin receptor
subtype-selective drugs for all therapeutic applications.
The collaboration involves two potential stages. During the first
stage, which commenced in October 1997 and will last up to 18 months, each
partner will fund its own research and use Synaptic's galanin receptor subtype
drug discovery systems to attempt to identify and characterize drug candidates.
The second stage of the collaboration, which will last for three years, will
commence at such time as the partners identify galanin compounds that are active
in animal models. During this stage, Warner-Lambert and Synaptic will attempt to
develop drug candidates identified during the first stage, as well as attempt to
identify additional drug candidates. Upon the commencement of the second stage,
Synaptic is entitled to receive research funding from Warner- Lambert, as well
as to require Warner-Lambert to purchase equity in Synaptic. In addition,
Synaptic is entitled to receive drug development milestones and royalties on
sales of all drugs identified through the collaboration. There can be no
assurance, however, that any suitable galanin compound will be identified which
would trigger commencement of the second stage of the collaboration or that,
even assuming the commencement of such stage, a product will result from this
collaboration.
Grunenthal Agreement
In January 1998, the Company and Grunenthal entered into the Grunenthal
Agreement pursuant to which they agreed to collaborate in the identification and
development of drugs for the alleviation of pain. As part of the collaboration,
the companies will jointly select receptors that may play a role in the
alleviation of pain and attempt to identify compounds that are active at the
selected receptors for further study in Grunenthal's animal model systems. The
selected receptors may be receptors known to be implicated in the transmission
or inhibition of pain or receptors whose function has not yet been elucidated
but which are cloned from tissues known to be so implicated. The companies are
responsible for their own expenses incurred during the research stage of any
project undertaken as part of the collaboration but will each be responsible for
50% of all development costs incurred as part of the project with respect to any
resulting drug candidates up to the commencement of Phase III clinical trials.
Synaptic will retain manufacturing and marketing rights in the United States,
Canada and Mexico with respect to any drug candidates resulting from the
collaboration, while Grunenthal will retain manufacturing and marketing rights
in Europe, Central America (other than Mexico) and South America with respect to
any such candidates. The two companies will share these rights in all other
countries. With respect to each country in its own territories and in the shared
territories in which it desires to market a drug candidate, each of Synaptic and
Grunenthal will be responsible for conducting Phase III clinical trials, if
required, for obtaining any necessary regulatory approval, and for all
associated costs.
As part of the collaboration, Synaptic agreed to make available to
Grunenthal for evaluation all receptors cloned by Synaptic that may be
implicated in pain (to the extent not already licensed exclusively to a third
party) and not to pursue such receptors, independently or with any third party,
as targets of potential drugs for the
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alleviation of pain during the evaluation period applicable to the receptors or
during the period over which activities involving any such receptor are being
jointly conducted with Grunenthal.
Glaxo Agreement
In March 1998, the Company and Glaxo entered into the Glaxo Agreement
pursuant to which the Company granted Glaxo (i) a nonexclusive license under the
Company's alpha 1 adrenergic receptor patents to develop and sell alpha-1a
selective compounds for therapeutic applications other than the treatment of BPH
and (ii) until May 22, 1999, a nonexclusive license under its alpha 1 adrenergic
receptor patents and its BPH use patents to develop but not to commercialize
alpha-1a selective compounds for the treatment of BPH. In addition, the Company
granted Glaxo an option to obtain a nonexclusive license under its alpha 1
adrenergic receptor patents and its BPH use patents to develop and commercialize
alpha-1a selective compounds for the treatment of BPH. Such option is
exercisable by Glaxo only until May 22, 1999, upon the payment to Synaptic of an
additional amount. As consideration for the foregoing licenses and option, Glaxo
made a $2,000,000 payment to Synaptic. Synaptic is also entitled to receive
royalties on sales of all alpha-1a selective drugs sold by Glaxo so long as
Synaptic has an issued patent relating to an alpha 1 adrenergic receptor subtype
in at least one major market country, as well as royalties on sales of any
alpha-1a antagonist for the treatment of BPH in any country in which Synaptic
has an issued BPH use patent.
Other Agreements
The Company's practice is to meet with pharmaceutical and biotechnology
companies on an on-going basis to discuss the possibility of collaborating with
them on projects of mutual interest, which may include the Company's existing
research programs that are not yet the subject of collaborations. In addition,
the Company continually evaluates opportunities for out-licensing its technology
on a collaborative basis or on a noncollaborative basis, in-licensing
third-party technologies and/or cross-licensing technology to maximally leverage
resources. At present, the Company is in the early stages of discussing with
other companies the possibility of a number of such arrangements. There can be
no assurance that the Company will be successful in consummating any such
arrangement.
In February 1996, the Company and The DuPont Merck Pharmaceutical
Company ("DuPont Merck") entered into an agreement pursuant to which the Company
granted DuPont Merck a nonexclusive license to use certain of the Company's
alpha adrenergic drug discovery systems for the development of alpha adrenergic
subtype-selective drugs. The license granted to DuPont Merck expired in February
1998.
Patents, Proprietary Technology and Trade Secrets
The Company's success depends, in part, on its ability to establish,
protect and enforce its proprietary rights relating to its technology. The
Company's policy is to seek, when appropriate, protection for its gene
discoveries, compound discoveries and other proprietary technology by filing
patent applications in the United States and other countries. The Company has
filed numerous patent applications both in the United States and in other
countries covering its inventions. As of March 2, 1998, the Company had been
issued United States patents relating to the genes that code for the human
serotonin 1B, serotonin 1D, serotonin 1E, serotonin 1F, serotonin 2A, alpha-1a
adrenergic, alpha-2b adrenergic, NPY2, NPY4 and NPY5 receptor subtypes and
related drug discovery systems, as well as a United States patent covering the
rat serotonin 4a receptor subtype and related drug discovery systems. These
patents expire at various times from 2008 to 2015. Several United States
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patent applications relating to the Company's receptor gene discoveries were
pending. In addition, several corresponding patents had been issued in other
countries and additional corresponding patent applications had been filed in
other countries.
In April 1995, the Company was issued its first functional use patent
in the United States. This patent covers the use of selective alpha-1a
antagonists for the treatment of BPH. In addition, in November 1996, the United
States Patent and Trademark Office issued the Company an additional patent
relating to the same subject matter. These patents expire in 2012. Additional
related patent applications are on file in the United States. In addition,
corresponding patents have been issued in other countries and additional
corresponding patent applications have been filed in other countries.
The Company has also filed patent applications in the United States and
in other countries covering its neurotransmitter transporter discoveries.
Whereas receptors are protein molecules which bind to and are activated by
certain ligands, transporters are protein molecules which serve to terminate the
action of certain ligands by carrying them back into the cells from which they
are released. As of March 2, 1998, the Company had been issued United States
patents covering three of these transporter discoveries. The Company is no
longer actively working on its transporter program. However, the transporter
technology, insofar as it may be used to design drugs for the alleviation of
pain, has been reserved exclusively for evaluation by Grunenthal as the
potential focus of a joint program between the Company and Grunenthal pursuant
to the Grunenthal Agreement. In addition, the Company is seeking to license its
transporter technology for other uses to one or more other companies.
Additional patent applications covering the Company's compound
discoveries and other inventions have been filed in the United States and in
other countries and the Company intends to file additional patent applications
in the future.
The Company has granted certain rights under several of its patents and
patent applications to Lilly, Merck, Novartis, Warner-Lambert, Grunenthal and
Glaxo.
Patent law as it relates to inventions in the biotechnology field is
still evolving, and involves complex legal and factual questions for which legal
principles are not firmly established. Accordingly, there can be no assurance
that patents will be granted with respect to any of the Company's patent
applications currently pending in the United States or in other countries, or
with respect to applications filed by the Company in the future. The failure by
the Company to receive patents pursuant to the applications referred to herein
and any future applications could have a material adverse effect on the Company.
There is no clear policy involving the breadth of claims allowed in
patents or the degree of protection afforded thereunder. Accordingly, no firm
predictions can be made regarding the breadth or enforceability of claims
allowed in the patents that have been issued to the Company or in patents that
may be issued to the Company in the future and there can be no assurance that
claims in the Company's patents, either as initially allowed by the United
States Patent and Trademark Office or any of its non-United States counterparts
or as subsequently interpreted by courts inside or outside the United States,
will be sufficiently broad to protect the Company's proprietary rights.
Also, there can be no assurance that the Company's patents or patent
applications will not be challenged by way of interference proceedings or
opposed by third parties or that the Company will not be required to participate
in interference proceedings or oppose the patents or patent applications of
third parties in order to protect its rights. Interference and opposition
proceedings can be expensive to prosecute and defend. As of March 2, 1998, one
of the Company's patent applications on file outside the United States was the
subject of an
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opposition filed by a pharmaceutical company and one of the Company's patent
applications on file in the United States was the subject of an interference
proceeding involving a patent application of a third party. In addition, the
Company is seeking to provoke an interference by the United States Patent and
Trademark Office between another of its patent applications and an issued patent
of a third party. The Company also believes that the United States Patent and
Trademark Office may declare an interference between one of its other patent
applications and patent a application of a third party. The Company recently
settled an interference proceeding involving an issued United States patent of a
third party and one of the Company's patent applications on file in the United
States. The third party conceded as part of the settlement that the subject
matter of Synaptic's patent application had priority over the subject matter of
its patent. As a consequence, Synaptic will be issued a patent covering the
subject matter and the third party's patent will be revoked. There can be no
assurance that the outcome of the pending opposition proceeding, the other
interference proceeding and the anticipated
interference proceedings will be favorable to the Company. In the event that the
outcome of the opposition proceeding were unfavorable to the Company, the
Company would not be issued the patent in the country in which the proceeding is
taking place and would not be able to prevent third parties from practicing the
subject matter of the opposed application in that country. Moreover, the
opponent may, whether or not the outcome of the opposition proceeding is
favorable to the Company, seek to file similar oppositions in other countries.
In the event that the outcome of the interference proceedings were unfavorable
to the Company, the Company might not be able to practice the subject matter of
the relevant patent applications in the United States. Accordingly, an
unfavorable outcome in any such proceeding would have an adverse effect on the
Company. Even if the eventual outcome of the pending opposition and interference
proceedings and the anticipated interference proceedings were favorable to the
Company, the Company's participation in them could result in substantial cost to
the Company.
Further, no assurance can be given that patents issued to the Company
will not be infringed, invalidated or circumvented by others, or that the rights
granted thereunder will be commercially valuable or will provide competitive
advantages to the Company and its present or future collaborative partners or
licensees. Moreover, because patent applications in the United States are
maintained in secrecy until patents issue, because patent applications in
certain other countries generally are not published until more than eighteen
months after they are filed and because publication of technological
developments in the scientific or patent literature often lags behind the date
of such developments, the Company cannot be certain that it was the first to
invent the subject matter covered by its patents or patent applications or that
it was the first to file patent applications for such inventions. The field of
gene discovery has become intensely competitive. A number of pharmaceutical
companies, biotechnology companies, universities and research institutions have
significantly expanded their gene discovery efforts in recent years and have
filed patent applications or received patents covering their gene discoveries.
Some of these applications or patents may be competitive with the Company's
applications or conflict in certain respects with claims made under the
Company's applications. There can be no assurance that, in the event of any
conflict, the Company will be in a priority position with respect to
inventorship on any of these applications.
The commercial success of the Company also depends on the Company's
ability to operate without infringing patents and proprietary rights of third
parties. The Company is aware of a large number of patents and patent
applications of third parties that contain claims to genes that code for G
protein- coupled receptors and/or compounds that interact with G protein-coupled
receptors. Patents issued to others may preclude the Company from using or
licensing its technology or may preclude the Company or its collaborative
partners and licensees from commercializing drugs developed with the use of the
Company's technology. The Company has acquired a license to use certain
technologies covered by a patent owned by Columbia University. The Columbia
University license is a worldwide non-exclusive license to manufacture, use,
sell and sublicense drugs derived from the use of certain recombinant DNA
technology. In consideration for such license, the Company has agreed to pay
royalties on sales of drugs developed through the use of such license. The term
of the license extends until the expiration of the last to expire of the patent
rights covered by the license. The Company may be required to
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obtain additional licenses to patents or other proprietary rights of other
parties in order to pursue its own technologies. No assurance can be given that
any such additional licenses would be made available on terms acceptable to the
Company, if at all. The failure to obtain such licenses could result in delays
in the Company's or its collaborative partners' activities, including the
development, manufacture or sale of drugs requiring such licenses, or preclude
such development, manufacture or sale.
In some cases, litigation or other proceedings may be necessary to
assert infringement claims against others, to defend against claims of
infringement, to enforce patents issued to the Company, to protect trade
secrets, know-how or other intellectual property rights owned by the Company, or
to determine the scope and validity of the proprietary rights of third parties.
Such litigation could result in substantial costs to and diversion of resources
by the Company and could have a material adverse effect on the Company. There
can be no assurance that any of the Company's patents would ultimately be held
valid or that efforts to defend any of its patents, trade secrets, know-how or
other intellectual property rights would be successful. An adverse outcome in
any such litigation or proceeding could subject the Company to significant
liabilities, require the Company to cease using the subject technology or
require the Company to license the subject technology from the third party, all
of which could have a material adverse effect on the Company's business.
In addition to patent protection, the Company relies upon trade
secrets, proprietary know-how and continuing technological advances to develop
and maintain its competitive position. To maintain the confidentiality of its
trade secrets and proprietary information, the Company requires its employees,
consultants and collaborative partners to execute confidentiality agreements
upon the commencement of their relationships with the Company. In the case of
employees, the agreements also provide that all inventions resulting from work
performed by them while in the employ of the Company will be the exclusive
property of the Company. There can be no assurance, however, that these
agreements will not be breached, that the Company would have adequate remedies
in the event of any such breach or that the Company's trade secrets or
proprietary information will not otherwise become known or developed
independently by others.
Competition
The Company operates in a field in which new developments occur and are
expected to continue to occur at a rapid pace. Competition from biotechnology
and pharmaceutical companies, joint ventures, academic and other research
institutions and others is intense and is expected to increase. Although the
Company believes that the elements of its human receptor-targeted drug design
technology and the manner in which the Company has integrated these elements are
proprietary to the Company, one or more of such elements are currently employed
by many other pharmaceutical and biotechnology companies in their drug discovery
efforts. Moreover, there are other companies with drug discovery programs at
least some of the objectives of which are the same as or similar to those of the
Company. The Company is aware of many pharmaceutical and biotechnology companies
that are engaged in efforts to develop compounds that interact with G
protein-coupled receptors subtypes, including receptor subtypes with which the
Company is working. Many of the Company's competitors are large biotechnology
companies and multinational pharmaceutical companies who may employ in such
activities greater financial and other resources, including larger research and
development staffs and more extensive marketing and manufacturing organizations,
than the Company or its collaborative partners.
The Company also expects to encounter significant competition with
respect to the drugs that it and its collaborative partners and licensees plan
to develop. Companies that complete clinical trials, obtain required regulatory
approvals and commence commercial sales of their drugs before their competitors
may achieve a significant competitive advantage. In order to compete
successfully, the Company's goal is to obtain patent
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protection for its gene discoveries and drug discovery systems and to make these
systems available to pharmaceutical companies through collaborative and
licensing arrangements for use in discovering drugs for major markets which have
historically been difficult to address using the traditional approach to drug
discovery. There can be no assurance, however, that the Company will obtain
patents covering its technology that protect it against competitors. Moreover,
there can be no assurance that the Company's competitors will not succeed in
developing technologies that circumvent the Company's technology or that such
competitors will not succeed in developing technologies and drugs that are more
effective than those developed by the Company and its collaborative partners and
licensees or that would render technology or drugs of the Company and its
collaborators and licensees less competitive or obsolete. In addition, there can
be no assurance that competitors of the Company will not obtain regulatory
approvals of their drugs more rapidly than the Company and its collaborative
partners and licensees, thereby rendering the Company's and its collaborative
partners' and licensees' drugs noncompetitive or obsolete. Moreover, there can
be no assurance that the Company's competitors will not obtain patent protection
or other intellectual property rights that would limit the Company's or its
collaborative partners' and licensees' ability to use the Company's technology
or commercialize its or their drugs.
Government Regulation
The development, manufacturing and marketing of drugs developed through
the use of the Company's technology are subject to regulation by numerous
Federal, state and local governmental authorities in the United States, the
principal one of which is the FDA, and by similar agencies in other countries
(each of such Federal, state, local and other authorities and agencies, a
"Regulatory Agency"). Regulatory Agencies impose mandatory procedures and
standards for the conduct of certain preclinical testing and clinical trials and
the production and marketing of drugs for human therapeutic use. Product
development and approval of a new drug are likely to take many years and involve
the expenditure of substantial resources.
The steps required by the FDA before new drugs may be marketed in the
United States include: (i) preclinical studies; (ii) the submission to the FDA
of a request for authorization to conduct clinical trials on an investigational
new drug (an "IND"); (iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug for its intended use; (iv)
submission to the FDA of a new drug application (an "NDA"); and (v) review and
approval of the NDA by the FDA.
In the United States, preclinical testing includes both in vitro and in
vivo laboratory evaluation and characterization of the safety and efficacy of a
drug and its formulation. Laboratories involved in preclinical testing must
comply with FDA regulations regarding Good Laboratory Practices. Preclinical
testing results are submitted to the FDA as part of the IND and are reviewed by
the FDA prior to the commencement of human clinical trials. Unless the FDA
objects to an IND, the IND will become effective 30 days following its receipt
by the FDA. There can be no assurance that submission of an IND will result in
the commencement of human clinical trials.
Clinical trials, which involve the administration of the
investigational drug to healthy volunteers or to patients under the supervision
of a qualified principal investigator, are typically conducted in three
sequential phases, although the phases may overlap with one another. Clinical
trials must be conducted in accordance with Good Clinical Practices under
protocols that detail the objectives of the study, the parameters to be used to
monitor safety and the efficacy criteria to be evaluated. Each protocol must be
submitted to the FDA as part of the IND. Further, each clinical study must be
conducted under the auspices of an independent Institutional Review Board (the
"IRB") at the institution where the study will be conducted. The IRB will
consider, among other
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things, ethical factors, the safety of human subjects and the possible liability
of the institution. Compounds must be formulated according to the FDA's GMP.
Phase I clinical trials represent the initial administration of the
investigational drug to a small group of healthy human subjects or, more rarely,
to a group of selected patients with the targeted disease or disorder. The goal
of Phase I clinical trials is typically to test for safety (adverse effects),
dose tolerance, absorption, bio- distribution, metabolism, excretion and
clinical pharmacology and, if possible, to gain early evidence regarding
efficacy.
Phase II clinical trials involve a small sample of the actual intended
patient population and seek to assess the efficacy of the drug for specific
targeted indications, to determine dose tolerance and the optimal dose range and
to gather additional information relating to safety and potential adverse
effects.
Once an investigational drug is found to have some efficacy and an
acceptable safety profile in the targeted patient population, Phase III clinical
trials are initiated to establish further clinical safety and efficacy of the
investigational drug in a broader sample of the general patient population at
geographically dispersed study sites in order to determine the overall
risk-benefit ratio of the drug and to provide an adequate basis for all
physician labeling. The results of the research and product development,
manufacturing, preclinical testing, clinical trials and related information are
submitted to the FDA in the form of an NDA for approval of the marketing and
shipment of the drug.
Timetables for the various phases of clinical trials and NDA approval
cannot be predicted with any certainty. The Company, its collaborative partners
or licensees or the FDA may suspend clinical trials at any time if it is
believed that individuals participating in such trials are being exposed to
unacceptable health risks. Even assuming that clinical trials are completed and
that an NDA is submitted to the FDA, there can be no assurance that the NDA will
be reviewed by the FDA in a timely manner or that once reviewed, the NDA will be
approved. The approval process is affected by a number of factors, including the
severity of the targeted indications, the availability of alternative treatments
and the risks and benefits demonstrated in clinical trials. The FDA may deny an
NDA if applicable regulatory criteria are not satisfied, or may require
additional testing or information with respect to the investigational drug. Data
obtained from preclinical and clinical activities are susceptible to varying
interpretations which could also delay, limit or prevent Regulatory Agency
approval. Even if initial FDA approval is obtained, further studies, including
post-market studies, may be required in order to provide additional data on
safety and will be required in order to gain approval for the use of a product
as a treatment for clinical indications other than those for which the product
was initially tested. The FDA will also require post-market reporting and may
require surveillance programs to monitor the side effects of the drug. Results
of post-marketing programs may limit or expand the further marketing of the
drug. Further, if there are any modifications to the drug, including changes in
indication, manufacturing process or labeling, an NDA supplement may be required
to be submitted to the FDA. Finally, delays or rejections may be encountered
based upon changes in Regulatory Agency policy during the period of drug
development and/or the period of review of any application for Regulatory Agency
approval for a compound. Moreover, because most of the Company's collaborative
partners are generally responsible for preclinical testing, clinical trials,
regulatory approvals, manufacturing and commercialization of drugs, the ability
to obtain and the timing of regulatory approvals are not within the control of
the Company. There can be no assurance that the regulatory framework described
above will not change or that additional regulations will not arise that may
affect approval of a potential drug.
Each manufacturing establishment for new drugs is required to receive
some form of approval by the FDA. Among the conditions for such approval is the
requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to GMP, which must be followed at all times. In
complying with
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standards set forth in these regulations, manufacturers must continue to expend
time, monies and effort in the area of production and quality control to ensure
full technical compliance. Manufacturing establishments, both foreign and
domestic, are also subject to inspections by or under the authority of the FDA
and may be subject to inspections by foreign and other Federal, state or local
agencies.
Prior to the commencement of marketing a product in other countries,
approval by the Regulatory Agencies in such countries is required, regardless of
whether FDA approval has been obtained for such product. The requirements
governing the conduct of clinical trials and product approvals vary widely from
country to country, and the time required for approval may be longer or shorter
than the time required for FDA approval. Although there are some procedures for
unified filings for certain European countries, in general, each country has its
own procedures and requirements.
Delays in obtaining Regulatory Agency approvals could adversely affect
the marketing of any drugs developed by the Company or its collaborative
partners or licensees, impose costly procedures upon the Company's or its
collaborative partners' or licensees' activities, diminish any competitive
advantages that the Company or its collaborative partners or licensees may
attain and adversely affect the Company's ability to receive revenues or
royalties. There can be no assurance that, even after such time and
expenditures, Regulatory Agency approvals will be obtained for any compounds
developed by, in collaboration with or pursuant to licenses from the Company.
Moreover, even if Regulatory Agency approval for a compound is granted, such
approval may entail limitations on the indicated uses for which it may be
marketed. Further, approved drugs and their manufacturers are subject to
continual review, and discovery of previously unknown problems with a drug or
its manufacturer may result in restrictions on such drug or manufacturer,
including withdrawal of the drug from the market. Regulatory Agency approval of
prices is required in many countries and may be required for the marketing of
any drug developed by the Company or its collaborative partners or licensees.
As with many biotechnology and pharmaceutical companies, the Company's
activities involve the use of radioactive compounds and hazardous materials. The
Company is subject to local, state and Federal laws and regulations relating to
occupational safety, laboratory practices, the use, handling and disposition of
radioactive materials, environmental protection and hazardous substance control.
Although the Company believes that its safety procedures for handling and
disposing of radioactive compounds and other hazardous materials used in its
research and development activities comply with the standards prescribed by
Federal, state and local regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of any
such accident, the Company could be held liable for any damages that result and
any such liability could exceed the resources of the Company.
Employees
As of March 2, 1998, the Company had 125 full-time employees, 42 of
whom hold Ph.D. or M.D. degrees. Of the Company's full-time employees, 108 were
engaged directly in scientific research and 17 were engaged in general and
administrative functions. The Company's scientific staff members have
diversified experience and expertise in molecular and cell biology,
biochemistry, molecular pharmacology, medicinal, structural, combinatorial and
computer-assisted chemistry and information systems.
All employees have entered into agreements with the Company pursuant to
which they are prohibited from disclosing to third parties the Company's
proprietary information and assign to the Company all rights to inventions made
by them during their employment with the Company.
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The Company's employees are not covered by a collective bargaining
agreement, and the Company believes that its relationship with its employees is
good.
Item 2. Properties
The Company leases laboratory and office space in a facility at 215
College Road in Paramus, New Jersey. The Company recently entered into an
amendment to its lease which extended the term through the year 2015 and
increased its leased space to up to 74,000 square feet. The Company is currently
converting a portion of its space into additional research laboratories and may
renovate other portions of its space in 1998 for additional laboratories and
offices. The Company believes that the space it currently leases is adequate to
accommodate the anticipated administrative and research needs of the Company for
the foreseeable future.
Item 3. Legal Proceedings
Other than as described in Item 1 above under the caption "Patents,
Proprietary Technology and Trade Secrets," the Company is not a party to any
legal proceedings.
Item 4. Submission of Matters to a Vote of Securityholders
None.
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Part II
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
The Common Stock of Synaptic Pharmaceutical Corporation has traded on
the National Market tier of The Nasdaq Stock Market under the symbol SNAP since
its initial public offering on December 13, 1995. As of March 2, 1998, there
were approximately 2,300 holders of record of the Company's Common Stock. No
dividends have been paid on the Common Stock to date, and the Company does not
currently intend to declare or pay dividends for the foreseeable future.
The following tables set forth the high and low last trade prices for
the Common Stock as reported by The Nasdaq Stock Market for the period from
January 1, 1996, through December 31, 1997.
1997 Fiscal Year
High Low
---- ----
1st Quarter 1997 15 1/2 12 1/4
2nd Quarter 1997 14 10 3/8
3rd Quarter 1997 15 5/8 12 3/8
4th Quarter 1997 16 3/4 10
1996 Fiscal Year
High Low
---- ----
1st Quarter 1996 20 12 1/2
2nd Quarter 1996 17 3/4 12 1/4
3rd Quarter 1996 14 9 1/2
4th Quarter 1996 13 10 1/2
During the quarter ended December 31, 1997, the Company did not make
any sales of its securities, other than sales that were registered under the
Securities Act of 1933, as amended (the "Securities Act").
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
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("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 reports
filed pursuant to the requirements under the Exchange Act 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 December 31, 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 $ 282,000
Purchase and installation of machinery and equipment $ 3,252,000
Working capital used to fund operations $ 13,262,000
Except for payments described in the following sentence, the cumulative
application of the net offering proceeds listed above represents 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 December 31, 1997, the status of proceeds pending final application
are as follows:
Temporary investment of proceeds in marketable securities $ 8,398,000
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Item 6. Selected Financial Data
The following table presents selected information relating to the
financial condition and results of operations of the Company for the past five
years. The following data should be read in conjunction with the Company's
financial statements.
(In thousands, except per share information)
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Total revenues $ 10,307 $ 9,481 $ 7,977 $ 5,043 $ 8,794
Total expenses $ 17,853 $ 14,319 $ 12,078 $ 11,221 $ 10,753
Other income, net $ 2,200 $ 2,205 $ 734 $ 651 $ 409
Net loss $ (5,346) $ (2,633) $ (3,367) $ (5,527) $ (1,550)
Basic and diluted net
loss per share $ (0.66) $ (0.35) $ (4.76) -- --
Total assets $ 69,402 $ 40,355 $ 40,913 $ 20,024 $ 19,754
Long term debt -- -- $ 107 $ 259 $ 383
Convertible redeemable
preferred stock -- -- -- $ 36,199 $ 28,906
Accumulated deficit $(29,316) $(23,970) $(21,337) $(17,970) $(12,443)
Stockholders'
equity (deficiency) $ 67,704 $ 39,040 $ 38,669 $(17,592) $(11,929)
Item 7. 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. During 1997, the
Company was engaged in collaborations with four pharmaceutical companies: Eli
Lilly and Company, Merck & Co., Inc., Novartis Pharma AG and the Warner-Lambert
Company. Since inception, the Company has financed its operations primarily
through the sale of stock and through funds provided by its collaborative
partners Lilly, Merck and Novartis under collaborative agreements. The Company
also granted a nonexclusive license to use certain of its technology to DuPont
Merck which license expired on February 5, 1998.
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
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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 $29,316,000 at December 31, 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 Fiscal Years Ended December 31, 1997, 1996 and 1995
Revenues. The Company recognized revenue of $10,307,000, $9,481,000 and
$7,977,000 for the fiscal years of 1997, 1996 and 1995, respectively. The
increase of $826,000 from 1996 to 1997 was attributable primarily to: an
increase in contract revenue of $2,842,000 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 receives research 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.
The increase of $1,504,000 from 1995 to 1996 was attributable primarily
to the recognition of the $2,000,000 of license revenue from one of the
Company's collaborative partners and an increase of $231,000 of grant revenue
over the comparable period in 1995, both of which were partially offset by a
decrease of contract revenue of $727,000. This decrease in contract revenue was
attributable primarily to the receipt in 1995 of a one-time $1,000,000 payment
from one of the Company's collaborative partners for the achievement of a
specific milestone that was partially offset by increases in 1996 in the rates
charged to the Company's collaborative partners per full-time equivalent
scientist.
Research and Development Expenses. The Company incurred research and
development expenses of $13,781,000, $11,337,000 and $9,863,000 for the fiscal
years of 1997, 1996 and 1995, respectively. The increase of $2,444,000, or 22%,
from 1996 to 1997 was attributable primarily to: an increase of $1,274,000 in
compensation expense resulting from an increase in average headcount
year-to-year, annual salary and bonus increases and an associated increase in
fringe benefit expenses; an increase of $726,000 in research supply costs; and
an increase of $397,000 in facility related costs.
The increase of $1,474,000, or 15%, from 1995 to 1996 was attributable
primarily to: an increase of $656,000 in compensation expense resulting from an
increase in average headcount year-to-year, annual salary and bonus increases
and an associated increase in fringe benefit expense, as well as an increase in
amortization of deferred compensation; an increase of $482,000 in research
supply costs; an increase of $112,000 in research
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equipment costs related to research funded by government grants; $92,000 in
increased depreciation expense; and an increase of $53,000 in software license
fees.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $4,072,000, $2,982,000 and $2,215,000 for the fiscal
years of 1997, 1996 and 1995, respectively. The increase of $1,090,000, or 37%,
from 1996 to 1997 was attributable primarily to an increase in patent and patent
related expenses resulting from increased patent related activities and the
expensing of all patent and patent application costs as incurred, effective
October 1, 1996.
The increase of $767,000, or 35%, from 1995 to 1996 was attributable
primarily to: an increase of $292,000 in expenses associated with being a public
company; an increase of $193,000 in compensation expense resulting from an
increase in average headcount and annual salary and bonus increases and an
associated increase in fringe benefit expense; an increase of $171,000 in patent
and patent related costs; and an increase of $64,000 in certain supply and
computer related expenses.
Other Income, Net. The Company received other income, net of interest
expense, of $2,200,000, $2,205,000 and $734,000 for the fiscal years of 1997,
1996 and 1995, respectively.
The increase of $1,471,000 from 1995 to 1996 in other income, net of
interest expense, was primarily attributable to an increase in interest income
as a result of an increase in the average cash, cash equivalent and marketable
security balance resulting from the Company's initial public offering in
December 1995.
Net Loss and Net Loss Per Share. The net loss incurred by the Company
was $5,346,000 ($0.66 per share), $2,633,000 ($0.35 per share) and $3,367,000
($4.76 per share) for the fiscal years of 1997, 1996 and 1995, respectively. The
increase of $2,713,000 in net loss from 1996 to 1997 was primarily attributable
to the recognition during 1996 of $2,000,000 of non-recurring license revenue
offset by higher total expenses.
The decrease of $734,000 in net loss from 1995 to 1996 was attributable
primarily to: the increase of $2,000,000 of non-recurring license revenue and
other income, offset by higher total expenses.
Operating Trends. It is expected that research funding from existing
collaborations will decrease from $9,785,000 in 1997 to $7,100,000 in 1998. It
is also expected that operating expenses will increase in order to further
support existing collaborations and internal research efforts. Operating
expenses are expected to continue to grow, at a minimum, consistent with
historical trends. Patent related expenditures are expected to grow at a rate
that is faster than the historical operating expense growth rate.
Other income, net is expected to decline in 1998 and 1999 as existing
funds are utilized to support the Company's operations.
Property and equipment costs are expected to continue to increase as
the Company's currently underutilized space is converted into laboratory space.
Management has performed a review of the computer hardware and software
components that the Company currently utilizes in order to determine the impact
that the year 2000 issue will have on the Company's future operating results,
future financial condition and on the future operations of its business. Based
on the results of the review, management has concluded that the impact the year
2000 issue will have on the aforementioned will be immaterial.
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The Company does not believe that inflation has had a material impact
on its results of operations.
Liquidity and Capital Resources
At December 31, 1997 and 1996, cash, cash equivalents and marketable
securities aggregated $62,100,000 and $34,684,000, respectively. The increase of
$27,416,000 was attributable primarily to the receipt of $33,822,000 in net
proceeds raised in a public offering offset by cash used in operations of
$4,310,000 and capital expenditures of $2,888,000.
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
December 31, 1997, the Company had received: $96,300,000 from the sale of its
stock; $47,200,000 in licensing fees, research funding and milestone payments
under its collaborative agreements; $3,400,000 in SBIR grants; and $6,600,000 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 December 31, 1997, the Company was involved in collaborative
arrangements with Lilly, Merck, Novartis and Warner-Lambert. Lilly, Merck and
Novartis provided research funding to the Company during 1997 and 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 1998 is $7,100,000. 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, 1998. Research funding under
the Novartis agreement is scheduled to expire on August 3, 1998.
At December 31, 1997, the Company had invested an aggregate of
$8,447,000 in property and equipment. The Company continues to convert currently
underutilized space into laboratory facilities beyond the level which existed at
December 31, 1997.
In November 1997, the Company extended its lease agreement, which was
due to expire on December 31, 1999, until December 31, 2015. The minimum annual
payment under the lease is currently $644,000. A standby letter of credit for
$580,000 has been issued to the Company's landlord as a security deposit and is
secured by investment securities of the Company which are, to the extent of
$600,000, recorded in the balance sheet as "Restricted Cash." This standby
letter of credit must be renewed annually during the life of the lease.
At December 31, 1997, the Company had $62,100,000 in cash, cash
equivalents and marketable securities. The Company intends to utilize these
funds primarily to conduct its current and future research programs, for general
corporate purposes and to make leasehold improvements to its facilities beyond
the level which existed on December 31, 1997. It is anticipated that the Company
will continue to incur significant operating losses for a number of years and
will require the use of cash to finance its capital programs. The Company
believes that its cash on hand, together with the funds that it expects to
receive from its collaborative partners, interest income and funds received
under SBIR grants, will be sufficient to fund an increased operating expense
level and an increased level of capital spending through the year 2000. The
Company expects to continue to incur operating losses for a number of years.
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As of December 31, 1997, the Company had net operating loss
carryforwards of approximately $25,000,000 for Federal income tax purposes that
will expire principally in the years 2002 through 2012. 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 and 1997,
the utilization of $25,000,000 of net operating loss carryforwards is subject to
annual limitation. The utilization of the research and development credits is
similarly limited.
Disclosure Regarding Forward-Looking Statements
This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
forward-looking statements include, but are not limited to, those relating to
future cash and spending plans, amounts of future research funding,
patent-related plans, additional drug discovery programs, the effectiveness,
efficacy, or other results of any of the Company's technology or drugs, 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 "anticipate,"
"estimate," "expect," "may," "project," and similar expressions are intended to
be among the statements that identify forward-looking statements. Such
statements involve risks and uncertainties, including, but not limited to, those
risks and uncertainties relating to those described below, as well as other
factors detailed elsewhere in this Report, including in Item 1 of this Report
under the captions "Patents, Proprietary Technology and Trade Secrets,"
"Competition" and "Government Regulation" ("Cautionary Statements"). Such
Cautionary Statements qualify the forward-looking statements included in this
Report. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
Early Stage of Product Development; Technological Uncertainty
Since its inception in January 1987, the Company has focused its
activities on the discovery and cloning of receptor genes and the use of such
genes as tools in the design of precisely targeted compounds for a broad range
of therapeutic applications. To date, the Company has not completed development
of any drugs alone or in collaboration with its partners and does not expect
that any drugs resulting from its or its collaborative partners' or licensees'
research and development efforts will be commercially available for a
significant number of years, if at all. All compounds discovered by the Company
and its collaborative partners and licensees will require extensive preclinical
and clinical testing prior to submission of any regulatory application for
commercial use. Extensive preclinical and clinical testing required to establish
safety and efficacy will take several years, and the time required to
commercialize new drugs cannot be predicted with accuracy. Moreover, potential
products that appear to be promising at early stages of development may never
reach the market for a number of reasons. Such reasons include the possibilities
that potential products are found during preclinical testing or clinical trials
to be ineffective or to cause harmful side effects, that they fail to receive
necessary regulatory approvals, that they are difficult or uneconomical to
manufacture on a large scale, that they fail to achieve market acceptance or
that they are precluded from commercialization by proprietary rights of third
parties. There can be no assurance that the Company's approach to drug
discovery, its research and development efforts or the efforts of Lilly, Merck,
Novartis, Warner-Lambert, Grunenthal or Glaxo, or any future collaborative
partner or licensee of the Company, will result in the development of any drugs,
or that any drugs, if successfully developed, will be proven to be safe
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and effective in clinical trials, receive required regulatory approvals, be
capable of being manufactured in commercial quantities at reasonable costs or be
successfully commercialized. Product development of new pharmaceuticals is
highly uncertain, and unanticipated developments, including clinical or
regulatory delays, unexpected adverse effects and inadequate therapeutic
efficacy, would slow or prevent product development efforts of the Company and
its collaborative partners and licensees and have a material adverse effect on
the Company's operations.
Dependence on Collaborative Partners and Licensees for Development, Regulatory
Approvals, Manufacturing, Marketing and Other Resources
A key element of the Company's business strategy is to leverage
resources by entering into collaborative and licensing arrangements with
pharmaceutical companies. Under the Collaborative Agreements with Lilly, Merck,
Novartis and Warner-Lambert, the Company's collaborative partners are each
responsible for conducting preclinical testing and clinical trials of compounds
developed through the use of the Company's technology, obtaining regulatory
approvals and manufacturing and commercializing any resulting drugs. Under the
Grunenthal Agreement, Grunenthal is responsible for conducting certain
preclinical testing and clinical trials of compounds developed through the use
of the Company's technology. The Company has no involvement in the research and
development activities of Glaxo under the Glaxo Agreement. As a result, the
Company's receipt of revenues (whether in the form of drug development
milestones, royalties on sales or net sales proceeds) in respect of drugs
resulting from its collaborative and licensing arrangements is dependent upon
the activities of its collaborative partners and licensees. The amount and
timing of resources dedicated by the Company's collaborative partners to their
respective collaborations with the Company and by the Company's licensee to the
development of drugs that would be subject to royalties payable to the Company
are not within the Company's control. Moreover, there can be no assurance that
the interests of the Company will continue to coincide with those of its
collaborative partners or licensee, that some of the Company's collaborative
partners or the Company's licensee will not develop independently or with third
parties drugs that could compete with drugs of the types covered by their
arrangements with the Company, or that disagreements over rights or technology
or other proprietary interests will not occur.
If any of the Company's collaborative partners or the Company's
licensee breaches its agreement with the Company, or fails to devote adequate
resources to or conduct in a timely manner its collaborative or licensed
activities, the research programs under the applicable Collaborative Agreement
or the development and commercialization of drug candidates subject to such
arrangement could be materially adversely affected. There can be no assurance
that the Company's collaborative or licensing arrangements will be successful.
Further, there can be no assurance that the Company will be able to enter into
acceptable collaborative or licensing arrangements with other pharmaceutical
companies in the future, or that, if negotiated, such arrangements will be
successful.
History of Operating Losses and Accumulated Deficit
The Company has incurred significant operating losses since its
inception in January 1987. At December 31, 1997, the Company's accumulated
deficit was $29,316,000. Losses have resulted principally from costs incurred in
connection with the Company's research and development activities and from
general and administrative costs associated with the Company's operations. The
Company expects to continue to incur substantial operating losses at least over
the next several years and expects losses to increase as the Company's research
and development efforts expand and its current collaborative arrangements
expire. As of December 31,
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1997, the only revenues generated by the Company had resulted from payments
under the Collaborative Agreements, and government grants under the SBIR program
of the National Institutes of Health. The Company's revenues, expenses and
losses may fluctuate from quarter to quarter and year to year. Research payments
under the Lilly Agreement, the Merck Agreement and the Novartis Agreements are
scheduled to expire in December 1998, November 1998 and August 1998,
respectively, unless the research programs under such agreements are extended by
mutual agreement of the Company and Lilly, Merck or Novartis. The Company does
not expect to achieve revenues or royalties from sales of drugs for a number of
years, if at all. The Company will not achieve revenues or royalties from drug
sales unless it or one of its collaborative partners or licensees successfully
completes clinical trials with respect to a drug candidate, obtains regulatory
approvals for that drug candidate and commercializes the resulting drug. Failure
to achieve significant revenue or profitable operations could impair the
Company's ability to sustain operations and there can be no assurance that the
Company will ever achieve significant revenues or profitable operations.
Future Capital Needs; Uncertainty of Additional Funding
The operation of the Company's business requires substantial capital
resources and such requirements are likely to increase in the future. The
Company's future financial requirements will depend on many factors, including
the continued progress of its research and development programs, the timing and
results of preclinical testing and clinical trials, if any, of its drug
candidates, the timing of regulatory approvals, if any, technological advances,
determinations as to the commercial potential of its or its collaborative
partners' proposed products and the status of competitive products. The
Company's capital requirements will also depend on the Company's ability to
establish and maintain collaborative arrangements with others and whether its
future collaborative partners provide research funding to the Company and are
responsible for all development activities, preclinical testing and regulatory
approvals and, if such approvals are obtained, the manufacturing and marketing
of products. In addition, such capital requirements will depend on the time and
expense associated with filing and, if necessary, prosecuting and enforcing
patent claims.
The Company entered into the Grunenthal Agreement in January 1998.
Under this agreement, the Company will retain certain ownership rights to any
products that result from the collaboration. In addition, the Company will be
significantly involved in the development of any such potential products but may
also be required to contribute substantial financial resources towards such
development. Accordingly, the cost to the Company of this arrangement may be
significantly greater than the cost to it of participating in a royalty-based
collaboration. The Company intends to explore the possibility of entering into
additional collaborative arrangements similar in nature to its collaboration
with Grunenthal.
No assurance can be given that the Company's existing cash on hand and
marketable securities and funds it will receive under the Collaborative
Agreements and under the Glaxo Agreement and government grants, together with
interest income, will be sufficient. The Company expects that it will, in the
future, seek to raise additional funding from other sources, including other
collaborative partners and licensees, and through public or private financings,
including sales of equity or debt securities. Any such collaborative or
licensing arrangement could result in limitations on the Company's ability to
control the research and development of potential drugs and the
commercialization of resulting drugs, if any, as well as its profits therefrom.
Any such equity financing could result in dilution to the Company's then
existing stockholders. There can be no assurance that additional funds will be
available on favorable terms or at all, or that such funds, if raised, would be
sufficient to permit the Company to continue to conduct its operations. If
adequate funds are not available, the Company may be required to curtail
significantly or eliminate one or more of its receptor or drug discovery
programs.
39
<PAGE>
Uncertainties Related to Clinical Trials
Before obtaining required regulatory approvals for the commercial sale
of each product under development, the Company or its collaborators and
licensees must demonstrate through preclinical studies and clinical trials that
such product is safe and efficacious for use. The results of preclinical studies
and initial clinical trials are not necessarily predictive of results that will
be obtained from large-scale clinical trials, and there can be no assurance that
clinical trials of any product under development will demonstrate the safety and
efficacy of such product or will result in a marketable product. The safety and
efficacy of a therapeutic product under development by the Company or its
collaborative partners and licensees must be supported by extensive data from
clinical trials. A number of companies have suffered significant setbacks in
advanced clinical trials, despite promising results in earlier trials. The
failure to demonstrate adequately the safety and efficacy of a therapeutic drug
under development would delay or prevent regulatory approval of the product and
could have a material adverse effect on the Company. In addition, the FDA or
other Regulatory Agency may require additional clinical trials, which could
result in increased costs and significant development delays.
The rate of completion of clinical trials of the Company's or its
collaborative partners' and licensees' products is dependent upon, among other
factors, obtaining adequate clinical supplies and the rate of patient accrual.
Patient accrual is a function of many factors, including the size of the patient
population, the proximity of patients to clinical sites and the eligibility
criteria for the trial. Delays in planned patient enrollment in clinical trials
may result in increased costs, program delays or both, which could have a
material adverse effect on the Company. In addition, the Company's collaborative
partners and licensees generally have the right to control the planning and
execution of product development and clinical programs, and there can be no
assurance that such partners and licensees will conduct such programs in
accordance with schedules that are satisfactory to the Company. There can be no
assurance that, if clinical trials are completed, the Company or its
collaborative partners and licensees will submit NDAs with respect to any
potential products or that any such application will be reviewed and approved by
the FDA in a timely manner, if at all.
Lack of Manufacturing Experience; Reliance on Contract Manufacturers
The Company currently has no manufacturing facilities and relies on its
collaborative partners or other manufacturers to produce its compounds for
research and development, preclinical and clinical purposes. The products under
development by the Company and its collaborative partners have never been
manufactured on a commercial scale and there can be no assurance that such
products can be manufactured at a cost or in quantities necessary to make them
commercially viable. If the Company were unable to contract for a sufficient
supply of its compounds on acceptable terms, or if it should encounter delays or
difficulties in its relationships with manufacturers, the Company's preclinical
and clinical testing schedule would be delayed, resulting in delay in the
submission of products for regulatory approval or the market introduction and
subsequent sales of such products, which could have a material adverse effect on
the Company. Moreover, manufacturers that the Company may use must adhere to
current GMP regulations enforced by the FDA through its facilities inspection
program. If these facilities cannot pass a pre-approval plant inspection, the
FDA pre-market approval of the products will not be granted.
40
<PAGE>
Lack of Sales and Marketing Capability
The creation of infrastructure to commercialize pharmaceutical products
is a difficult, expensive and time-consuming process. Synaptic currently has no
sales or marketing capability. To market directly any product it may develop,
the Company will need to establish a marketing and sales force with technical
expertise and distribution capability or contract with other pharmaceutical
and/or health care companies with distribution systems and direct sales forces.
There can be no assurance that the Company will be able to establish direct or
indirect sales and distribution capabilities or be successful in gaining market
acceptance for licensing arrangements. To the extent that the Company enters
into co-promotion or licensing arrangements, any revenues received by the
Company will be dependent on the efforts of third parties, and there can be no
assurance that any such efforts will be successful.
Dependence on Key Personnel
The Company is highly dependent on its management and scientific staff.
Loss of the services of any key individual could have an adverse effect on the
Company. The Company believes that its future success will depend, in part, on
its ability to attract and retain highly talented managerial and scientific
personnel and consultants. The Company faces intense competition for such
personnel from, among others, biotechnology and pharmaceutical companies, as
well as academic and other research institutions. There can be no assurance that
it will be able to attract and retain the personnel it requires on acceptable
terms.
41
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42
<PAGE>
Item 8. Financial Statements
SYNAPTIC PHARMACEUTICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors..............................................44
Balance Sheets at December 31, 1997 and 1996................................45
Statements of Operations for the years ended December 31, 1997, 1996
and 1995.................................................................. 46
Statements of Stockholders' Equity (Deficiency) for the years
ended December 31, 1997, 1996 and 1995....................................47
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.......................................................49
Notes to Financial Statements...............................................50
43
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
SYNAPTIC PHARMACEUTICAL CORPORATION
We have audited the accompanying balance sheets of Synaptic
Pharmaceutical Corporation as of December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity (deficiency) and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Synaptic
Pharmaceutical Corporation at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Hackensack, New Jersey
January 30, 1998, except for
the second paragraph of Note 11
as to which the date is March 2, 1998
44
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
BALANCE SHEETS
(in thousands, except share information)
December 31, 1997 and 1996
Assets
1997 1996
-------- --------
Current assets:
Cash and cash equivalents $23,113 $ 4,589
Restricted cash 600 --
Marketable securities--current maturities 10,010 21,418
Revenue receivable under license agreement 40 192
Restricted securities -- 712
Other current assets 674 458
-------- --------
Total current assets 34,437 27,369
Property and equipment, net 4,682 2,664
Marketable securities 28,977 8,677
Patent and patent application costs, net of
accumulated amortization (1997--$1,069; 1996--$730) 1,306 1,645
-------- --------
$69,402 $40,355
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 811 $ 639
Accrued liabilities 547 189
Accrued compensation 340 380
Current portion of capital lease obligations -- 107
-------- --------
Total current liabilities 1,698 1,315
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value; authorized--
1,000,000 shares -- --
Common Stock, $.01 par value; authorized--
25,000,000 shares; issued and outstanding--
10,526,585 shares in 1997 and 7,633,543
shares in 1996 105 76
Additional paid-in capital 97,049 63,231
Net unrealized gains (losses) on securities 26 (1)
Deferred compensation (160) (296)
Accumulated deficit (29,316) (23,970)
-------- --------
Total stockholders' equity 67,704 39,040
-------- --------
$69,402 $40,355
======== ========
See notes to financial statements.
45
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except share and per share information)
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------- -------- --------
Revenues:
Contract revenue $ 9,785 $ 6,943 $ 7,670
License revenue -- 2,000 --
Grant revenue 522 538 307
------- ------- -------
Total revenues 10,307 9,481 7,977
Expenses:
Research and development 13,781 11,337 9,863
General and administrative 4,072 2,982 2,215
------- ------- -------
Total expenses 17,853 14,319 12,078
------- ------- -------
Loss from operations (7,546) (4,838) (4,101)
Other income, net:
Interest income 2,205 2,013 748
Interest expense (5) (20) (33)
Gain on sale of securities -- 212 19
------- ------- -------
Other income, net 2,200 2,205 734
------- ------- -------
Net loss $(5,346) $(2,633) $(3,367)
======= ======= =======
Basic and diluted net loss per share $ (0.66) $ (0.35) $ (4.76)
======= ======= =======
Shares used in computation of
net loss per share 8,129,260 7,577,610 707,094
========= ========= =======
See notes to financial statements.
46
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(in thousands, except share information)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
Unrealized Notes Total
Gains Receivable Stock-
Additional (Losses) Deferred From Accumu- holders'
Common Stock Paid-In on Compen- Stock- lated Treasury Equity
Shares Amount Capital Securities sation holders Deficit Stock (Deficiency)
------ ------ ------- ---------- ------ ------- ------- ----- ------------
Balance at January 1, 1995 340,193 $ 3 $ 661 $(171) $(103) $(11) $(17,970) $(1) $(17,592)
Purchase of 1,893 shares of
treasury stock at cost -- -- -- -- -- -- -- (3) (3)
Payments received on notes
receivable from stockholders -- -- -- -- -- 5 -- -- 5
Deferred compensation related
to stock incentive plan -- -- 191 -- (191) -- -- -- --
Forfeiture of deferred
compensation related to
stock incentive plan -- -- (1) -- 1 -- -- -- --
Amortization of deferred
compensation -- -- -- -- 85 -- -- -- 85
Issuance of 1,646 shares
of treasury stock -- -- 1 -- -- -- -- 2 3
Issuance of 57,769 shares of
common stock to employees
and consultants 57,769 1 258 -- -- -- -- -- 259
Issuance of 2,000,000 shares
of common stock in initial
public offering 2,000,000 20 22,692 -- -- -- -- -- 22,712
Conversion of preferred stock 4,928,382 49 36,150 -- -- -- -- -- 36,199
Adjustment to reflect net
unrealized holding gain on
securities -- -- -- 367 -- -- -- -- 367
Net loss for the year ended
December 31, 1995 -- -- -- -- -- -- (3,367) -- (3,367)
Fractional shares issued in
reverse stock split 24 -- -- -- -- -- -- -- --
------ ------ ------- ---------- ------ ------- ------- ----- -----------
Balance at December 31, 1995 7,326,368 73 59,952 196 (208) (6) (21,337) (2) 38,668
Purchase of 1,190 shares of
treasury stock at cost -- -- -- -- -- -- -- (1) (1)
Payments received on notes
receivable from stockholders -- -- -- -- -- 6 -- -- 6
Deferred compensation related
to stock incentive plan -- -- 388 -- (388) -- -- -- --
Forfeiture of deferred
compensation related to
stock incentive plan -- -- (121) -- 121 -- -- -- --
Amortization of deferred
compensation -- -- -- -- 179 -- -- -- 179
Issuance of 48,126, shares
of common stock pursuant
to exercise of stock options 46,061 1 81 -- -- -- -- 3 85
Issuance of 48,114 shares of
common stock pursuant to
exercise of stock warants 48,114 -- 457 -- -- -- -- -- 457
Issuance of 213,000 shares
of common stock pursuant to
overallotment option 213,000 2 2,474 -- -- -- -- -- 2,476
Adjustment to reflect net
unrealized holding loss on
securities -- -- -- (197) -- -- -- -- (197)
Net loss for the year ended
December 31, 1996 -- -- -- -- -- -- (2,633) -- (2,633)
--------- ------- -------- ---------- --------- ------- ------------ ----- ------------
Balance at December 31, 1996 7,633,543 $ 76 $63,231 $ (1) $ (296) $ -- $ (23,970) $ -- $ 39,040
========= ======= ======== ========== ========= ======= ============ ===== ============
</TABLE>
See notes to financial statements.
47
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) -- (Continued)
(in thousands, except share information)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net
Unrealized Notes Total
Gains Receivable Stock-
Additional (Losses) Deferred From Accumu- holders'
Common Stock Paid-In on Compen- Stock- lated Treasury Equity
Shares Amount Capital Securities sation holders Deficit Stock (Deficiency)
------ ------ ------- ---------- ------ ------- ------- ----- ------------
Balance at December 31, 1996 7,633,543 $ 76 $63,231 $ (1) $ (296) $ -- $ (23,970) $ -- $ 39,040
Purchase of 438 shares of
Treasury Stock at cost -- -- -- -- -- -- -- (1) (1)
Forfeiture of Deferred
Compensation related to
Stock Incentive Plan -- -- (12) -- 12 -- -- -- --
Amortization of Deferred
Compensation -- -- -- -- 124 -- -- -- 124
Issuance of 18,480, shares
of common stock pursuant 18,042 1 36 -- -- -- -- 1 38
to exercise of stock options
Issuance of 2,875,000 share
of common stock in public
offering 2,875,000 28 33,794 -- -- -- -- -- 33,822
Adjustment to reflect net
unrealized holding loss on
securities -- -- -- 27 -- -- -- -- 27
Net loss for the year ended
December 31, 1997 -- -- -- -- -- -- (5,346) -- (5,346)
---------- ------- -------- ---------- --------- ------- ------------ ----- ------------
Balance at December 31, 1997 10,526,585 $ 105 $ 97,049 $ 26 $ (160) $ -- $ (29,316) $ -- $ 67,704
========== ======= ======== ========== ========= ======= ============= ===== ============
</TABLE>
See notes to financial statements.
48
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------- -------- -------
Operating activities:
Net loss $(5,346) $(2,633) $(3,367)
Adjustments to reconcile net loss
to net cash (used in)
provided by operating activities:
Depreciation and patent amortization 1,209 960 792
Amortization of (discounts)/premiums
on securities (123) (158) 42
Amortization of deferred compensation 124 179 86
Gain on sale of securities -- (212) (19)
Changes in operating assets and liabilities:
(Increase) decrease in other assets (816) (107) 356
Increase in accounts payable,
accrued liabilities
and accrued compensation 490 44 131
Decrease (increase) in license
agreement revenue receivable 152 (62) 1,904
(Decrease) increase in deferred revenue -- (821) 821
-------- -------- ------
Net cash (used in) provided
by operating activities (4,310) (2,810) 746
Investing activities:
Proceeds from sale or maturity of
investments 27,666 10,710 6,318
Purchases of investments (35,696) (32,238) (3,669)
Purchases of property and equipment (2,888) (1,106) (529)
Increase in patent and patent
application costs -- (518) (602)
Principal payments made by
employee/stockholders -- -- 1
-------- -------- -------
Net cash (used in) provided
by investing activities (10,918) (23,152) 1,519
Financing activities:
Issuance of common stock, net of
repurchases 33,859 3,016 22,971
Payments on capital lease (107) (152) (125)
Payments on notes receivable from
stockholders -- 6 6
-------- -------- -------
Net cash provided by financing activities 33,752 2,870 22,852
-------- -------- -------
Net increase (decrease) in cash and
cash equivalents 18,524 (23,092) 25,117
Cash and cash equivalents at
beginning of period 4,589 27,681 2,564
-------- -------- -------
Cash and cash equivalents at end of period $23,113 $ 4,589 $27,681
======== ======== =======
Supplemental cash flow disclosure:
Cash paid for interest $ 5 $ 20 $ 33
======== ======== =======
See notes to financial statements.
49
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
Note 1 -- Summary of Significant Accounting Policies
Organization. Synaptic Pharmaceutical Corporation (the "Company") is
engaged in the development of a broad platform of enabling technology which it
calls "human receptor-targeted drug design technology". The Company 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 makes available this technology to its pharmaceutical partners through
licensing and research agreements from which the Company derives the principal
portion of its revenue.
Basic and Diluted Net Loss Per Share. Net loss per share is computed
using the weighted average number of shares of common stock outstanding. In
1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Since the Company has a history of operating losses, the adoption of the new
standard had no effect on the current and prior year net loss per share amounts.
Also, as a result of the Company's operating losses and the anti-dilutive effect
from stock options and warrants, such instruments are excluded from the
computation of basic and diluted net loss per share.
Revenue Recognition. Research funding revenue is recognized ratably over
the period of the contract to which it relates. Payments received in advance
under such contracts is recorded as deferred revenue until the research is
performed. Research milestone payment revenue is recognized at the time 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. Government grant
receipts are recorded as revenue in the period in which the related research is
performed.
Cash Equivalents. Cash equivalents consist of highly liquid investments
with a maturity of three months or less when purchased. Included in cash
equivalents at December 31, 1997, is approximately $23,109,000 related to
investments in money market funds. At December 31, 1996, this amount totaled
$4,383,000.
Available-for-Sale Securities. Available-for-sale securities are carried
at fair value, with the unrealized gains and losses reported as a separate
component of stockholders' equity. The cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary, if any, are included in
other income. The cost of securities sold is based on the specific
identification method. Investments held as of December 31, 1997 consist
primarily of U.S. Government and Federal Agency obligations, U.S. corporate debt
securities and mortgage-backed securities. The maturities range from January 31,
1998, through November 26, 2001.
The Company has established guidelines relative to diversification,
credit ratings and maturities to maintain safety and liquidity. The guidelines
are periodically reviewed and modified to take advantage of trends in yields and
interest rates.
Property and Equipment. Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Scientific equipment, office equipment and
50
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
furniture and fixtures are depreciated over a life of 7 years. Leasehold
improvements are depreciated principally over the life of the facility lease,
which is currently 18 years (see Note 9). Software is depreciated over a life of
3 years. Assets acquired under capital lease arrangements were depreciated over
the life of the related leases.
Patents. Prior to October 1, 1996, patent and patent application costs
were capitalized and amortized over 7 years or the estimated life of the patent,
if less, using the straight-line method. Capitalized costs through October 1,
1996 will continue to be amortized over the remaining portions of their
seven-year lives. Effective October 1, 1996, patent and patent application costs
are expensed as incurred. The effect in 1996 of this change in accounting
estimate was to increase expenses and net loss by $171,000, or $0.02 per share.
The Company continually reviews capitalized costs to assess ongoing
recoverability.
Accrued Liabilities. Included in accrued liabilities at December 31,1997
and 1996 are accrued professional fees totaling $345,000 and $68,000,
respectively.
Stock-Based Compensation. The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB No. 25"), in accounting for its employee stock options. Under APB No. 25,
compensation expense is recognized only when the exercise price of options is
below the market price of the underlying stock on the date of grant. Such
expense is recognized ratably over the vesting period.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Estimates also affect the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from these
estimates.
New Accounting Standard. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." This pronouncement, which is required to be
adopted effective January 1, 1998, requires the presentation of a statement of
comprehensive income. Comprehensive income is defined as the change in equity of
a business enterprise during a period resulting from transactions and other
events and circumstances from nonowner sources. Comprehensive income for the
Company, in addition to net loss, will include unrealized gains and losses on
marketable securities held for sale, currently recorded in stockholders' equity.
Reclassifications. Certain prior year amounts have been reclassified to
conform with the current year presentation.
51
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Note 2 -- Investments
The following is a summary of all of the Company's securities. All of
the Company's securities are classified as available-for-sale securities.
Determination of estimated fair value is based on quoted market prices:
Gross Gross
Unrealized Unrealized Estimated
Cost Gains (Losses) Fair Value
---- ----- -------- ----------
December 31, 1997:
U.S. Treasury obligations and
obligations of U.S. government
agencies $21,299,000 $ -- $(22,000) $21,277,000
U.S. corporate debt securities 15,966,000 57,000 (11,000) 16,012,000
Mortgage-backed securities 1,696,000 2,000 -- 1,698,000
----------- ------- -------- -----------
$38,961,000 $59,000 $(33,000) $38,987,000
=========== ======= ======== ===========
December 31, 1996:
U.S. Treasury obligations and
obligations of U.S. government
agencies $20,846,000 $ 1,000 $ (4,000) $20,843,000
U.S. corporate debt securities 6,991,000 5,000 (8,000) 6,988,000
Mortgage-backed securities 2,971,000 5,000 -- 2,976,000
----------- ------- -------- -----------
$30,808,000 $11,000 $(12,000) $30,807,000
=========== ======= ======== ===========
The gross realized gains on sale of available-for-sale securities for
the years ending December 31, 1997, 1996 and 1995 totaled $0, $212,000 and
$24,000, respectively, and the gross realized losses totaled $0, $0 and $6,000,
respectively. The net adjustment to unrealized gains (losses) on
available-for-sale securities included as a separate component of stockholders'
equity totaled $27,000 in 1997, $(197,000) in 1996 and $367,000 in 1995.
52
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Note 3 -- Collaborative Research Agreements
At December 31, 1997, the Company was engaged in collaborations with
four pharmaceutical companies, three of which account for all of its contract
and license revenues. In addition, the Company has licensed certain technology
to The DuPont Merck Pharmaceutical Company. Details of these arrangements are
set forth below:
Eli Lilly and Company. In January 1991, the Company and Eli Lilly and
Company ("Lilly") entered into an agreement to promote the discovery and
development of serotonin receptor subtype-selective drugs for the treatment of
serotonin-related disorders. The original term of the collaboration was four
years, but was extended in January 1995 for an additional four-year period. In
October 1996, the size of the collaboration was increased. As part of this
agreement, Lilly is providing funding to the Company to support a specified
number of the Company's scientists who conduct research as part of the
collaboration.
Revenue recognized in the accompanying financial statements is not
subject to repayment. Lilly will also provide the Company with milestone
payments and royalties on sales of any products resulting from the collaboration
for a period of time based upon the term of the related patents.
During 1997, 1996 and 1995, the Company recognized $4,748,000,
$2,011,000, and $1,960,000, respectively, in revenue under this agreement.
Merck & Co., Inc. In November 1993, the Company and Merck & Co., Inc.
("Merck") entered into an agreement pursuant to which they agreed to collaborate
in the identification and development of alpha-1a antagonists, principally for
the treatment of BPH. The initial term of the collaboration was three years. In
October 1996, the term of the collaboration was extended for an additional
one-year period and in November 1997, the term was again extended for an
additional one-year period. Under the terms of the agreement, Merck is providing
funding to the Company to support a specified number of the Company's scientists
who conduct research as part of the collaboration. In addition, Merck is
required to pay royalties on sales of any products resulting from the
collaboration and is required to make payments upon the achievement of certain
milestones.
As part of the collaboration, Merck received an exclusive worldwide
license to use the Company's alpha adrenergic drug discovery systems for the
development and commercialization of alpha-1a antagonists, as well as an
exclusive worldwide license under several of the Company's related patents and
patent applications. The Company retained the right to use its alpha adrenergic
technology for the development of alpha adrenergic and other agents that are not
alpha-1a antagonists.
Merck has the right to terminate the Merck Agreement at any time upon 90
days' prior written notice. In the event of any such termination, Merck will not
be required to provide the Company with any research funding that has not come
due prior to such termination or make certain other payments to the Company that
have not come due prior to such termination.
During 1997, 1996 and 1995, the Company recognized $1,631,000,
$3,613,000 and $1,477,000, respectively, in revenue under this agreement.
53
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
At December 31, 1997 and 1996, the Company had a receivable amounting to
approximately $40,000 and $192,000, respectively, for certain reimbursable
expenditures.
Novartis Pharma AG (a subsidiary of the successor-in-interest of
Ciba-Geigy Limited). In August 1994, the Company and Ciba-Geigy Limited
("Ciba-Geigy") entered into an agreement pursuant to which they agreed to
collaborate in the identification and development of neuropeptide Y drugs for
the treatment of obesity and eating disorders, as well as cardiovascular
disorders. In May 1996, the Company and Ciba-Geigy entered into a second
agreement and an amendment to the first agreement pursuant to which the term of
the collaboration was extended by one year and the scope of the collaboration
was expanded to provide for research on additional targets for the design of
drugs for the treatment of obesity and eating disorders. In December 1996,
Ciba-Geigy and Sandoz Limited consolidated to form a new company, Novartis AG,
the pharmaceutical subsidiary of which is Novartis Pharma AG ("Novartis").
Novartis assumed Ciba-Geigy's rights and obligations relating to the
collaboration. The term of the collaboration will expire on August 4, 1998, but
may be further extended by mutual agreement of the parties. As part of the
agreements, Novartis is providing funding to the Company to support a specified
number of the Company's scientists who conduct research as part of the
collaboration. In return for this research support, the Company granted Novartis
an exclusive worldwide license to use the Company's neuropeptide Y technology to
develop, manufacture and sell compounds that work through neuropeptide Y
receptor subtypes for the treatment of obesity and eating disorders. Novartis is
also required to provide the Company with milestone payments and royalties on
sales of any products resulting from the collaboration.
During August 1994, Novartis made a $7,500,000 equity investment in the
Company. During December 1995, Novartis made an additional $2,000,000 equity
investment in the Company.
During 1997, 1996 and 1995, the Company recognized $3,406,000,
$3,319,000 and $4,234,000, respectively, in revenue under this agreement.
Warner-Lambert Company. In July 1997, the Company and Warner-Lambert
Company ("Warner- Lambert") entered into a collaborative research and license
agreement pursuant to which they agreed to collaborate in the identification and
development of galanin drugs for a variety of therapeutic applications. As part
of the collaboration, Warner-Lambert received an exclusive worldwide license to
use the Company's galanin receptor subtype drug discovery systems for the
development and commercialization of galanin receptor subtype- selective drugs
for all therapeutic applications. To date, the Company has not recognized any
revenue under this agreement.
The DuPont Merck Pharmaceutical Company. In February 1996, the Company
and The DuPont Merck Pharmaceutical Company ("DuPont Merck") entered into an
agreement pursuant to which the Company granted DuPont Merck a nonexclusive
license to use certain of the Company's alpha adrenergic drug discovery systems
for the development of alpha adrenergic subtype-selective drugs. The license
granted to DuPont Merck expired on February 5, 1998.
54
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Note 4 -- Property and Equipment
Property and equipment consists of the following as of December 31, 1997
and 1996:
1997 1996
Scientific equipment $ 4,921,000 $ 2,960,000
Furniture and fixtures 188,000 184,000
Office equipment 454,000 433,000
Leasehold improvements 1,557,000 1,225,000
Software 669,000 99,000
Equipment under capitalized leases 658,000 658,000
----------- -----------
8,447,000 5,559,000
Accumulated depreciation and amortization (3,765,000) (2,895,000)
----------- -----------
$ 4,682,000 $ 2,664,000
=========== ===========
Note 5 -- Capital Leases
The Company and a bank were parties to a master lease agreement under
which the Company leased laboratory and computer equipment with a cost basis of
$658,000. The effective interest rate on the leases approximated 10.5%. The
assets were depreciated over the related lease terms.
Under the terms of the master lease agreement, $112,000 in securities
held in an investment account maintained by the bank was restricted as to use at
December 31, 1996.
Accumulated amortization on leased equipment as of December 31, 1997 and
1996 was $658,000 and $623,000, respectively.
55
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Note 6 -- Stockholders' Equity
Common Stock. In December 1995, the Company completed an initial public
offering of 2,000,000 shares of its common stock. In January 1996, the
underwriters of the initial public offering exercised their over-allotment
option to purchase an additional 213,000 shares of common stock. As part of the
initial public offering, the then existing convertible redeemable preferred
stock automatically converted into 4,928,382 shares of common stock.
In October 1997, the Company completed a public offering of 2,500,000
shares of its common stock. In November 1997, the underwriters of the public
offering exercised their over-allotment option to purchase an additional 375,000
shares of common stock.
In connection with the sale of certain convertible redeemable preferred
stock which was converted into common stock upon completion of the Company's
initial public offering, the placement agents of certain convertible redeemable
preferred stock received warrants to purchase 192,458 shares of the Company's
common stock at an exercise price of $9.50 per share. In May 1996, 48,114 of
these warrants were exercised. At December 31, 1997, 144,344 shares of common
stock were reserved for issuance. In January 1998, 137,648 warrants were
exercised and the remaining warrants expired .
Stockholders' Rights Plan. In November 1995, the Company's Board of
Directors approved the adoption of a stockholders' rights plan (the "Rights
Plan"). The Rights Plan provides for the distribution of one right (a "Right")
with respect to each share of outstanding common stock and any new issuances of
common stock. Upon completion of the initial public offering in December 1995,
the Board of Directors designated Series A Junior Participating Preferred Stock
and declared a dividend of one Right with respect to each share of common stock
outstanding. Each Right will become exercisable to purchase from the Company, at
an exercise price of $160.00, 1/1000th of a share of Series A Junior
Participating Preferred Stock or that number of shares of common stock having a
market value equal to two times the exercise price of the Right. The Rights
generally become exercisable for the Series A Junior Participating Preferred
Stock ten days following the announcement by any person or group of an intention
to make a tender offer or exchange offer, the consummation of which would cause
any person or group to become the owner of 15% or more of the outstanding common
stock, and generally become exercisable for common stock ten days following the
acquisition by any person or group of more than 15% of the outstanding common
stock. The Rights will expire in the year 2005. The Rights Plan may discourage
certain types of transactions involving an actual or potential change in control
of the Company.
Each 1/1000th of a share of Series A Junior Participating Preferred
Stock will have one vote. Each share of Series A Junior Participating Preferred
Stock will be entitled to a preferential quarterly dividend per share equal to
the larger of (i) an amount equal to any dividend declared on the common stock
and (ii) $.00025. Additionally, in the event of a liquidation, each 1/1000th of
a share of the Series A Junior Participating Preferred Stock would be entitled
to a preferential liquidation payment equal to $0.01 plus an amount equal to the
amount that would be distributed with respect to each share of common stock.
Preferred Stock. The Company is authorized to issue up to 1,000,000
shares of preferred stock, 200,000 of which is designated as Series A Junior
Participating and 800,000 of which is undesignated. The Board of Directors is
authorized to provide for the issuance of preferred stock in one or more classes
or series and to fix
56
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
the number of shares constituting any such class or series, and the voting
powers, designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereof,
including the dividend rights, dividend rate, terms of redemption, redemption
price or prices, conversion rights and liquidation preferences of the shares
constituting any class or series, without any further vote or action by the
shareholders of the Company.
Note 7 -- Incentive/Stock Plans
The Company currently has three stock incentive plans: the 1996
Incentive Plan (the "1996 Plan"), the 1988 Amended and Restated Incentive Plan
(the "1988 Plan" and, together with the 1996 Plan, the "Incentive Plans") and
the 1996 Nonemployee Director Stock Option Plan (the "Director Plan").
The Company has elected to follow APB No. 25 in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under Financial Accounting Standards Board Statement No.
123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, compensation expense is required to be
recognized when the exercise price of the Company's employee stock options is at
a price below the market price of the underlying stock on the date of grant.
Incentive Plans. The 1996 Plan and the 1988 Plan were adopted in October
1995 and June 1988, respectively. Under both plans, a committee of the Company's
Board of Directors (the "Committee") approves the sale of shares and the
granting of nonstatutory or incentive stock options. In addition, under the 1996
Plan, the committee may grant stock appreciation rights to employees and
consultants of the Company. The purchase price for shares and the exercise price
of options are determined by the Committee (although, the exercise price of
incentive stock options may be no less than the fair market value of the common
stock on the date of grant). The 1996 Plan replaced the 1988 Plan, effective as
of January 1, 1996, with respect to all future stock and option awards by the
Company to its employees and consultants.
In general, options granted under the Incentive Plans vest over a
four-year period. Unvested options are forfeited upon termination of the
employee or consulting relationship. Vested options, if not exercised within a
specified period of time following the termination of the employment or
consulting relationship, are also forfeited. Options generally expire 10 years
from the date of grant. Shares of common stock sold under the Incentive Plans
are also generally subject to vesting. Unvested shares of common stock which are
sold under the Incentive Plans may be repurchased by the Company, at its option,
at the original sale price upon termination of the employment or consulting
relationship of the holder with the Company. Options granted and shares sold to
employees under the Incentive Plans generally become fully vested upon the
occurrence of a change in control of the Company (as defined) if the holders
thereof are terminated in connection with such change in control other than for
cause (as defined). The maximum number of shares subject to the 1996 Plan is
1,100,000. At December 31, 1997, 245,812 shares remain available for future
awards under the 1996 Plan. As of December 31, 1997, no stock appreciation
rights had been awarded under the 1996 Plan.
Director Plan. The Director Plan was adopted by the Board of Directors
in March 1996 and approved by the stockholders in June 1996. In general, under
the Director Plan, each nonemployee director of the Company
57
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
is automatically granted an option on the date that he or she first becomes a
member of the Board of Directors. In addition, on June 1 of each year,
commencing in 1997, each nonemployee director is granted an additional option to
purchase 2,500 shares of common stock at an exercise price equal to the fair
market value on the date of grant. The maximum number of shares subject to the
Director Plan is 250,000. In general, options granted under the Director Plan
become exercisable as to 1/24th of the total number of shares subject to the
option for each calendar month elapsed after the date of the option grant. In
the event of a change in control of the Company (as defined) or the death or
disability of the optionee, any unvested portion of the options will become
exercisable in full. Options granted under the Director Plan will expire upon
the earliest to occur of the following: (a) the expiration of ten years from the
date of grant of the option, (b) one year after the optionee ceases to be a
director of the Company by reason of death or disability of the optionee, or (c)
three months after the date the optionee ceases to be a director of the Company
for any reason other than death or disability.
Option activities under the Incentive Plans and the Director Plan are
detailed in the following table:
Weighted
Average
1996 1988 Director Option Price
Plan Plan Plan Per Share
--------- -------- --------- -----------
Outstanding at January 1, 1995 -- 327,345 -- $ 1.77
Granted -- 36,328 -- $ 2.00
Exercised -- (11,125) -- $ 1.76
Forfeited -- (12,773) -- $ 1.77
--------- -------- --------- -----------
Outstanding at December 31, 1995 -- 339,775 -- $ 1.79
Granted 443,762 -- 17,500 $13.24
Exercised (2,500) (45,626) -- $ 1.77
Forfeited (25,500) (2,638) -- $11.26
--------- -------- --------- -----------
Outstanding at December 31, 1996 415,762 291,511 17,500 $ 8.55
Granted 503,751 -- 15,000 $12.99
Exercised (625) (17,855) -- $ 2.01
Forfeited (67,825) (8,354) (2,500) $12.88
--------- -------- --------- -----------
Outstanding at December 31, 1997 851,063 265,302 30,000 $10.47
======== ======== ========= ===========
Exercisable at December 31, 1997 71,511 221,212 15,000 $ 5.27
======== ======== ========= ===========
Exercisable at December 31, 1996 8,375 189,549 5,034 $ 2.72
======== ======== ========= ===========
Exercisable at December 31, 1995 -- 184,125 -- $ 1.76
======== ======== ========= ===========
58
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
The following table discloses at December 31, 1997, for each of the
following classes of options as determined by range of exercise price, the
information regarding weighted-average exercise price and weighted-average
remaining contractual life of each said class:
Weighted Weighted
Weighted Average Average
Average Remaining Exercise
Exercise Contractual Number Of Price of
Number Of Price of Life Of Options Options
Options Outstanding Outstanding Currently Currently
Option Class Outstanding Options Options Exercisable Exercisable
------------ ----------- ------- ------- ----------- -----------
Prices ranging
from
$1.76 - $2.00 280,302 $ 1.81 5.0 years 224,962 $ 1.79
Prices ranging
from
$10.125 - $14.25 700,363 $12.53 9.5 years 29,486 $11.36
Prices ranging
from
$15.25 - $16.75 165,700 $16.44 8.4 years 53,275 $16.62
The following table discloses for each of the years ending December 31,
1997, 1996 and 1995, the number of options granted, the weighted-average fair
values and the weighted-average exercise prices for those options with exercise
prices that equaled or were less than the market price of the common stock on
the date of grant. There were no options granted with an exercise price above
the market price of the common stock on the date of grant.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995
----------------------------------- -------------------------------------- ----------------------------------
Number Number Number
of Fair Exercise of Fair Exercise of Fair Exercise
Options Value Price Options Value Price Options Value Price
- --------------- ----------- ---------- ----------- ------------ ----------- ------------ ----------- ---------- ----------
Exercise
price equals
market price 518,751 $7.59 $12.99 433,262 $ 5.75 $13.92 -- -- --
Exercise
price less
than market
price -- -- -- 28,000 $14.44 $2.98 36,328 $5.12 $2.00
</TABLE>
During 1995, the Company sold shares of common stock under the 1988 Plan
totaling 8,810 at $2.00 per share. At December 31, 1997, 1,442 of the shares
sold under the 1988 Plan remain subject to repurchase at an aggregate price of
approximately $3,000.
Other Disclosures.Pro forma information regarding net income and earnings
per share is required by SFAS No. 123, and has been determined as if the Company
had been accounting for its employee stock options under the fair value method
of SFAS No. 123. The fair value for these options was estimated at the date of
grant
59
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
using a Black-Scholes option pricing model with the following assumptions for
1997, 1996 and 1995, respectively: weighted average risk-free interest rates of
5.92%, 6.34% and 6.50%; no dividends; and a weighted-average expected life of
the options of 5 years. Weighted average volatility factors of the expected
market price of the Company's common stock of .623, .352 and .352, were used for
1997, 1996 and 1995, respectively. Options granted in 1995 were issued prior to
the initial public offering.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma net loss disclosures, the estimated fair value
of options granted subsequent to 1994 is amortized to expense over the options'
vesting period. The Company's pro forma net loss information is as follows:
1997 1996 1995
------------ ------------ ------------
Pro forma net loss $(6,113,000) $(2,847,000) $(3,381,000)
Pro forma net loss per share $ (0.75) $ (0.38) $ (4.78)
The pro forma information above is not likely to be representative of
the effects on reported net loss for future years as options are generally
granted each year and vest over several years and only include grants subsequent
to 1994.
For certain options granted during 1996, the Company has recorded
pursuant to APB No. 25 approximately $388,000 of deferred compensation expense
representing the difference between the exercise price thereof and the market
value of the common stock as of the date of grant. This compensation expense is
amortized over the vesting period of each option granted. Amortization of
deferred compensation under the Incentive Plans amounted to approximately
$124,000, $179,000 and $86,000 during 1997, 1996 and 1995, respectively. In
addition, approximately $12,000, $121,000 and $1,000 of deferred compensation as
it relates to the Incentive Plans was reversed during 1997, 1996 and 1995,
respectively, due to the forfeiture of the unvested options.
Note 8 -- Income Taxes
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
60
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
At December 31, 1997 and 1996, the Company had net operating loss
("NOL") carryforwards of approximately $25,000,000 and $21,000,000,
respectively, for Federal income tax purposes that will expire principally in
the years 2002 through 2012. 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 the limitations imposed by the Tax Reform Act of 1986, and as a result of
significant changes in the Company's ownership in 1993 and 1997, the utilization
of approximately $25,000,000 of net operating loss carryforwards is subject to
annual limitation. The utilization of the research and development credits is
similarly limited.
A reconciliation of the Company's income tax expense (benefit) at U.S.
federal statutory tax rates to recorded income tax expense (benefit) is as
follows:
1997 1996 1995
------------ ----------- ------------
Tax at U.S. statutory rates $(1,818,000) $ (895,000) $(1,145,000)
State income taxes (318,000) (156,000) (200,000)
Expiration of state NOL's 356,000 -- --
Other 108,000 8,000 37,000
Valuation allowance recorded 1,672,000 1,043,000 1,308,000
------------ ----------- ------------
Recorded tax provision -- -- --
============ =========== ============
Significant components of the Company's deferred tax assets as of
December 31, 1997 and 1996, are as follows:
1997 1996
Deferred tax assets: ------------- ------------
Net operating loss carryforwards $ 9,752,000 $ 8,579,000
Research and development credit carryforwards 1,500,000 1,500,000
Book over tax amortization 770,000 271,000
------------- ------------
Total deferred tax assets 12,022,000 10,350,000
Valuation allowance (12,022,000) (10,350,000)
Deferred tax assets: ------------- ------------
Net deferred tax assets -- --
============= ============
Note 9 -- Commitments
The Company leases facilities under an agreement expiring on December
31, 2015.
Rent expense for the years ended December 31, 1997, 1996 and 1995
approximated $703,000, $674,000, and $654,000, respectively, and included
executory costs of $120,000, $93,000 and $80,000, respectively. In November
1996, a standby letter of credit for $580,000 was issued to the landlord as a
security deposit (expires November 1998). The Company is to renew the letter of
credit annually during the duration of the lease. As of December 31, 1997, a
bank imposed restriction has been placed on $600,000 in cash held in the
Company's investment account to secure the letter of credit.
61
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
As of December 31, 1997, future minimum annual payments under the lease
are as follows:
1998 $ 644,000
1999 644,000
2000 1,155,000
2001 1,155,000
2002 1,155,000
Thereafter 19,225,000
------------
Total $ 23,978,000
============
The Company is party to two license agreements with major research
universities. Under the terms of the agreements, the Company received worldwide
nonexclusive licenses under patents issued in December 1980 and January 1991,
which patents expire in 1997 through 2008. One of these agreements requires a
$10,000 annual payment. The Company is also committed under these agreements to
pay royalties on future net sales of products employing the technology or
falling under claims of the patents covered by these agreements.
The Company has an employment agreement with its Chairman, President and
Chief Executive Officer which provides for severance payments of up to one year
of base salary upon the occurrence of certain events, including early
termination and termination upon a change in control, as defined. In addition to
severance payments, under certain circumstances, the agreement calls for
immediate vesting of any unvested shares of common stock and stock options.
At December 31, 1997, the Company had entered into agreements with each
of its Senior Vice President and Chief Financial Officer, Senior Vice President
for Research and Development, Vice President and General Counsel and Vice
President of Business Development which provide for severance payments in
amounts equal to 50% of annual base salary, on substantially the same terms as
stated above. In addition to severance, under certain circumstances, the
agreements call for immediate vesting of any unvested shares of common stock and
stock options.
Note 10 -- Employee Benefit Plans
The Company established a defined contribution employee retirement plan
(the "Plan") effective January 1, 1990, conforming to Section 401(k) of the
Internal Revenue Code ("IRC"). All eligible employees with six months service
may elect to have a portion of their salary deducted and contributed to the Plan
up to the maximum allowable limitations of the IRC. The Company matches 50% of
each participant's contribution up to the first 5% of annual compensation (as
defined) with a maximum employer contribution of 2.5% of a participant's
compensation. The Company's matching portion, which amounted to approximately
$107,000,
62
<PAGE>
SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997
$103,000 and $42,300 for the years ended December 31, 1997, 1996 and 1995,
respectively, vests over a six-year period.
The Company currently provides medical, dental, long-term disability and
life insurance benefits for its full-time employees. The Company does not
presently provide any post-retirement health benefits.
Note 11 -- Subsequent Events
On January 12, 1998, the Company entered into a cooperation agreement
with Grunenthal GmbH ("Grunenthal"). Under this agreement the parties agreed to
work together in discovering and developing drugs for the treatment of pain.
Synaptic will use its receptor-targeted drug design technology to identify
compounds of interest and Grunenthal will use its expertise to evaluate the
compounds in pain model systems and to conduct preclinical and clinical studies
with promising compounds. The companies will each be responsible for their own
research costs and equally share the development costs through Phase IIa
clinical trials. Synaptic will retain manufacturing and marketing rights in the
U.S., Canada and Mexico and share these rights in countries outside of Europe,
South and Central America.
On March 2,1998, the Company and Glaxo entered into the Glaxo Agreement
pursuant to which the Company granted Glaxo (i) a nonexclusive license under the
Company's alpha 1 adrenergic receptor patents to develop and sell alpha-1a
selective compounds for therapeutic applications other than the treatment of BPH
and (ii) until May 22, 1999, a nonexclusive license under its alpha 1 adrenergic
receptor patents and its BPH use patents to develop but not to commercialize
alpha-1a selective compounds for the treatment of BPH. In addition, the Company
granted Glaxo an option to obtain a nonexclusive license under its alpha 1
adrenergic receptor patents and its BPH use patents to develop and commercialize
alpha-1a selective compounds for the treatment of BPH. Such option is
exercisable by Glaxo only until May 22, 1999, upon the payment to Synaptic of an
additional amount. As consideration for the foregoing licenses and option, Glaxo
made a $2,000,000 payment to Synaptic. Synaptic is also entitled to receive
royalties on sales of all alpha-1a selective drugs sold by Glaxo so long as
Synaptic has an issued patent relating to an alpha 1 adrenergic receptor subtype
in at least one major market country, as well as royalties on sales of any
alpha-1a antagonist for the treatment of BPH in any country in which Synaptic
has an issued BPH use patent.
63
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
64
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated herein by reference
from the information under the captions "ELECTION OF DIRECTORS" and
"COMPENSATION AND OTHER INFORMATION CONCERNING OFFICERS, DIRECTORS AND CERTAIN
STOCKHOLDERS" contained in the Proxy Statement.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference
from the information under the caption "COMPENSATION AND OTHER INFORMATION
CONCERNING OFFICERS, DIRECTORS AND CERTAIN STOCKHOLDERS" contained in the Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference
from the information under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" contained in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein by reference
from the information under the caption "COMPENSATION AND OTHER INFORMATION
CONCERNING OFFICERS, DIRECTORS AND CERTAIN STOCKHOLDERS" contained in the Proxy
Statement.
65
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements
Reference is made to the Index to Financial Statements under Item 8, Part II
hereof.
(2) Financial Statement Schedules
The Financial Statement Schedules have been intentionally omitted either
because they are not required or because the information has been included in
the notes to the Financial Statements included in this Report on Form 10-K.
(3) Exhibits
Exhibit
No. Description
- ----------- --------------------------------------------------------------
3.1(a) Amended and Restated Certificate of Incorporation of the
Company, filed December 19, 1995 (incorporated by reference to
Exhibit 3.1(a) to the Company's Quarterly Report on Form 10-Q
filed for the quarter ended June 30, 1996, Commission File
Number 0-27324)
3.1(b) Certificate of Designations of Series A Junior Participating
Preferred Stock filed December 19, 1995 (incorporated by
reference to Exhibit 3.1(b) to the Company's Quarterly Report
on Form 10-Q filed for the quarter ended December 31, 1995,
Commission File Number 0-27324)
3.1(c) Certificate of Amendment of the Amended and Restated
Certificate of Incorporation of the Company, filed June 5,
1996 (incorporated by reference to Exhibit 3.1(c) to the
Company's Quarterly Report on Form 10-Q filed for the quarter
ended June 30, 1996, Commission File Number 0-27324)
3.2 Amended and Restated By-Laws of the Company, as amended on
February 6, 1998 (filed herewith)
4.1 Specimen of Certificate of Common Stock of the Company
(incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
4.2 Rights Agreement dated as of December 11, 1995, between the
Company and Chase Mellon Shareholder Services, as Rights Agent
(incorporated by reference to Exhibit 4.2 to the Company's
Annual Report on Form 10-K filed for the fiscal year ended
December 31, 1995, Commission File Number 0-27324)
66
<PAGE>
*10.1 Research, Option and License Agreement dated as of January 25,
1991, between the Company and Eli Lilly and Company, as
amended by Addendum dated as of January 1, 1995 (incorporated
by reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-1, as amended (File Number 33-98366),
which became effective on December 13, 1995)
*10.2 Research Collaboration and License Agreement dated as of
November 30, 1993, between the Company and Merck & Co., Inc.,
as amended by Amendment No. 1 dated as of February 15, 1995,
and as modified by the Letter Agreement dated August 25, 1995
(incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
*10.3 Research and License Agreement dated as of August 4, 1994,
between the Company and Ciba-Geigy Limited
(predecessor-in-interest of Novartis AG, the parent of
Novartis Pharma AG) (incorporated by reference to Exhibit 10.3
to the Company's Registration Statement on Form S-1, as
amended (File Number 33-98366), which became effective on
December 13, 1995)
+10.4 1988 Amended and Restated Incentive Plan of the Company
(incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
+10.5 Form of Restricted Stock Purchase Agreement under the 1988
Amended and Restated Incentive Plan of the Company
(incorporated by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
+10.6 Form of Incentive Stock Option Agreement under the 1988
Amended and Restated Incentive Plan of the Company
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
+10.7 Form of Non-Qualified Stock Option Agreement under the 1988
Amended and Restated Incentive Plan of the Company
(incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
10.8 Third Amended and Restated Registration Rights Agreement dated
as of January 19, 1993, as amended by Amendment No. 1 dated as
of August 4, 1994 (incorporated by reference to Exhibit 10.13
to the Company's Registration Statement on Form S-1, as
amended (File Number 33-98366), which became effective on
December 13, 1995)
10.9 Form of Common Stock Purchase Warrant dated as of January 1993
(incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
67
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10.10 License Agreement dated June 3, 1991, between the Company and
the Trustees of Columbia University in the City of New York
(incorporated by reference to Exhibit 10.16 to the Company's
Registration Statement on Form S-1, as amended (File Number
33-98366), which became effective on December 13, 1995)
10.11 Sublease Agreement dated October 31, 1991, between the Company
and Playtex, Inc., as amended by the First Sublease Amendment
effective as of August 15, 1994 (incorporated by reference to
Exhibit 10.18 to the Company's Registration Statement on Form
S-1, as amended (File Number 33-98366), which became effective
on December 13, 1995)
+10.12 Employment Agreement dated as of February 14, 1994, between
the Company and Robert I. Taber (incorporated by reference to
Exhibit 10.21 to the Company's Registration Statement on Form
S-1, as amended (File Number 33- 98366), which became
effective on December 13, 1995)
+10.13 Employment Agreement dated as of April 6, 1995, between the
Company and Richard L. Weinshank (incorporated by reference to
Exhibit 10.24 to the Company's Registration Statement on Form
S-1, as amended (File Number 33- 98366), which became
effective on December 13, 1995)
10.14 Form of Indemnification Agreement between the Company and each
of its executive officers and directors (incorporated by
reference to Exhibit 10.25 to the Company's Registration
Statement on Form S-1, as amended (File Number 33-98366),
which became effective on December 13, 1995)
+10.15 1996 Incentive Plan of the Company (incorporated by reference
to Exhibit 10.21 to the Company's Annual Report on Form 10-K
filed for the fiscal year ended December 31, 1995, Commission
File No. 0-27324)
+10.16 Incentive Stock Option Agreement dated October 1, 1993,
between the Company and Kathleen P. Mullinix (incorporated by
reference to Exhibit 10.28 to the Company's Registration
Statement on Form S-1, as amended (File Number 33-98366),
which became effective on December 13, 1995)
+10.17 Incentive Stock Option Agreement dated February 14, 1994,
between the Company and Robert I. Taber (incorporated by
reference to Exhibit 10.29 to the Company's Registration
Statement on Form S-1, as amended (File Number 33- 98366),
which became effective on December 13, 1995)
+10.18 Incentive Stock Option Agreement dated February 7, 1994,
between the Company and Lisa L. Reiter (incorporated by
reference to Exhibit 10.30 to the Company's Registration
Statement on Form S-1, as amended (File Number 33- 98366),
which became effective on December 13, 1995)
+10.19 Incentive Stock Option Agreement dated as of March 21, 1996,
between the Company and Kathleen P. Mullinix (incorporated by
reference to Exhibit 10.25 to the Company's Quarterly Report
on Form 10-Q filed for the quarter ended March 31, 1996,
Commission File Number 0-27324)
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<PAGE>
+10.20 Incentive Stock Option Agreement dated as of March 21, 1996,
between the Company and Robert L. Spence (incorporated by
reference to Exhibit 10.26 to the Company's Quarterly Report
on Form 10-Q filed for the quarter ended March 31, 1996,
Commission File Number 0-27324)
+10.21 Incentive Stock Option Agreement dated as of March 21, 1996,
between the Company and Lisa L. Reiter (incorporated by
reference to Exhibit 10.27 to the Company's Quarterly Report
on Form 10-Q filed for the quarter ended March 31, 1996,
Commission File Number 0-27324)
+10.22 Nonqualified Stock Option Agreement dated as of March 21,
1996, between the Company and Richard L. Weinshank
(incorporated by reference to Exhibit 10.28 to the Company's
Quarterly Report on Form 10-Q filed for the quarter ended
March 31, 1996, Commission File Number 0-27324)
+10.23 Form of Incentive Stock Option Agreement under the 1996
Incentive Plan (incorporated by reference to Exhibit 10.29 to
the Company's Quarterly Report on Form 10-Q filed for the
quarter ended March 31, 1996, Commission File Number 0-27324)
+10.24 Form of Nonqualified Stock Option Agreement under the 1996
Incentive Plan (incorporated by reference to Exhibit 10.30 to
the Company's Quarterly Report on Form 10-Q filed for the
quarter ended March 31, 1996, Commission File Number 0-27324)
***10.25 Research and License Agreement dated as of May 31, 1996,
between the Company and Ciba-Geigy Limited
(predecessor-in-interest of Novartis AG, parent of Novartis
Pharma AG) (incorporated by reference to Exhibit 10.31 to the
Company's Quarterly Report on Form 10-Q/A filed for the
quarter ended June 30, 1996, Commission File Number 0-27324)
***10.26 Supplement No. 1 to Research and License Agreement dated as of
August 4, 1994, between the Company and Ciba-Geigy Limited
(predecessor-in-interest of Novartis AG, parent of Novartis
Pharma AG) (incorporated by reference to Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q/A filed for the
quarter ended June 30, 1996, Commission File Number 0-27324)
10.27 1996 Nonemployee Director Stock Option Plan of the Company
(incorporated by reference to Exhibit 10.33 to the Company's
Quarterly Report on Form 10-Q filed for the quarter ended June
30, 1996, Commission File Number 0-27324)
10.28 Form of Stock Option Agreement under the 1996 Nonemployee
Director Stock Option Plan of the Company (incorporated by
reference to Exhibit A attached to Exhibit 10.33 to the
Company's Quarterly Report on Form 10-Q filed for the quarter
ended June 30, 1996, Commission File Number 0-27324)
**10.29 Addendum No. 2 to Research, Option and License Agreement dated
as of October 31, 1996, between the Company and Eli Lilly and
Company (incorporated by reference to Exhibit 10.35 to the
Company's Annual Report on Form 10-K filed for the fiscal year
ended December 31, 1996, Commission File No. 0-27324)
69
<PAGE>
**10.30 Amendment No.2 to Research Collaboration and License Agreement
dated as of October 9, 1996, between the Company and Merck &
Co., Inc. (incorporated by reference to Exhibit 10.36 to the
Company's Annual Report on Form 10-K filed for the fiscal year
ended December 31, 1996, Commission File No. 0-27324)
+10.31 Incentive Stock Option Agreement dated as of December 13,
1996, between the Company and Kathleen P. Mullinix
(incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K filed for the fiscal year ended
December 31, 1996, Commission File No. 0-27324)
+10.32 Form of Incentive Stock Option Agreement dated as of December
13, 1996, entered into between the Company and each of Robert
L. Spence, Robert I. Taber, Lisa L. Reiter and Richard L.
Weinshank (incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-K filed for the fiscal year
ended December 31, 1996, Commission File No. 0-27324)
***10.33 Collaborative Research and License Agreement dated as of July
28, 1997, between the Company and the Warner-Lambert Company
(incorporated by reference to Exhibit 10.39 to the Company's
Quarterly Report on Form 10-Q filed for the quarter ended
September 30, 1997, Commission File Number 0- 27324)
+10.34 Executive Employment Agreement effective as of October 1,1997,
between the Company and Dr.Kathleen P.Mullinix(filed herewith)
10.35 Lease Agreement dated November 19, 1997, between the Company
and Century Associates, which becomes effective January 1,
1998 (filed herewith)
10.36 Amendment No.3 to Research Collaboration and License Agreement
dated as of December 1, 1997, between the Company and Merck &
Co., Inc. (filed herewith)
+10.37 Amended and Restated Employment Agreement dated as of January
1, 1998, between the Company and Robert L. Spence (filed
herewith)
**10.38 Cooperation Agreement dated as of January 12,1998, between the
Company and Grunenthal GmbH (filed herewith)
+10.39 Amended and Restated Employment Agreement dated as of February
7, 1998, between the Company and Lisa L. Reiter (filed
herewith)
10.40 Amendment No.4 to Research Collaboration and License Agreement
dated as of March 2,1998, between the Company and Merck & Co.,
Inc. (filed herewith)
**10.41 Option and License Agreement dated as of March 2,1998, between
the Company and Glaxo Group Limited (filed herewith)
23.1 Consent of Independent Auditors, Ernst & Young LLP
24 Powers of Attorney
70
<PAGE>
27 Financial Data Schedule
- -----------------
* Portions of this Exhibit were omitted and confidential treatment thereof
has been granted by the Secretary of the Securities and Exchange
Commission in response to the Registrant's Application Requesting
Confidential Treatment under Rule 406 under the Securities Act of 1933, as
amended.
** 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.
*** Portions of this Exhibit were omitted and confidential treatment thereof
has been granted by the Secretary of the Securities and Exchange
Commission in response to the Registrant's Application Requesting
Confidential Treatment under Rule 246-2 under the Securities Act of 1933,
as amended.
+ Management contracts and compensatory plans or arrangements
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the
fourth quarter of the fiscal year ended December 31, 1997.
Supplemental Information
Copies of the Registrant's Proxy Statement and copies of the form of proxy
to be used at the Annual Meeting of Stockholders to be held on May 12, 1998,
will be furnished to the Securities and Exchange Commission at the time they are
distributed to the Registrant's stockholders.
71
<PAGE>
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
Date: March 27, 1998 By:/s/ Kathleen P. Mullinix
-----------------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
Signature Title Date
/s/ Kathleen P. Mullinix, Ph.D. Chairman, President and
Chief Executive Officer March 27, 1998
- -------------------------------
Kathleen P. Mullinix
/s/ Robert L. Spence Senior Vice President and
- ------------------------------- Chief Financial Officer March 27, 1998
Robert L. Spence
* Director March 27, 1998
- -------------------------------
Jonathan J. Fleming
* Director March 27, 1998
- -------------------------------
Zola P. Horovitz, Ph.D.
* Director March 27, 1998
- -------------------------------
Eric R. Kandel, M.D.
* Director March 27, 1998
- -------------------------------
John E. Lyons
* Director March 27, 1998
- -------------------------------
Sandra Panem
* Director March 27, 1998
- -------------------------------
Alison Taunton-Rigby, Ph.D.
* By:/s/ Kathleen P. Mullinix
-----------------------------------
Name: Kathleen P. Mullinix, Ph.D.
Title: Attorney-in-Fact
72
EXHIBIT 3.2
-----------
Adopted March 1992
as Amended Through
February 6, 1998
SYNAPTIC PHARMACEUTICAL CORPORATION
(the "Corporation")
Amended and Restated By-laws
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held in the City of New York, State of New York, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with
the year 1987, shall be held on the first Thursday of May if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
11:00 A.M., or at such other date and time as shall be designated from time to
time by the board of directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the
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<PAGE>
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the chairman of the board or the
president and shall be called by the chairman of the board or the president or
secretary at the request in writing of a majority of the members of the board of
directors. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given, not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the shares of capital stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of law or of the certificate of incorporation, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy
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<PAGE>
for each share of the capital stock having voting power held by such
stockholder, but no proxy shall be voted on or after three years from its date,
unless the proxy provides for a longer period.
Section 11. Written notice of the intent by any stockholder to
make a nomination of any person for election as a director at a meeting of
stockholders must be received by the secretary of the Corporation not later than
(i) with respect to an election to be held at an annual meeting of stockholders,
ninety days in advance of the annual meeting and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the day on which
notice of such meeting is first given to stockholders. The notice shall contain:
(A) the name and address of the stockholder who intends to make the nomination
and of the person or persons to be nominated; (B) a representation that the
stockholder is a holder of record of shares of stock having power to vote at the
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice: (C) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (D) the citizenship
of each nominee proposed by such stockholder; (E) the information that would
have been required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the board of directors of the
Corporation; and (F) the written consent of each nominee to serve as a director
of the Corporation if so elected.
ARTICLE III
DIRECTORS
GENERAL
Section 1. The number of directors constituting the whole
board shall be seven. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 2 of this Article or as
otherwise provided in the Corporation's certificate of incorporation, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.*
Section 2. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by law.
Section 3. The business of the Corporation shall be managed by
or under the direction of its board of directors which may exercise all such
powers of the Corporation and do all such lawful
- --------
* This Section was amended by the Board of Directors on February 6, 1998,
to read as set forth herein.
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<PAGE>
acts and things as are not by law or by the certificate of incorporation or by
these By-laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected board of
directors may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the board of directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time be
determined by the board of directors.
Section 7. Special meetings of the board may be called by the
president on twenty-four hours' notice to each director, either personally, by
mail, by telegram or by telecopier. Special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of two directors.
Section 8. At all meetings of the board of directors a
majority of the directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these By-laws, members of the board of directors, or any
committee designated by the board of directors, may participate in a meeting of
the board of directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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<PAGE>
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, be resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
board of directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-laws of the Corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
COMPENSATION OF DIRECTORS
Section 12. Unless otherwise restricted by the certificate of
incorporation or these By-laws, the board of directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
REMOVAL OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or By-laws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of law or of the
certificate of incorporation or of these By-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail,
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<PAGE>
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by hand, by telegram or by
telecopy.
Section 2. Whenever any notice is required to be given under
the provisions of law or of the certificate of incorporation or of these
By-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The principal officers of the Corporation shall be
chosen by the board of directors and shall be a president, a vice-president, a
secretary and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these By-laws otherwise provide.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 3. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all principal officers of the
Corporation shall be fixed by the board of directors.
Section 5. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative vote of
a majority of the board of directors. Any vacancy occurring in any office of the
Corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer
of the Corporation, shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall preside at the meetings
of the stockholders and the board of directors. He shall have such other powers
and perform such other duties as are provided in these By-laws and, in addition
thereto, as the board of directors may from time to time determine.
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<PAGE>
Section 7. The president shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the Corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of
his inability or refusal to act, the vice-president (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the board of
directors.
Section 12. The treasurer shall disburse the funds of the
Corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so
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<PAGE>
requires, an account of all his transactions as treasurer and of the financial
condition of the Corporation.
Section 13. If required by the board of directors, the
treasurer shall give the Corporation a bond (which shall be renewed every six
years) in such sum and with such surety or sureties as shall be satisfactory to
the board of directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of shares of stock of the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the chairman of the board of directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the Corporation, certifying the number of shares owned
by him in the Corporation.
Section 2. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meetings, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, deem
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such
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other purpose as the directors shall deem conducive to the interests of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. Except as otherwise provided in the certificate of
incorporation, these Bylaws, or any of them, may be altered, amended or
repealed, or new By-laws may be made, at any annual or special meeting, by the
stockholders having at least 67% of the total voting power of the Corporation,
or at any regular or special meeting of the Board of Directors, by vote of a
majority of the whole Board. By-laws made, altered or amended by the Board shall
be subject to alteration, amendment or repeal by the stockholders having at
least 67% of the total voting power of the Corporation.
ARTICLE IX
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer,
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employee or agent of the Corporation, or is or was serving or has agreed to
serve at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity, against costs, charges, expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or proceeding and
any appeal therefrom, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was or has agreed to
become a director, officer, employee or agent of the Corporation, or is or was
serving or has agreed to serve at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been taken
or committed in such capacity, against costs, charges and expenses (including
attorney's fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper.
Section 3. Expenses incurred in connection with a civil,
criminal, administrative or investigative action, suit or proceeding, or threat
thereof, may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article.
Section 4. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
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EXHIBIT 10.34
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EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment
Agreement (the "Agreement") is
entered into effective as of October
1, 1997 (the "Effective Date"),
between Synaptic Pharmaceutical
Corporation (the "Company"), a
Delaware corporation, and Dr.
Kathleen P. Mullinix (the
"Executive").
ARTICLE I
EMPLOYMENT OF EXECUTIVE
1.1. Employment. Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive in a full time capacity to
serve as the President and Chief Executive Officer of the Company and to perform
such specific duties as may reasonably be assigned to Executive from time to
time by the Board of Directors of the Company for the period commencing on the
Effective Date, and terminating four years from such date, unless earlier
terminated as herein provided. Executive hereby accepts such employment for the
term hereof.
1.2. No Conflicting Commitments. During the period of
Executive's full time employment with the Company, Executive will not undertake
any commitments which might impair Executive's performance of her duties as a
full time employee of the Company.
ARTICLE II
COMPENSATION
For all services to be rendered by Executive to the Company
pursuant to this Agreement, the Company shall pay to Executive the compensation
and provide for Executive the benefits set forth below:
2.1. Base Salary. Until January 1, 1998, the Company shall pay
to Executive a base salary of $250,000 per annum, prorated and payable in
substantially equal bi-monthly installments. Executive's base salary may be
increased from time to time thereafter by the Board of Directors of the Company,
in its discretion.
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2.2. Bonuses. Executive shall be eligible for a cash bonus in
an amount of $100,000 for the calendar year ending December 31, 1997, subject to
the assessment by the Compensation Committee of the Board of Directors of the
achievement of the previously agreed to criteria. Such cash bonus, if earned,
will be payable to Executive within forty-five (45) days after the end of such
calendar year. Additional bonuses may be approved by the Board of Directors of
the Company, in its discretion.
2.3. Fringe Benefits. In addition to Executive's base salary
and bonuses, the Company shall provide Executive and Executive's dependents
medical insurance and such other benefits as are generally made available by the
Company to its other full time executive employees.
2.4. Participation in Future Equity Incentive Plans. Executive
shall be entitled to participate, to the extent and in the manner determined by
the Board of Directors of the Company or the Compensation Committee thereof, as
appropriate, in its absolute discretion, in any stock option, stock purchase or
the equity incentive plans established by the Company.
2.5. Reimbursement of Expenses. The Company shall reimburse
Executive for reasonable business expenses incurred in the performance of her
duties hereunder.
ARTICLE III
EARLY TERMINATION
3.1. Early Termination. Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement upon the
occurrence of any of the following events:
3.1.1. Executive's death or legal incapacity; or
3.1.2. The termination of Executive's employment hereunder by
the Board of Directors of the Company, at its option, to be
exercised by written notice to Executive, upon Executive's
other incapacity or inability to further perform services as
contemplated herein for a period aggregating 90 days or more
within any six-month period because Executive's physical or
mental health shall have become impaired so as to make it
impossible or impractical to perform the duties and
responsibilities contemplated hereunder; or
3.1.3. The termination of Executive's employment with Cause
(as defined below) by the Board of Directors of the Company,
at its option, to be exercised by written notice to Executive.
As used in this Article III, termination by the Company of
Executive's employment for "Cause" shall mean termination upon
(i) the willful and continued failure by Executive to
substantially perform Executive's duties with the Company
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) after a written
demand for substantial performance is
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delivered to Executive by the Board of Directors of the
Company, which specifically and in reasonable detail
identifies the manner in which the Board of Directors believes
that Executive has not substantially performed Executive's
duties, (ii) the willful engaging by Executive in misconduct
which is materially injurious to the Company, monetarily or
otherwise or (iii) Executive's conviction of a felony; or
3.1.4. The termination of Executive's employment hereunder by
the Board of Directors of the Company, at its option, without
Cause, to be exercised by delivery of 90 days prior written
notice from the Company to Executive; or
3.1.5. The termination of Executive's employment hereunder by
Executive other than for Good Reason (as defined below), to be
exercised by delivery of 90 days prior written notice from
Executive to the Company; or
3.1.6. The termination of Executive's employment hereunder by
Executive for Good Reason, to be exercised by delivery of 90
days prior written notice from Executive to the Company. As
used in this Article III, termination by Executive of
Executive's employment for "Good Reason" shall mean (a)
termination by Executive within 180 days following and based
on any of the following events if any such event occurs
without Executive's prior written consent:
(i) the assignment to Executive of any
duties inconsistent with Executive's position,
duties, responsibilities and status within the
Company or any change in Executive's reporting
responsibilities, titles or offices which constitutes
a demotion;
(ii) any reduction by the Company in
Executive's base salary or any termination of
Executive's participation in any bonus plan as in
effect on the Effective Date or as the same may be
increased or in effect from time to time;
(iii) the Company's requiring Executive to
be based anywhere other than within 30 miles of
Executive's present office location, except for
required travel on the Company's business to an
extent substantially consistent with Executive's
present business travel obligations; and
(iv) any material breach of the provisions
of this Agreement by the Company (including those
outlined above), which is not cured within 30 days
after written notice from Executive to the Company
identifying such breach and stating that it
constitutes "Good Reason" under this Article III or
which is not commenced to be cured by reasonable
measures within such period if a full cure is not
possible within 30 days; or
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(b) termination by Executive with the express prior written
consent of the Board of Directors of the Company.
3.2. Adjustments Upon Early Termination. Subject to Section
3.3, notwithstanding any other provision in this Agreement or in any stock
option agreement or restricted stock purchase agreement between Executive and
the Company to the contrary:
3.2.1. If Executive's employment with the Company terminates
pursuant to Section 3.1.1 or 3.1.2., (a) all payments and
benefits provided to Executive under this Agreement shall
cease as of the date of termination of employment and (b) all
stock options and restricted stock in the Company held by
Executive on that date shall become immediately exercisable or
vest, as the case may be, on that date, and all stock options
shall continue to be exercisable for 120 days from such date
or for such longer period as their terms may provide.
3.2.2. If Executive's employment with the Company terminates
pursuant to Section 3.1.3, (a) all payments and benefits
provided to Executive under this Agreement shall immediately
cease to accrue as of the date of termination of employment
and (b) all further vesting of all stock options and
restricted stock in the Company held by Executive on that date
shall immediately cease as of the date of termination of
employment and thereafter such stock options shall be
exercisable and such restricted stock shall be subject to
repurchase by the Company in accordance with their respective
terms.
3.2.3. If Executive's employment with the Company terminates
pursuant to Section 3.1.4 or 3.1.6, (a) all payments and
benefits provided to Executive under this Agreement shall
continue for 12 months after the date of termination of
employment and (b) all stock options and restricted stock in
the Company held by Executive on the date of termination of
employment shall become immediately exercisable or vest, as
the case may be, on that date, and all stock options shall
continue to be exercisable for 120 days from such date or for
such longer period as their terms may provide.
3.2.4. If Executive's employment with the Company terminates
pursuant to Section 3.1.5., (a) all payments and benefits
provided to Executive under this Agreement shall continue for
9 months after the date of termination of employment and (b)
all further vesting on all stock options and restricted stock
in the Company held by Executive on that date shall
immediately cease as of the date of termination of employment
and thereafter such stock options shall be exercisable and
such restricted stock shall be subject to repurchase by the
Company in accordance with their respective terms.
This Section 3.2 is intended to override inconsistent
provisions of any other option or stock purchase agreement entered into prior to
the date of actual execution of this Agreement.
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3.3. Special Rules Regarding Continuation of Benefits.
Notwithstanding anything contained in Section 3.2 to the contrary, the Company
shall not be required upon Executive's termination of employment to continue any
benefits under any plan, program or arrangement of the Company unless
Executive's continued participation therein is possible under the general terms
and provisions of such plan, program or arrangement. In the event that
Executive's participation in any such plan, program or arrangement is barred or
in the event any medical condition covered by any plan, program or arrangement
of the Company is not covered by a plan, program or arrangement of a new
employer, the Company shall arrange to provide Executive with benefits
substantially similar to those which Executive would have been entitled to
receive under such plan, program or arrangement pursuant to the provisions of
Section 3.2, upon Executive's request and at Executive's expense.
3.4. No Duty to Mitigate. Executive shall be required to
mitigate the amount of any payment provided for in Section 3.2.4 by seeking
other employment, and any payment or benefit provided for in Section 3.2.4 shall
be reduced by compensation earned by Executive as the result of employment by
another employer after the date of termination. Executive shall not be required
to mitigate the amount of any payment provided for in Section 3.2.3 by seeking
other employment or otherwise, and no payment or benefit provided for in Section
3.2.3 shall be reduced by compensation earned by Executive as the result of
employment by another employer after the date of termination; provided, however,
that in the event Executive commences employment with a new employer at any time
during which she is entitled to receive payments and/or benefits pursuant to
Section 3.2.3, then (a) the aggregate amount of any remaining payments which
Executive would otherwise be entitled to receive pursuant to any such provision
shall be paid to Executive in a single lump sum within two weeks following the
Company's receipt of notice from Executive of her commencement of such
employment and (b) all benefits which Executive would otherwise be entitled to
receive pursuant to any such provision shall cease as of the date of her
commencement of such employment or, in the case of life insurance, medical,
health and accident insurance, and disability plans, programs or arrangements,
as soon thereafter as Executive becomes eligible to participate in such plans,
programs or arrangements of her new employer.
ARTICLE IV
CHANGE OF CONTROL OF THE COMPANY
4.1. Change in Control Defined. For purposes of this
Agreement, a "change in control of the Company" shall mean a change in control
of the Company of a nature that would be required to be reported in response to
Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act") if the Company were at that time subject to such
reporting requirements of the Exchange Act; provided that, without limitation,
such a change in control shall be deemed to have occurred if (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding securities;
or (ii) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of
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Directors of the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors of the Company then still in office who were directors at the
beginning of the period.
4.2. Termination of Employment Following Change in Control. If
any of the events defined in Section 4.1. to constitute a change in control of
the Company shall have occurred, Executive shall be entitled to the benefits
provided in Section 4.3. hereof upon the subsequent termination of Executive's
employment unless such termination is (a) because of Executive's death or
Retirement, (b) by the Company for Cause or (c) by Executive other than for Good
Reason.
4.2.1. Retirement. Termination by the Company of Executive's
employment based on "Retirement" shall mean termination in
accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried
employees.
4.2.2. Cause. As used in this Article IV, termination by the
Company of Executive's employment for "Cause" shall mean
termination upon (i) the willful and continued failure by
Executive to substantially perform Executive's duties with the
Company (other than any such failure resulting from
Executive's incapacity due to physical or mental illness)
after a written demand for substantial performance is
delivered to Executive by the Board of Directors of the
Company, which specifically and in reasonable detail
identifies the manner in which the Board of Directors believes
that Executive has not substantially performed Executive's
duties, (ii) the willful engaging by Executive in misconduct
which is materially injurious to the Company, monetarily or
otherwise or (iii) Executive's conviction of a felony.
4.2.3. Good Reason. As used in this Article IV, termination by
Executive of Executive's employment for "Good Reason" shall
mean termination based on:
(i) subsequent to a change in control of the Company,
and without Executive's express written consent, the
assignment to Executive of any duties inconsistent
with Executive's position, duties, responsibilities
and status within the Company immediately prior to a
change in control, or a change in Executive's
reporting responsibilities, titles or offices as in
effect immediately prior to a change in control, or
any removal of Executive from or any failure to
re-elect Executive to any of such positions or to the
Board of Directors of the Company except in
connection with the termination of Executive's
employment for Cause or Retirement or as a result of
Executive's death or by Executive other than for Good
Reason;
(ii) subsequent to a change in control of the
Company, a reduction by the Company in Executive's
base salary or a termination of Executive's
participation in any bonus plan as in effect on the
date hereof or as the same may be increased or in
effect from time to time;
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(iii) subsequent to a change in control of the
Company, and without Executive's express written
consent, the Company's requiring Executive to be
based anywhere other than within 30 miles of
Executive's present office location, except for
required travel on the Company's business to an
extent substantially consistent with Executive's
present business travel obligations;
(iv) subsequent to a change in control of the
Company, the failure by the Company to continue in
effect, or to continue Executive's participation in,
any benefit or compensation plan, life insurance
plan, health-and-accident plan or disability plan in
which Executive is participating at the time of a
change in control of the Company (or plans providing
Executive with substantially similar benefits), the
taking of any action by the Company which would
adversely affect Executive's participation in or
materially reduce Executive's benefits under any of
such plans or deprive Executive of any material
fringe benefit enjoyed by Executive at the time of
the change in control, or the failure by the Company
to provide Executive with the number of paid vacation
days to which Executive is then entitled in
accordance with the Company's normal vacation policy
in effect on the date hereof;
(v) subsequent to a change in control of the Company,
the failure by the Company to obtain the assumption
of the agreement to perform this Agreement by any
successor as contemplated in Section 8.4 hereof; or
(vi) subsequent to a change in control of the
Company, any material breach of this Agreement by the
Company (including those outlined above), which is
not cured within 30 days after written notice from
Executive to the Company identifying such breach and
stating that it constitutes "Good Reason" hereunder
or is not commenced to be cured by reasonable
measures within such period if a full cure is not
possible within 30 days.
4.2.4. Notice of Termination. Any purported termination by the
Company pursuant to Section 4.2.1. or 4.2.2. or by Executive
pursuant to Section 4.2.1. or 4.2.3. shall be communicated by
written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment
under the provision so indicated.
4.2.5. Date of Termination. "Date of Termination" shall mean
(i) if Executive's employment is terminated for Cause, the
date specified in the Notice of Termination, and (ii) if
Executive's employment is terminated for any other reason, the
date on which a Notice of Termination is given; provided that
if within 30 days after any Notice of Termination is given the
party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the
Date of
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Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties,
by a binding and final arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction
entered upon such arbitration award (the time for appeal
therefrom having expired and no appeal having been perfected).
4.3. Certain Benefits Upon Termination. If, after a change in
control of the Company shall have occurred, as defined in Section 4.1. above,
Executive's employment by the Company shall be terminated (a) by the Company
other than for Cause or Retirement or (b) by Executive for Good Reason, then
Executive shall be entitled to the benefits provided below:
4.3.1. Payment of Back Salary. The Company shall pay
Executive Executive's full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given plus
credit for any vacation earned but not taken and the amount, if any, of
any bonus for a past fiscal year which has not yet been awarded or paid
to Executive under the Company's bonus plans;
4.3.2. Payment of Future Salary. Until the end of the
12th calendar month following the Date of Termination, the Company
shall continue to pay Executive monthly Executive's base salary in
effect on the Date of Termination;
4.3.3. Continuation of Benefits. The Company shall
maintain in full force and effect, for Executive's continued benefit
until the earlier of (a) the end of the 12th calendar month following
the Date of Termination or (b) Executive's commencement of full time
employment with a new employer, all life insurance, medical, health and
accident insurance, and disability plans, programs or arrangements in
which Executive was entitled to participate immediately prior to the
Date of Termination, provided that Executive's continued participation
is possible under the general terms and provisions of such plans and
programs. In the event that Executive's participation in any such plan
or program is barred or in the event any medical condition covered by
any plan or program of the Company is not covered by the plan or
program of a new employer, the Company shall arrange to provide
Executive with benefits substantially similar to those which Executive
was entitled to receive under such plans and programs, at Executive's
expense;
4.3.4. Vesting of Stock Options, Etc. All stock
options, stock bonus awards and restricted stock grants relating to
securities of the Company held by Executive on the Date of Termination
shall vest or become exercisable, as the case may be, on the Date of
Termination, notwithstanding any provisions in any such stock options,
stock bonus awards or restricted stock grants to the contrary, and all
rights to exercise stock options shall remain exercisable by Executive
for a period of not less than 120 days after the Date of Termination.
If the benefits payable hereunder, together with other
payments in the nature of compensation to or with respect to Executive, would
otherwise be subject to the excise taxes imposed under Section 280G of the
Internal Revenue Code of 1986, as amended ("Code"), and if the net value
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of such benefits and payments in the nature of compensation, after reduction for
such taxes, is less than the aggregate value of the benefits and payments in the
nature of compensation determined as if such amounts had been $1.00 less than a
maximum amount which could be paid without imposition of excise taxes, then the
benefits payable hereunder shall be reduced to highest amount such that such
excise taxes shall not be imposed with respect to the benefits or the other
payments in the nature of compensation. It is the intention of this provision to
reduce benefits payable hereunder only if the Executive would be in a superior
position taking into account such excise taxes than if such payments were made,
and such reduction shall, in any event, be the least amount in order that the
Executive be better off with the reduction than before such reduction. The
calculation of the value of benefits payable hereunder and other payments in the
nature of compensation, and the implications of the excise tax rules of Section
280G of the Code, shall be determined by the Company in good faith based on
written advice of a national accounting firm.
4.4. No Duty to Mitigate. Executive shall not be required to
mitigate the amount of any payment provided for in Section 4.3 by seeking other
employment or otherwise, and no payment or benefit provided for in Section 4.3.
shall be reduced by compensation earned by Executive as the result of employment
by another employer after the Date of Termination, or otherwise.
ARTICLE V
COVENANTS AGAINST COMPETITION WITH THE COMPANY
5.1. Non-solicitation of Employees. Executive agrees that
during the term of Executive's employment with the Company and for a period of
two years after the termination of Executive's employment with the Company for
any reason, Executive shall not directly or indirectly recruit, solicit or
otherwise induce or attempt to induce any employees of the Company to leave the
employment of the Company.
5.2. Non-competition. Executive agrees that during the term of
Executive's employment with the Company and for a period of two years after the
termination of Executive's employment with the Company for any reason, Executive
shall not directly or indirectly, except as a passive investor in publicly held
companies and except for investments held at the date hereof, engage in
competition with the Company or any of its subsidiaries, or own or control any
interest in, or act as director, officer or employee of, or consultant to, any
firm, corporation or institution directly or indirectly engaged in competition
with the Company or any of its subsidiaries; provided, however, that such period
shall be reduced to six months if the Executive was terminated without Cause by
the Company or by the Executive for Good Reason after a change of control.
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ARTICLE VI
CONFIDENTIAL INFORMATION
6.1. Maintenance of Confidentiality. Executive agrees that
Executive will not (except as required in the course of employment with the
Company), both during the term of Executive's employment with the Company and
thereafter, communicate or divulge to, or use for Executive's own benefit or the
benefit of any other person, firm or organization, any confidential and
proprietary information of the Company and its subsidiaries.
6.2. Ownership of Confidential Information. Records, files,
memoranda, reports, price lists, customer lists, drawings, plans, sketches and
documents and the like, relating to the business of the Company, which Executive
shall use or prepare or come into contact within the course of, in connection
with, or as a result of employment with the Company, shall remain the Company's
sole and exclusive property.
ARTICLE VII
OWNERSHIP OF INVENTIONS
7.1. "Invention" Defined. As used in this Agreement,
"Invention" means any invention, discovery or innovation with regard to
chemistry, enzymology, biotechnology, genetic engineering or recombinant DNA
technology, whether or not patentable, made, conceived, or first actually
reduced to practice by Executive, alone or jointly with others, in the course
of, in connection with, or as a result of service as an executive of the
Company, including any art, method, process, machine, manufacture, design or
composition of matter, or any improvement thereof, or any variety of plant or
microorganism.
7.2. Disclosure of Inventions. Each Invention made, conceived
or first actually reduced to practice by Executive, whether alone or jointly
with others, during the term of Executive's employment with the Company and each
Invention made, conceived or first actually reduced to practice by Executive,
whether alone or jointly with others, within one year after the termination of
Executive's employment with the Company which relates in any way to work
performed for the Company during the term of Executive's employment, shall be
promptly disclosed in writing to the President of the Company (or such officer
of the Company as the President or Board of Directors may designate). Such
report shall be sufficiently complete in technical detail and appropriately
illustrated by sketch or diagram to convey to one skilled in the art of which
the invention pertains, a clear understanding of the nature, purpose,
operations, and, to the extent known, the physical, chemical, biological or
electrical characteristics of the Invention.
7.3. Ownership of Inventions. Each Invention, as herein
defined, shall be the sole and exclusive property of the Company.
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7.4. Assignment of Title. Executive agrees to execute an
assignment to the Company or its nominee of Executive's entire right, title and
interest in and to any Invention, without compensation beyond that provided in
this Agreement. Executive further agrees, upon the request of the Company and at
its expense, that Executive will execute any other instrument and document
necessary or desirable in applying for and obtaining patents in the United
States and in any foreign country with respect to any Invention. Executive
further agrees, whether or not Executive is then an employee of the Company, to
cooperate to the extent and in the manner reasonably requested by the Company in
the prosecution or defense of any claim involving a patent covering any
Invention or any litigation or other claim or proceeding involving any Invention
covered by this Agreement, but all expenses thereof shall be paid by the
Company.
ARTICLE VIII
MISCELLANEOUS
8.1. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
8.2. Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective lawful successors
and assigns and upon Executive's heirs and personal representatives.
8.3. Assignment. Except as otherwise provided in Section 8.4,
neither this Agreement nor any rights or obligations hereunder shall be
assignable by either party hereto without the prior written consent of the other
party.
8.4. Obligation of the Company's Successors. Any successor to
substantially all of the Company's assets and business, whether by merger,
consolidation, purchase of assets or otherwise, shall succeed to the rights and
obligations of the Company hereunder. The Company will require any such
successor, by agreement in form and substance satisfactory to Executive, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. The failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to compensation from the Company or its
successor in the same amount and on the same terms as Executive would be
entitled hereunder if Executive had terminated Executive's employment for Good
Reason following a change in control of the Company, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
8.5. Notices. All notices, requests, demands and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed to have been duly given if
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delivered by hand or mailed by registered or certified mail, return receipt
requested, postage prepaid, as follows:
If to the Company, to:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: President
If to Executive, to:
Dr. Kathleen P. Mullinix
975 Park Avenue, Apt. 2D
New York, New York 10028
or such other address as either party hereto shall have designated by notice in
writing to the other party.
8.6. Amendments. This Agreement may be amended, supplemented
or otherwise modified at any time, but only by an instrument in writing signed
by the parties hereto.
8.7. Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance with
the laws of New Jersey.
8.8. Severability. In case any provision hereof shall, for any
reason, be held to be invalid or unenforceable in any respect, such invalidity
or unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid or unenforceable provision had
not been included herein. If any provision hereof shall, for any reason, be held
by a court to be excessively broad as to duration, geographical scope, activity
or subject matter, it shall be construed by limiting and reducing it to make it
enforceable to the extent compatible with applicable law as then in effect.
8.9. Equitable Relief. Articles 5, 6, and 7 constitute
independent covenants, which shall be enforceable notwithstanding any right or
remedy that the Corporation may have under any other provision of this Agreement
or otherwise. The parties agree that the remedy at law for any breach of any
such section will be inadequate and the Company, in addition to all other
remedies, shall be entitled to a preliminary injunction to restrain such breach
prior to the trial of any issue and to temporary and permanent injunction relief
without the necessity of proving damages.
8.10. Survival. Articles 5, 6 and 7 shall survive the
termination of this Agreement for the periods of time indicated therein or
indefinitely if no period is indicated.
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IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Agreement as of the date first above written.
SYNAPTIC PHARMACEUTICAL CORPORATION
By: /s/ Lisa L. Reiter
-----------------------
Name: Lisa L. Reiter
Title: VP, General Counsel & Secretary
EXECUTIVE
/s/ Kathleen P. Mullinix
------------------------
Kathleen P. Mullinix
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EXHIBIT 10.35
-------------
AGREEMENT
BETWEEN
CENTURY ASSOCIATE
("CENTURY")
AND
SYNAPTIC PHARMACEUTICAL CORPORATION
THIS AGREEMENT is made and entered into this 19th day of
November, 1997 (but shall be effective as of the Effective Date, as herein
defined, for all purposes), by and between Century Associates, a New Jersey
partnership, having an address c/o Sun Chemical, 222 Bridge Plaza South, Fort
Lee, New Jersey 07024 (hereinafter sometimes referred to as "Century" and
sometimes referred to as "Sublessor") and Synaptic Pharmaceutical Corporation, a
Delaware corporation, having an address at 215 College Road, Paramus, New Jersey
(hereinafter sometimes referred to as "Synaptic" and sometimes referred to as
"Sublessee").
WITNESSETH:
WHEREAS, Century is the fee simple owner of the real property located
at 215 College Road, Paramus, New Jersey 07652, and more particularly described
in Schedule A attached hereto and made a part hereof ("Land"), together with the
buildings and other improvements located thereon ("Improvements") (such Land and
Improvements, collectively, "Paramus Facility");
WHEREAS, Century is also the Landlord under certain lease agreements
and amendments thereto listed on Schedule B attached hereto and made a part
hereof (collectively, "Overlease");
WHEREAS, International Playtex Corporation and International Playtex
Company, as successor to International Playtex Corporation (collectively,
"Playtex") was the tenant under the Overlease;
WHEREAS, Playtex Apparel, Inc. ("Apparel"), as assignee of Playtex, was
the sublessor under a certain Sublease with Neurogenetic Corporation, the
sublessee thereunder, dated October 31, l991, as amended by that certain First
Sublease Amendment, dated August, 1994 ("Sublease Amendment") (said Sublease and
Sublease Amendment, collectively, the "Sublease") pursuant to which Neurogenetic
Corporation leased space in the Improvements, more particularly described in the
Sublease ("Demised Premises");
WHEREAS, Synaptic is successor in interest to Neurogenetic
Corporation as sublessee under the Sublease;
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WHEREAS, the Term of the Overlease expires December 31, 1999
("Expiration Date") and it is anticipated that the Overlease will not be
extended and, accordingly, Century is negotiating with Apparel to terminate the
Overlease prior to the Expiration Date and to have Apparel assign to Century
Apparel's interest in the Sublease;
WHEREAS, upon such assignment, Century and Synaptic desire to amend the
Sublease for the Premises in certain respects as well as to provide for the
lease of certain additional space in the Improvements as such additional space
becomes available for lease;
WHEREAS, Synaptic has operated pursuant to the terms and provisions of
the Sublease since October 1991 and is desirous of continuing to do so to the
extent such terms and provisions may continue to apply to its respective rights
and obligations, as same may be amended by the terms and provisions of this
Agreement and, accordingly Century and Synaptic each agree and acknowledge that
it is their respective intent and desire that, notwithstanding the earlier
termination of the Overlease, the Sublease will remain in full force and effect,
as hereby amended, as a direct lease between Century and Synaptic, the terms and
provisions of the Sublease, as amended by this Agreement, shall constitute the
terms and provisions of a direct lease between Century and Synaptic (such
Sublease, as amended by this Agreement, "Lease"); Century will become the
successor to Apparel as Sublessor under the Sublease and Synaptic will continue
to be the Sublessee and, notwithstanding such designation as Sublessor and
Sublessee, Century will be the Landlord and Synaptic will be the Tenant under
the direct Lease;
WHEREAS, it is also the intent of the parties hereto that, if Century
acquires the interest of Playtex under the Overlease, no merger of Century's
positions as Landlord and Tenant thereunder shall be deemed to have occurred
and, while the Overlease shall terminate as of the Effective Date, as such term
is hereinafter defined, it will nevertheless remain in full force and effect as
between Sublessor and Sublessee for the sole purpose of interpreting the rights
and obligations of the parties under the Lease as necessary;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The recital clauses are hereby incorporated herein in full as though
set forth verbatim and at length herein. A capitalized term used herein but not
defined herein shall have the meaning given such term in the Sublease.
2. This Agreement shall be effective on January l, 2000, or such
earlier date, as designated by Sublessor by notice to Sublessee, upon which
Century succeeds to the interests of Apparel as sublessee under the Overlease
and sublessor under the Sublease ("Effective Date"). If the Effective Date
occurs before January 1, 2000, the period commencing on the Effective Date and
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ending on December 31, 1999 (such period, the "Add-on Period") shall be added to
the Term. The parties hereto acknowledge and agree that, if Apparel extends the
term of the Overlease, this Agreement shall be deemed null and void ab initio.
3. This Agreement modifies, amends and supplements the Sublease. Any
conflict between the terms and provisions of this Agreement and the terms and
provisions of the Sublease shall be controlled by the terms of this Agreement.
In all other respects, the Sublease shall remain in full force and effect.
4. All of the obligations contained in the Overlease conferred and
imposed upon Sublessor (as successor of the lessee therein), except as modified
and amended by the Lease, are hereby conferred and imposed upon Sublessee with
respect to the Demised Premises. Any rights granted to Sublessor (as successor
of the lessee therein) are not hereby granted to Sublessee and Sublessee shall
have only those rights as are specifically set forth in the Lease. Sublessee
covenants and agrees to fully and faithfully perform the terms and conditions of
the Overlease and the Lease on its part to perform with respect to the Demised
Premises. Sublessee agrees as an express inducement for Sublessor's executing
this Agreement that, if there is any conflict between the provisions of the
Lease and the provisions of the Overlease which would permit Sublessee to do or
cause to be done or suffer or permit any act or thing to be done which is
prohibited by the Overlease, then the provisions of the Overlease shall prevail,
provided that, notwithstanding the foregoing, Paragraph 9 D of the Sublease
shall in no way be amended by the foregoing. At the request of Sublessee,
Sublessor agrees that it will use reasonable efforts to incorporate the terms
and provisions of the Overlease as well as the terms and provisions of the Lease
into one document.
5. (a) Paragraph 1 A of the Sublease, as amended by the
Sublease Amendment, is hereby deleted and restated in its
entirety as follows:
"A. "Sublessor does hereby lease to Sublessee and Sublessee
does hereby take from Sublessor the Demised Premises "AS IS
WHERE IS" at the rent and upon the terms and conditions herein
stated, for the Term, as hereinafter defined. When the
Effective Date occurs, the term of the Sublease will expire
and the Term of this Lease will commence and such term will
expire, unless sooner terminated in accordance with the terms
of this Lease, at midnight on December 31, 2015 ("Expiration
Date") (such period from the Effective Date to the Expiration
Date, inclusive, herein referred to as the "Term"). If the
Effective Date occurs on a day that is not the first day of
the month, Annual Base Rent for the initial fractional month
of the Term, if any, shall be prorated and paid, together with
the
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first monthly installment of Annual Base Rent due for the
Term. As used herein, the term "Demised Premises" shall
include (i) a minimum of 41,274 rentable square feet on the
Effective Date, exclusive of Sublessee's pro-rata share of the
rentable square feet of the Cafeteria (such 41,274 rentable
square feet and its pro-rata share of the Cafeteria,
collectively, the "Current Space"); (ii) the additional space
more particularly described on Schedule C attached hereto and
made a part hereof currently occupied by Playtex Products
Inc., which space shall be added to the Current Space as of
the day ("Expansion Date") after the day on which Playtex
Products Inc. vacates its space, with the result that the
Current Space will be increased as of the Expansion Date to
73,918 rentable square feet (such 73,918 rentable square feet,
the "Minimum Rentable Square Feet"); and (iii) the additional
space more particularly described on Schedule D attached
hereto and made a part hereof as same shall be added in
accordance with the terms of Paragraphs 35 hereof to the space
theretofore leased by Sublessee.
(b) Paragraphs 1 B and
1 C are deleted in their
entirety.
6. (a) Paragraph 4 A, as modified by the Sublease Amendment, is hereby
further modified as follows:
"From the Expansion Date, Sublessee shall pay to Sublessor during the
Term a fixed basic rent per annum, absolutely net ("Annual Base Rent")
as follows:
(i) for Lease Years 1-5, calculated at the annual
rate of $13.00 per rentable square foot [based on the
Minimum Rentable Square Feet, $960,934 per Lease Year
($80,077.83 per month)];
(ii) for Lease Years 6-10, calculated at the rate of
$16.00 per rentable square foot [based on the Minimum
Rentable Square Feet, $1,182,688 per Lease Year
($98,557.33 per month)]; and
(iii) for Lease Years 11-15, calculated at the rate
of $20.00 per rentable square foot [based on the
Minimum Rentable Square Feet, $1,478,360 per Lease
Year ($123,196.67 per month)]; .
"Lease Year" shall mean the period commencing on the Effective Date (or
the first day of the month immediately following the Effective Date if
the Effective Date is not the first day of the month), or any
anniversary thereof occurring during the Term, and ending on the last
day of the
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12 month period immediately following the date on which the Lease Year
commenced, or the anniversary thereof, as the case may be. Sublessor
and Sublessee agree that (i) the aforesaid Annual Base Rent shall apply
to the Add-on Period and that the term "Lease Years 1-5" shall be
deemed to be increased by the Add-on Period if the Expansion Date
occurs prior to January 1, 2000; and (ii) notwithstanding anything
herein to the contrary, from the Effective Date until the day prior to
the Expansion Date, Annual Base Rent and Sublessee's percentage share
of Operating Costs, but not the components of such Operating Costs,
shall be as stated in the Sublease."
(b) Paragraphs 4 B and 4 C are hereby deleted and Paragraph 4
B is restated in its entirety as follows:
"The Annual Base Rent shall be adjusted, as of the date such
space becomes available to Sublessor for lease, by the number
of rentable square feet of space in excess of the Minimum
Rentable Square Feet added to the Demised Premises during the
Term, calculated at the annual rate then in effect pursuant to
Paragraph 4 A per rentable square foot. [In no event will the
total rentable square feet of the Demised Premises during the
Term be less than the Minimum Rentable Square Feet, it being
understood by the parties hereto that Sublessor is entering
into this Lease on the condition that Sublessee be deemed to
have leased the Minimum Rentable Square Feet on the Expansion
Date.] The parties shall execute and deliver a supplemental
agreement which shall be attached hereto and made a part
hereof as Schedule D specifying the total rentable square feet
of such added space. The Annual Base Rent and Sublessee's
share of Operating Costs shall be appropriately adjusted,
provided, however, that, if Sublessee leases space in excess
of the Minimum Rentable Square Feet prior to January 1, 2000,
the Annual Base Rent with respect to such rentable square feet
in excess of the Minimum Rentable Square Feet shall be
appropriately adjusted as of January 1, 2000."
7. (a) Paragraph 5 is hereby modified to add the
following in line 3 before the words "Real Estate
Taxes":
"other operating expenses,if any, incurred by Sublessor in
maintaining, repairing, and replacing the Building systems,
roof, structural components, public halls and stairways, smoke
detectors and alarm systems, and the exterior portions of the
Paramus Facility,"
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<PAGE>
(b) Paragraph 5(a) is deleted and restated in its
entirety as follows:
"Sublessee's share of Operating Costs shall be the ratio of
the total rentable square feet of the Demised Premises from
time to time to 110,666 (which is the total rentable square
feet of the Paramus Facility), provided, however, that no
adjustment shall be made which would result in a reduction of
Sublessee's share of Operating Costs. Based upon the Demised
Premises having the Minimum Rentable Square Feet, Sublessee's
share of Operating Costs is 66.8%. Operating Costs shall mean
the actual costs, without duplication, paid or accrued,
incurred by the Sublessor during each calendar year. Sublessee
acknowledges and agrees that this Lease is triple net and that
Operating Costs shall include, without limitation, all
expenses incurred by Sublessor in maintaining the Paramus
Facility, including, the Cafeteria, in accordance with
Paragraph 13 B, as well as the cost to Sublessor of hiring and
retaining a Building maintenance person."
(c) Paragraph 5 A (b) is hereby modified to delete the last
two sentences thereof.
8. Paragraph 6 A is hereby modified to add to following as the first
subparagraph thereof:
"(a) Sublessee shall be responsible for, and shall perform, at
its own cost and expense, using licensed and insured
contractors and subcontractors, all alterations within the
Demised Premises, including the construction of all demising
walls. Not later than 30 days prior to commencing any such
alterations, Sublessee shall obtain from its contractors and
subcontractors performing construction activities at the
Paramus Facility and deliver to Sublessor evidence of
insurance coverages, which shall be primary to the insurance
maintained by Sublessee and shall name Sublessor as an
additional insured, in amounts and forms reasonably
satisfactory to Sublessor."
and to renumber the following paragraph as "6 A(b)".
9. Paragraph 8 C (d)(i) is hereby modified to add "to be" prior to
"paid" in line 4 thereof.
10. Paragraphs 9E and 9F are hereby deleted in their entirety.
11. (a) Paragraph 10 B (2) is hereby modified to replace "$4,000,000"
with "$5,000,000" in lines 3 and 5 thereof;
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<PAGE>
(b) Paragraph 10 is hereby further modified to add the
following as new subparagraph E:
"E. To the maximum extent permitted by law, Sublessee
agrees that Sublessor shall not be responsible or
liable to Sublessee or to those claiming by, through or
under Sublessee, for any loss or damage to property of
Sublessee or of others that may be placed or contained
within the Demised Premises."
12. Paragraph 11 is hereby modified to replace "ten (10)" with "twelve
(12)" in line 24, and to add the following in line 27 after "Section 11A":
"which right shall be exercised by Sublessee's delivery to
Sublessor within 30 days of the expiration of such 12 month
period of written notice of Sublessee's irrevocable election
to terminate as of the date specified in such notice, provided
however that Sublessor may negate such termination by
Sublessee by completing such restoration of the Demised
Premises within 30 days of Sublessor's receipt of Sublessee's
termination notice."
13. (a) Paragraph 12 A is hereby modified as follows:
In line 3 after the word "expense", insert the following,
"maintain the Demised Premises in compliance with and shall".
(b) Paragraph 12 B is hereby modified as follows:
In line 6, after the word "ECRA", add the following to the end
of the sentence:
"as amended by the Industrial Site Recovery Act of 1993; the
regulations promulgated thereunder and any successor or
amended legislation or regulations ("ISRA")."
and the term "ECRA" is replaced with the term "ISRA"
throughout Paragraph 12.
(c) Paragraph 12 B (ii) is hereby modified as follows:
In line 3, replace the word "achieve" with the word "obtain";
in that same line, after the word "Declaration" insert the
word "Approval"; in that same line, after the word "ECRA" add
a comma; in line 4, delete the words "completion of a cleanup
plan as defined in ECRA" and replace it with the words "shall
obtain an unconditional no further action letter from the New
Jersey Department of Environmental Protection";
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and at the end of this paragraph (ii), add the following
sentence:
"In no event shall any cleanup by the
Sublessee involve the use of engineering or
institutional controls, or a groundwater
classification exception area."
(d) Paragraph 12 B (iii) is hereby modified as
follows:
In line 3, after the word "materials", add the words
"issued or received by the Sublessee."
(e) Paragraph 12 G is hereby modified as follows:
In line 1, replace the word "premises" with the words "Demised
Premises" and in line 3, replace the word "Sublessor" with the
word "Sublessee".
14. (a) Paragraph 13 A is hereby modified as follows:
In line 3, add the words: "including, without limitation, the
roof and structural components of the Demised Premises, the
building plumbing and electrical systems and equipment located
within the Demises Premises for general supply of water, heat,
air conditioning, gas and electricity, the existing HVAC
system, alarm system and smoke detectors within the Demised
Premises" after the words "Demised Premises"; and in line 6,
delete "(other than structural and other repairs which are the
responsibility of Sublessor pursuant to subsection B), subject
to latent defects which Sublessor shall be required to
correct" and replace such phrase with the phrase: "(other than
repairs which are the responsibility of the building
maintenance person pursuant to Paragraph 13 B below)".
(b) Paragraph 13 B is hereby deleted and replaced in
its entirety as follows:
"Sublessor will provide a building maintenance person.
Sublessee shall be responsible for payment of its pro-rata
share, determined as provided in Paragraph 5 (a) above, of the
costs and expenses incurred by Sublessor in performing this
service, including the cost of hiring and maintaining a
Building maintenance person (such costs and expenses,
collectively, "Janitorial Costs") as Additional Rent."
(c) Paragraph 13 C is hereby modified to delete the following:
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"Except as otherwise specified herein (including, without
limitation, Sublessor's obligations with respect to Casualty
Damage," in lines 1-3; and "(except for latent defects which
are not readily apparent by inspection, which Sublessor shall
repair)" in lines 11- 13;
and to add the following as the last sentence thereof:
"Sublessee accepts the existing HVAC system and other building
systems, the roof and structure of the Demised Premises, and
the exterior portions of the Paramus Facility "AS IS" and
hereby assumes the full and sole responsibility, at its own
cost, for the condition, operation, repair, replacement,
maintenance and modification of the Demised Premises."
15. Paragraph 16 E (2) is hereby modified to add the following prior to
the period in the last sentence thereof:
"except as otherwise specifically provided in this Lease with
respect to any obligation of Sublessee to indemnify Sublessor
that survives termination of this Lease"
16. Paragraph 20 is hereby deleted and restated in its entirety as
follows:
"Subject to compliance by Sublessee with the terms and
conditions of the operating agreement to be entered into
between Sublessor and Sublessee and other tenants of the
Paramus Facility which shall provide for the operation by such
tenants, including Sublessee, of the Cafeteria in the Paramus
Facility at their own cost and expense, allocated on a
pro-rata basis which, as to Sublessee, shall be based upon the
total rentable square feet of the Demised Premises determined
in accordance with Paragraph 4 B above, Sublessee shall have a
non-exclusive license to use such Cafeteria for its employees
and business invitees at Sublessee's risk and expense on the
same terms as other tenants of the Paramus Facility are
permitted to use such Cafeteria and subject to compliance with
such reasonable rules and regulations as may be promulgated by
Sublessor from time to time regarding the use of the Cafeteria
which shall be applied uniformly to all such tenants and
enforced without discrimination. Nothing herein shall obligate
Sublessor, its successors or assigns, to continue to operate
or maintain the Cafeteria, or any cafeteria, in the Paramus
Facility and, if Sublessee shall fail to comply with its
obligations hereunder or under the operating agreement, the
license herein granted to Sublessee to use, operate, and
maintain the
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Cafeteria shall be discontinued or suspended, at the election
of Sublessor. In such event, there shall be no adjustment to
Rent as a result thereof, except that no further pro-rata
allocation with respect to the Cafeteria shall be payable by
Sublessee in the event and from and after the date that the
license is suspended or discontinued, and Sublessor reserves
the right to lease the Cafeteria space to a third party for
use as a cafeteria or for any other use."
17. Paragraph 26 H is hereby modified to replace the addressees therein
specified with the following:
"As to Sublessor:
Mr. Eugene Jacobson
Century Associates
c/o Sun Chemical
222 Bridge Plaza South
Fort Lee, New Jersey 07024
As to Sublessee:
Mr. Robert Spence
Chief Financial Officer
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652"
and to replace the telephone numbers therein specified as
follows:
"Sublessor: (201) 224-4600
Sublessee: (201) 261-1331"
18. Paragraph 26 G is hereby modified as follows:
In line 1, delete the word "NO"; in line 3, delete the word
"Sublease" and add the words "Lease, other than Cushman &
Wakefield of New Jersey, Inc. (the "Broker") immediately prior
to the period; in line 7, add the word "other" immediately
prior to the word "realtors"; in lines 9 and 13, replace the
word "Sublease" with "Lease"; and add the following as the
last sentence of the Paragraph:
"Sublessor shall pay the brokerage commission due
Broker pursuant to the terms of a separate agreement
with Broker."
19. The following provisions shall be added to the Existing Lease as
indicated:
10
<PAGE>
(a) Add as new Paragraph 27:
"27. SUBLESSOR'S EXCULPATION.
Notwithstanding anything contained in this Lease to the
contrary, it is specifically agreed that there shall be no
personal liability on the part of the Sublessor, or
Overlandlord, and/or their respective employees, agents,
directors, officers, shareholders, partners, constituent
members, successors or assigns, with respect to any of the
terms, provisions, covenants and conditions of this Lease and
Sublessee agrees to look solely to Sublessor's interest in the
Paramus Facility for the recovery of any judgment against
Sublessor. The foregoing is not intended to and shall not
limit any right that Sublessee may have to pursue a suit for
injunctive relief or specific performance of the obligation
that is the subject of any breach or default on the part of
Sublessor under this Lease. The within exculpation of personal
liability shall be absolute and without exception. The term
"Sublessor" as used in this sublease shall mean the owner of
the Sublessor's interest, whether fee or leasehold, in the
Paramus Facility, or any portion thereof, and if any such
interest be sold or transferred, the seller shall be entirely
relieved of all covenants and obligations under this Lease."
(b) Add as new Paragraph 28:
"28. LEASE MODIFICATION.
If in connection with obtaining financing for the Paramus
Facility, or any part thereof, or interest therein, a bank,
insurance company or other recognized institutional lender
shall request reasonable modifications in the Lease as a
condition to such financing, Sublessee will not unreasonably
withhold, delay or defer its consent thereto, provided that
such modifications do not increase the obligations of
Sublessee hereunder or materially decrease the obligations of
Sublessor hereunder. In addition thereto, Sublessee shall
furnish to any such mortgagee or proposed mortgagee copies of
Sublessee's latest financial statements duly certified by an
independent certified public accountant, or if no such
certified statement is available, then such statements shall
be certified by the chief financial officer of Sublessee."
(c) Add as new Paragraph 29:
"29. LIENS.
11
<PAGE>
Sublessee shall not do any act, or make any contract, which
may create or be the foundation for any lien or other
encumbrance upon any interest of Sublessor or any ground or
underlying lessor, in any portion of the Paramus Facility. If
any construction lien claim or other lien (collectively,
"Lien"), charge or order for the payment of money or other
encumbrance shall be filed against Sublessor and/or any such
ground or underlying lessor and/or any portion of the Paramus
Facility (whether or not such Lien, charge, order, or
encumbrance is valid or enforceable as such) which names
Sublessee as the debtor or obligor or alleges that Sublessee
is the debtor or obligor, Sublessee shall, at its own cost and
expense, cause same to be discharged of record or bonded
within 15 days after Sublessee's receipt of notice of the
filing thereof, and Sublessee shall indemnify and save
harmless Sublessor and all such ground and underlying
lessor(s) against and from all costs, liabilities, suits,
penalties, claims, and demands, including reasonable attorney
fees, resulting from Sublessee's failure to discharge same
within such period. If Sublessee fails to comply with the
foregoing provisions, Sublessor shall have the option of
discharging or bonding any such Lien, charge, order, or
encumbrance, and Sublessee agrees to reimburse Sublessor for
all costs, expenses and other sums of money in connection
therewith as Additional Rent with interest at the maximum rate
permitted by law, which shall accrue from the date due until
paid, promptly upon demand. All materialmen, contractors,
artisans, mechanics, laborers, and any other persons now or
hereafter contracting with Sublessee or any contractor or
subcontractor of Sublessee for the furnishing of any labor,
services, materials, supplies, or equipment with respect to
any portion of the Demised Premises, at any time from the date
hereof until the end of the Term, are hereby charged with
notice that they look exclusively to Sublessee to obtain
payment for same." (d) Add as new Paragraph 30:
"30. SUBLESSOR'S RESERVED RIGHTS.
Sublessee acknowledges that the Paramus Facility is
not open to the general public. Access to the Paramus
Facility is restricted to Sublessor, Sublessee, their
agents, employees, and their invited visitors. In the
event of a labor dispute including a strike,
picketing, informational or associational activities
directed at Sublessee or any other tenant, Sublessor
reserves the right, on such notice to Sublessee as is
reasonably practicable, unilaterally to alter
Sublessee's
12
<PAGE>
ingress and egress to the Demised Premises or make
any other change in operating conditions to restrict
pedestrian, vehicular or delivery ingress and egress
to a particular location. Additionally, Sublessor
reserves unto itself all rights not granted to
Sublessee in this Lease, including, by way of
example, the right to change the name by which the
Paramus Facility is commonly known."
(e) Add as new Paragraph 31:
"31. SUBLESSOR'S RIGHT TO MORTGAGE/ASSIGN.
Notwithstanding any other provision of this Lease to the
contrary, Sublessor, and any successor or assignee of
Sublessor, may convey all or any portion of its interest in
Sublessor, this Lease, the Paramus Facility
or the Demises Premises. Sublessor shall also have the right
from time to time to pledge, mortgage or encumber its
Interests in the Demised Premises and the Paramus Facility.
Any provision of this Lease to the contrary notwithstanding,
the provisions of any such mortgage shall govern in the event
of Casualty Damage or a Taking of the Demised Premises,
including, without limitation, the disposition of any
insurance proceeds payable in the case of Casualty Damage and
of awards payable in connection with such Taking. Sublessor
shall provide Sublessee with notice of such mortgage."
(f) Add as new Paragraph 32:
"32. ASBESTOS REMEDIATION.
Sublessee agrees that it shall have the obligation to promptly
remove or encapsulate asbestos present within the Demised
Premises (which term, for purposes of this Paragraph 32, shall
include the space attributable to Sublessee plus Sublessee's
pro-rata share of the common areas of the Building), at its
costs and expense, in compliance with Laws. Sublessee
acknowledges that prior to the date of this Lease, Sublessee
will inspect the Demised Premises for the purpose of
determining the presence, if any, of asbestos, and the costs
of removing or encapsulating same in compliance with Laws
("Asbestos Remediation Costs"). As a result of such
inspection, Sublessee has determined that asbestos is present
within the Demised Premises. Sublessee represents to Sublessor
that, pursuant to its agreement with Sublessor respecting
same, the Asbestos Remediation Costs for remediation of VAT
tile located in areas of the Demised Premises that are not
utilized as laboratory space (such space, "Non-Laboratory
Space") will be determined on the basis of
13
<PAGE>
encapsulation of such VAT tile rather than removal of same. If
the Asbestos Remediation Costs actually incurred by Sublessee
exceed $100,000, Sublessor hereby agrees that, upon submission
of evidence reasonably satisfactory to it of such
expenditures, it will reimburse Sublessee in the form of a
rental credit applied in equal monthly installments to the
Annual Base Rent due hereunder during Lease Years 1 and 2, for
the amount of such Asbestos Remediation Costs in excess of
$100,000; provided, however, that Sublessor's obligations
under this Paragraph 32 shall not exceed $133,600 in the
aggregate and Sublessor shall have no obligation to pay for
the cost of removal of VAT tile from the Non-Laboratory Space.
Sublessee shall be responsible for payment of all of the costs
of removal of asbestos from the Demised Premises in excess of
$233,600. Notwithstanding the foregoing, Sublessor reserves
the right to have its contractor determine the cost of removal
of the asbestos and, if such contractor's estimate is lower
than that provided by Sublessee, Sublessee agrees that, at the
election of Sublessor, such removal will be performed by
Sublessor's contractor. The provisions of this Paragraph 32
shall survive expiration or earlier termination of this
Lease."
(g) Add as new Paragraph 33:
"33. REPRESENTATIONS AND WARRANTIES.
Sublessee hereby reaffirms all of its representations in the
Sublease including, without limitation, those set forth in
Paragraph 9 of the Sublease and in Paragraph 6(a) of the
Sublease Amendment."
(h) Add as new Paragraph 34:
"34. LOADING DOCKS.
Sublessee shall have control of the loading docks at the
Paramus Facility provided that Sublessor and other tenants of
the Paramus Facility shall not at any time during the Term be
precluded from using such loading docks. Sublessee agrees to
cooperate with Sublessor and such other tenants in their
respective use of the loading docks."
(i) Add as new Paragraph 35:
"35. RIGHT OF FIRST OFFER
A. Subject to and in accordance with the provisions
of this Paragraph 35 and provided that Sublessee is not
14
<PAGE>
then in default of the provisions of this Lease, Sublessor
agrees that if, as and when space in the Paramus Facility not
then included in the Demised Premises becomes available (such
space, the "Available Space"), Sublessor will notify Sublessee
thereof and of the terms and conditions pursuant to which
Sublessor will lease such Available Space (such notice,
"Availability Notice"). If Sublessee elects to add the
Available Space to the Demised Premises on the terms and
conditions set forth in the Availability Notice, Sublessee
shall deliver notice of its election ("Expansion Election
Notice") to Sublessor within fifteen (15) days of the date of
Sublessee's receipt of the Availability Notice. Sublessee
agrees that, if it fails to deliver the Expansion Election
Notice as and when aforesaid, it shall be deemed to have
elected not to lease the Available Space and to have forever
waived its right to exercise its option to add the Available
Space to the Demised Premises and Sublessor shall have the
right to lease the Available Space to a third party free and
clear of any claim of Sublessee thereto. Notwithstanding such
waiver, however, Sublessor agrees that if the Available Space
is offered to a third party at an annual base rent less than
ten percent (10%) of the annual base rent set forth in the
Availability Notice, Sublessor will notify Sublessee of such
reduction (such notice, "Reduction Notice") and Sublessee
shall have five (5) days from its receipt of such Reduction
Notice to deliver its Expansion Election Notice to Sublessor.
If Sublessee elects to add the Available Space to the Demised
Premises, such Available Space shall be added to the Demised
Premises for all purposes under this Lease and on the terms
and conditions as are then in effect as modified by the terms
and conditions of the Availability Notice, and/or the
Reduction Notice, as applicable, as of the earlier of the date
listed in the Expansion Election Notice or the date that is
thirty (30) days from the date of the Availability Notice or
Reduction Notice, if applicable. Any termination, expiration,
cancellation or surrender of this Lease shall terminate any
right or option to expand provided for in this Paragraph 35
not yet exercised. Said right or option may not be separately
sold, assigned or otherwise transferred.
20. Paragraphs 6 (a), 8, 9 and 10 of the Sublease Amendment are hereby
deleted in their entirety.
21. Schedule C, Subparagraph (a) is hereby modified as follows:
(a) replace the word: "Building" with the words:
"Paramus Facility" throughout;
15
<PAGE>
(b) add the following at the end of the subparagraph:
"If at any time during the Term of this Lease the methods of
taxation shall be altered so that, in addition to or in lieu
of or as a substitute for the whole or any part of real estate
taxes there shall be levied, assessed or imposed (i) a tax,
license, fee or other charge on the rents received, or (ii)
any other type of tax or other imposition in lieu of, or as a
substitute for, or in addition to the whole or any portion of
any real estate taxes, then the same shall be included as Real
Estate Taxes under this Lease."
The submission of this Agreement does not constitute an offer,
and this Agreement shall become effective only upon execution and delivery
thereof by Sublessor and Sublessee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
WITNESS: CENTURY ASSOCIATES
By: J&E of Paterson, Inc.
- -------------------- /s/ Eugene Jacobson
-------------------
President
ATTEST: SYNAPTIC PHARMACEUTICAL
CORPORATION
- -------------------- By:/s/Robert L. Spence
-------------------
Its:
16
<PAGE>
STATE OF NEW JERSEY
COUNTY OF BERGEN
)
)
)
SS.:
I CERTIFY that on November 19, 1997, Eugene Jacobson
personally came before me and acknowledged under oath, to my satisfaction, that
this person
(a) is named in and personally signed the attached
document; and
(b) signed, sealed and delivered this document on behalf of the
Partnership.
/s/ Virginia Edwards
-----------------------------
Attorney at Law
State of New Jersey
STATE OF NEW JERSEY
COUNTY OF BERGEN
)
)
)
SS.:
I CERTIFY that on October 17, 1997, Robert L. Spence
personally came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) this person signed, sealed, and delivered the attached
document as
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as its
voluntary act and deed by virtue of authority from its Board
of Directors.
/s/ Elinor Bernstein
------------------------------
Notary Public
17
<PAGE>
SCHEDULE A
DESCRIPTION OF THE LAND
18
<PAGE>
SCHEDULE B
INSTRUMENTS COMPRISING OVERLEASE
1. Lease Agreement dated February 4, 1969
Century Associates (Landlord)
International Playtex Corporation (Tenant)
2. Land Lease Agreement dated June 21, 1973
Century Associates (Landlord)
International Playtex Corporation (Tenant)
3. Lease Agreement dated October 7, 1974
Century Associates Landlord)
International Playtex Company, Division of Rapid-
America Corporation (Tenant)
4. Amendment to Lease dated August 7, 1973
Century Associates (Landlord)
International Playtex Corporation (Tenant)
5. Amendment to Lease dated August 30, 1973
Century Associates (Landlord)
International Playtex Corporation (Tenant)
6. Amendment to Lease Agreement dated October 7, 1974
Century Associates (Landlord)
International Playtex Company, Division of Rapid-
American Corporation (Tenant)
7. Letter Agreement dated May 30, 1974
Century Associates (Landlord)
International Playtex Company, Division
of Rapid - American Corporation (Tenant)
19
<PAGE>
SCHEDULE C
DEMISED PREMISES
Space A: approximately 42,000 square feet, 28,474 square feet of
which is located in the northwest part of the Paramus
Facility and 12,800 square feet of which is located in
the northeast part of the single story center section
of the Paramus Facility, each as shown stripped on
Schedule A attached hereto and made a part hereof;
Space B: approximately 15,000 square feet on the second floor of
the east wing of the Paramus Facility;
Space C: approximately 3,000 square feet of space adjacent to
Space A;
Space D: approximately 8,000 square feet of laboratory space,
adjacent to Space A;
Space E: approximately 5,000 square feet adjacent to Space A;
Space F: approximately 37,000 square feet now or formerly
occupied by Playtex Apparel Inc. or AOE if, as and when
same, or any portion thereof, shall become available
for lease ("Playtex Space");
each as identified as such on Schedule C-l attached hereto and made a part
hereof, plus, in each case, Sublessee's pro-rata share of the total rentable
square feet of the Cafeteria.
20
<PAGE>
SCHEDULE D
[GRAPHIC OMITTED]
21
EXHIBIT 10.36
-------------
AMENDMENT NO. 3 AND SUPPLEMENT TO
RESEARCH COLLABORATION AND LICENSE AGREEMENT
Amendment No. 3 and
Supplement dated and
effective December 1, 1997,
between SYNAPTIC
PHARMACEUTICAL CORPORATION,
a Delaware corporation
("Synaptic"), and MERCK &
CO., INC., a New Jersey
corporation ("Merck").
Recitals
WHEREAS, Merck and Synaptic are parties to a Research
Collaboration and License Agreement dated as of November 30, 1993, as amended
(the "Agreement"); and
WHEREAS, Merck and Synaptic desire to extend the term of the
Research Program (capitalized terms used and not defined herein having the
meanings set forth in the Agreement) under the Agreement as set forth herein in
order to continue to work towards the identification of back-up safety
assessment candidates;
NOW THEREFORE, in consideration of the premises and covenants
set forth herein, the parties agree as follows:
1. The term of the Research Program is hereby extended for an
additional one-year period expiring on November 30, 1998 (the
"Second Extension Period"). The term may be further extended
only upon the mutual agreement of the parties in writing.
2. During the Second Extension Period, as part of the Research
Program, Synaptic shall devote the efforts of two man years in
support of the continuing pharmacological characterization of
Merck compounds.
3. Merck shall pay to Synaptic, within 30 days following the end
of each three-month period of the Second Extension Period, an
amount equal to $120,000 (one hundred twenty thousand dollars)
in consideration of the support set forth in Article 2. In the
event that Merck terminates the Research Program pursuant to
Article 4 hereof, Merck will pay Synaptic a pro rata portion
of the $120,000 based on that number of days which precede the
Termination Date in the three-month period in which the
Termination Date occurs.
1
<PAGE>
4. At any time following written notification from Merck to
Synaptic that the Merck Research Management Committee has
accepted a second back-up safety assessment candidate, Merck
may terminate the Research Program by providing at least 90
days prior written notice to Synaptic. As of the ninetieth day
following such notice (the "Termination Date"), Synaptic shall
discontinue the support set forth in Article 2 hereof. Upon
any termination of the Research Program pursuant to this
Article 4, no sums shall be payable by Merck under Article 3
except for amounts due or earned but not yet paid as of the
Termination Date.
5. From and after the date first written above, all references in
the Agreement to "this Agreement," "hereunder," "hereof,"
"herein," or words of similar import, shall be a reference to
the Agreement, as amended by this Amendment No. 3 and
Supplement.
6. From and after the date first written above, all references in
the Agreement to "the Research Program" shall be a reference
to the Research Program conducted during the period beginning
on November 30, 1993, and ending on November 30, 1998, in
accordance with the Agreement, as amended and supplemented by
this Amendment No. 3 and Supplement, or such earlier date as
may be specified in a notification from Merck to Synaptic in
accordance with Article 4 above.
7. Except as expressly amended and supplemented by this Amendment
No. 3 and Supplement, the Agreement shall remain in full force
and effect and unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment No.
3 and Supplement to be executed and delivered as of the date first written
above.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinix
------------------------------
Kathleen P. Mullinix
Chairman, President and Chief Executive Officer
MERCK & CO., INC.
By:/s/ Bennett M. Shapiro
------------------------------
Bennett M. Shapiro
Executive VP, Worldwide Basis Research
2
EXHIBIT 10.37
-------------
AMENDED AND
RESTATED EMPLOYMENT
AGREEMENT dated as of
January 1, 1998, between
SYNAPTIC PHARMACEUTICAL
CORPORATION, a Delaware
corporation (the
"Company"), and ROBERT L.
SPENCE (the "Employee").
The Employee is currently employed by the Company and
possesses special and partic ular knowledge of the business and operations of
the Company and of the industry in which it operates. The Company and the
Employee are parties to an Employment Agreement dated as of January 1, 1994 (the
"Original Employment Agreement") the initial term of which expires on January 1,
1998. The Company and the Employee now desire to amend and restate herein the
terms of the Employee's employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs the Employee,
and the Employee hereby accepts such employment by the Company, on the terms and
subject to the conditions hereinafter set forth.
2. Term. Subject to earlier termination as provided herein,
the employment of the Employee hereunder shall be for a four-year period
commencing on January 1, 1998 (the "Effective Date") and ending on the fourth
anniversary of the Effective Date; provided, however, that commencing as of such
fourth anniversary and on each anniversary thereafter, unless either party
hereto gives the other party at least 90 days' prior written notice of its or
his election not to extend the period of the Employee's employment hereunder,
such period shall automatically be extended for an additional one-year period on
the same terms and conditions set forth herein, unless otherwise agreed upon by
the parties. For convenience of reference, such period of employment, as the
same may be extended as aforesaid, is referred to herein as the "Employment
Period."
3. Duties. (a) During the Employment Period, the Employee
shall be employed as the Senior Vice President, Finance and Chief Financial
Officer of the Company and shall perform such duties for the Company consistent
with such position as may be assigned to him by the persons having authority
regarding such matters at the Company.
(b) The Employee shall perform his duties hereunder at the offices of the
Company in Paramus, New Jersey; provided, however, that the Company may require
the Employee to travel in connection with the performance of such duties.
Anything contained herein to the contrary notwithstanding, if the Company
requires the Employee to be based anywhere other than within a 50-mile radius of
New York City and notifies the Employee in writing that his continued employment
by the Company is conditional upon such relocation and the Employee refuses to
so
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<PAGE>
relocate, then any Termination of Employment of the Employee resulting
therefrom, whether initiated by the Company or by the Employee, shall constitute
a Termination Without Cause.
4. Time to be Devoted to Employment. Except for vacations in
accordance with the Company's vacation policies and absences due to temporary
illness, during the Employment Period, the Employee shall devote all of his
business time, attention and energies to the performance of his duties under
this Agreement. During the Employment Period, the Employee shall not be engaged
in any other business activity which, in the judgment of the Company, conflicts
with the duties of the Employee under this Agreement, whether or not such
activity is pursued for gain, profit or other pecuniary advantage.
5. Compensation; Reimbursement.
(a) Base Salary. During the Employment Period, the Company shall pay
to the Employee a base salary of $170,000 per annum, subject to increase by the
Board of Directors of the Company, in its discretion. For convenience of
reference, such base salary, as the same may be increased as aforesaid, is
referred to herein as the "Base Salary." The Base Salary shall be payable in
such installments (but not less frequent than monthly) as is the policy of the
Company generally with respect to its employees.
(b) Annual Performance Bonus. The Employee shall be eligible to
receive a cash bonus of at least $25,000 with respect to each calendar year
during the Employment Period, subject to the achievement of the goals determined
at the commencement of each year by the President of the Company. Such cash
bonus, if earned, will be payable to the Employee within forty-five days after
the end of the calendar year in respect of which such bonus is earned.
Additional bonuses may be approved by the Board of Directors of the Company, in
its discretion.
(c) Benefits. During the Employment Period, the Employee shall be
entitled to such benefits as are generally made available to other employees of
the Company and to such additional benefits as are generally made available to
employees of the Company at substantially the same level of employment as the
Employee.
(d) Reimbursement of Expenses. During the Employment Period, the
Company shall reimburse the Employee, in accordance with the policies and
practices of the Company in effect from time to time during such Period, for all
reasonable and necessary traveling expenses and other disbursements incurred by
him for or on behalf of the Company in connection with the perfor mance of his
duties hereunder (such expenses being referred to herein as "Reimbursable
Expenses") upon presentation by the Employee to the Company of appropriate
documentation therefor.
6. Termination of Employment.
(a) General. The Company may terminate the Employee's employment
hereunder at any time for any reason. The Employee may terminate his employment
hereunder pursuant to a Resignation for Good Reason, a Voluntary Termination or
a Disability Termination.
-2-
<PAGE>
The Employee's employment shall terminate automatically upon his death. Any
termination of the Employee's employment is referred to herein as a "Termination
of Employment."
(b) Termination Notice. The Company or the Employee may initiate a
Termination of Employment in any manner permitted hereunder by giving the other
party written notice thereof (the "Termination Notice").
(c) Termination Date. The effective date (the "Termination Date") of
any Termination of Employment shall be deemed to be the later of (i) the date on
which the Termination Notice is given and (ii) the date specified as the
effective date in the Termination Notice; provided, however, that in the case of
the Employee's death, the Termination Date shall be his date of death.
7. Termination by the Company.
(a) Termination for Cause. Any Termination of Employment initiated
by the Company upon the occurrence of an event that constitutes Cause shall be a
"Termination for Cause." For purposes of this Agreement, the term "Cause" shall
mean the Employee's (i) willful failure to perform those duties that the
Employee is required or expected to perform as an employee of the Company under
Section 2 hereof, (ii) consistent failure over a substantial period of time to
perform competently such duties, (iii) conviction of a crime involving moral
turpitude, dishonesty, theft, unethical business conduct or conduct that
significantly impairs the reputation of the Company or (iv) failure to devote
all of his business time, attention and energies to the performance of his
duties hereunder. In the event of a Termination for Cause, the Termination
Notice given to the Employee by the Company shall state that the Termination of
Employment is "for Cause."
(b) Termination Without Cause. Any Termination of Employment
initiated by the Company (other than a Termination for Cause or a Disability
Termination) shall be a "Termination Without Cause."
8. Termination by the Employee.
(a) Resignation for Good Reason. Any Termination of Employment
initiated by the Employee within 90 days following the occurrence of any of the
following events shall be a "Resignation for Good Reason":
(i) subsequent to a Change in Control, and without the
Employee's express written consent, (A) the assignment to the Employee
of any duties inconsistent with his position, duties, responsibilities
and status within the Company prior to such Change in Control, (B) any
material change in the Employee's titles or offices as in effect prior
to such Change in Control or (C) any removal of the Employee from or
any failure to re-elect the Employee to any material position held by
him prior to such Change in Control;
(ii) subsequent to a Change in Control, a reduction in the
Employee's Base Salary or a termination of the Employee's participation
in any bonus plan or program (or a
-3-
<PAGE>
substantial reduction in the level of such participation) as in effect
on the Effective Date or as the same may be increased after the
Effective Date and in effect at the time;
(iii) subsequent to a Change in Control, and without the
Employee's express written consent, any requirement that the Employee
be based anywhere other than within a 50-mile radius of New York City;
(iv) subsequent to a Change in Control, the failure by the
Company to continue the Employee's participation in any benefit or
compensation plan, life insurance plan, health-and- accident plan or
disability plan in which the Employee is participating at the time of
such Change in Control (or in plans providing the Employee with
substantially similar or more favorable benefits) or the taking of any
action by the Company which would materially adversely affect the
Employee's participation in or materially reduce the Employee's
benefits under any of such plans or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of such
Change in Control; or
(v) subsequent to a Change in Control, the failure by the
Company to obtain the assumption of the agreement to perform this
Agreement by any successor as contemplated by Section 16.
In the event of a Resignation for Good Reason, the Termination Notice given to
the Company by the Employee shall state that the Termination of Employment is a
"Resignation for Good Reason."
(b) Other Termination by the Employee. Any Termination of
Employment initiated by the Employee (other than a Termination of Employment
resulting from the Employee's death, a Resignation for Good Reason or a
Disability Termination) shall be a "Voluntary Termination."
9. Termination by the Company or by the Employee -- Disability
Termination. Any Termination of Employment resulting from the Employee's
Disability shall be a "Disability Termination." For purposes of this Agreement,
the term "Employee's Disability" shall mean the Employee's illness or other
physical or mental disability that prevents the Employee from performing his
duties hereunder for a period of 90 days in any 180-day period. In the event of
a Disability Termination, the Termination Notice given to one party by the other
party shall state that the Termination of Employment is a "Disability
Termination."
10. Effect of Termination of Employment. (a) In the Event of a
Termination of Employment (other than a Termination of Employment contemplated
by Section 11(a)), neither the Employee nor his estate or beneficiaries shall
have any further rights or claims against the Company under this Agreement
except the right to receive:
(i) the portion of the Base Salary which accrued with respect
to the period prior to the Termination Date but which remained unpaid
as of the Termination Date;
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(ii) the aggregate amount of Reimbursable Expenses which were
incurred prior to the Termination Date but which were not reimbursed by
the Company as provided in Section 5(d) prior to the Termination Date;
and
(iii) any other benefits to which the Employee may be entitled
upon such Termination of Employment under the plans, programs and
policies of the Company then in effect, which benefits shall be payable
in accordance with the terms of such plans, programs and policies;
provided, however, that if the Termination of Employment is pursuant to a
Termination Without Cause, then, in addition to the amounts computed pursuant to
the foregoing provisions of this Section 10(a), the Employee shall have the
right to receive as severance compensation an amount (the "Severance Amount")
equal to 50% of one year's Base Salary, such Severance Amount to be payable at
the same times at which and in the same manner in which the Base Salary would
have been payable to the Employee had the Termination of Employment not
occurred.
(b) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 10 by seeking other employment or
otherwise, and no payment or benefit provided for in this Section 10 shall be
reduced by compensation earned by the Employee as a result of his employment by
another employer following the Termination Date, or otherwise.
11. Effect of Termination of Employment following a Change in
Control. (a) In the event that the Employee's employment with the Company is
terminated in contemplation of, or at any time within one year following, a
Change in Control, and such termination constitutes a Termination Without Cause
or a Resignation for Good Reason, neither the Employee nor his estate or
beneficiaries shall have any further rights or claims against the Company under
this Agreement other than the following:
(i) the right to receive all amounts and benefits to which the
Employee would be entitled under Section 10 upon a Termination of
Employment; and
(ii) all stock options, stock bonus awards and restricted
stock grants relating to securities of the Company held by the Employee
on the Termination Date shall vest or become exercisable, as the case
may be, on the Termination Date, notwithstanding any provisions in any
such stock options, stock bonus awards or restricted stock grants or
the plans covering the same to the contrary, and all rights to exercise
such stock options shall remain exercisable by the Employee for a
period of not less than 120 days after the Termination Date.
If the benefits payable hereunder, together with other payments in the nature of
compensation to or with respect to the Employee, would otherwise be subject to
the excise taxes imposed under Section 280G of the Internal Revenue Code of
1986, as amended ("Code"), and if the net value of such benefits and payments in
the nature of compensation, after reduction for such taxes, is less than the
aggregate value of the benefits and payments in the nature of compensation
determined as if such amounts had been $1.00 less than a maximum amount which
could be paid without imposition of
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excise taxes, then the benefits payable hereunder shall be reduced to highest
amount such that such excise taxes shall not be imposed with respect to the
benefits or the other payments in the nature of compensation. It is the
intention of this provision to reduce benefits payable hereunder only if the
Employee would be in a superior position taking into account such excise taxes
than if such payments were made, and such reduction shall, in any event, be the
least amount in order that the Employee be better off with the reduction than
before such reduction. The calculation of the value of benefits payable
hereunder and other payments in the nature of compensation, and the implications
of the excise tax rules of Section 280G of the Code, shall be determined by the
Company in good faith based on written advice of a national accounting firm.
(b) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 11 by seeking other employment or
otherwise, and no payment or benefit provided for in this Section 11 shall be
reduced by compensation earned by the Employee as a result of his employment by
another employer following the Termination Date, or otherwise.
(c) As used herein, the term "Change in Control" shall mean a
change in control of the Company of a nature that would be required to be
reported in response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), if the Company were at that
time subject to such reporting requirements of the Exchange Act; provided,
however, that such term shall in any event be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's then outstanding
securities or (ii) during any one-year period or any period of two consecutive
years, individuals who at the beginning of any such period constitute the Board
of Directors of the Company cease for any reason to constitute at least a
majority thereof as of the end of such period unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors of the Company then
still in office who were directors at the beginning of such period.
12. Notices. All notices or other communications that are
required or permitted hereunder shall be in writing and shall be deemed to have
been given if (a) personally delivered or sent by telecopier, (b) sent by
nationally-recognized overnight courier or (c) sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to the Employee, to him at:
50 Jackson Place
Lyndhurst, New Jersey 07071
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if to the Company, to it at:
215 College Road
Paramus, New Jersey 07652
Attention: President
Telecopier: 201-261-0623
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered, sent by telecopier or sent by nationally-recognized,
overnight courier and (ii) on the third Business Day following the date on which
the piece of mail containing such communication is posted, if sent by mail. As
used herein, the term "Business Day" means a day that is not a Saturday, a
Sunday or a day on which banking institutions in the city to which the notice or
communication is to be sent are not required to be open.
13. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior or contemporaneous negotiations, correspondence,
understandings and agreements between the parties with respect thereto,
including, without limitation, the Original Employment Agreement. This Agreement
may be amended only by an agreement in writing signed by both parties hereto.
Anything contained herein to the contrary notwithstanding, the provisions of
Sections 10 and 11 shall survive the expiration or early termination of the
Employment Period.
14. Assignment. This Agreement is personal in its nature.
Accordingly, neither party hereto shall, without the consent of the other,
assign this Agreement or any rights or obligations hereunder to any other person
or entity.
15. Benefits of Agreement. The provisions of this Agreement
shall be binding upon and inure to the benefit of the heirs, beneficiaries,
executors, administrators and permitted assigns of the Employee and the
successors and permitted assigns of the Company.
16. Obligation of the Company's Successors. Any successor to
substantially all of the Company's assets and business, whether by merger,
consolidation, purchase of assets or otherwise, shall succeed to the rights and
obligations of the Company hereunder. The Company shall require any such
successor, by agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. The failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to receive from the Company or its
successor the same amounts and benefits that the Employee would be entitled to
receive under Sections 11(a)(i) and 11(a)(ii) upon a Resignation for Good
Reason. For purposes of implementing the immediately preceding sentence, the
date on which any such succession becomes effective shall be deemed the
Termination Date.
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17. Waiver of Breach. A waiver of any breach of any provision
of this Agreement shall not constitute or operate as a waiver of any other
breach of such provision or of any other provision, and any failure to enforce
any provision hereof shall not operate as a waiver of such provision or of any
other provision.
18. Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
19. Headings. The headings of sections in this Agreement
are for convenience only, are not a part of this Agreement and shall not affect
the construction of the provisions of this Agreement.
20. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Jersey
without giving effect to principles of conflicts of laws.
21. Enforceability. In the event that any provision of this
Agreement is determined to be partially or wholly invalid, illegal or
unenforceable in any jurisdiction, then such pro vision shall, as to such
jurisdiction, be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable, or, if such provision cannot be
modified or restricted, then such provision shall, as to such jurisdiction, be
deemed to be excised from this Agreement; provided, however, that the binding
effect and enforceability of the remaining provisions of this Agreement, to the
extent that the economic benefits conferred upon the parties by virtue of this
Agreement remain substantially unimpaired, shall not be affected or impaired in
any manner, and that any such invalidity, illegality or unenforceability with
respect to such provisions shall not invalidate or render unenforceable such
provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinix
-----------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President and
Chief Executive Officer
/s/ Robert L. Spence
------------------------------
Robert L. Spence
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EXHIBIT 10.38
-------------
Cooperation Agreement
entered into as of January 12, 1998 (the "EFFECTIVE DATE" )
between
Grunenthal GmbH
Zieglerstr. 6
52078 Aachen
Federal Republic of Germany
- hereinafter "GRUNENTHAL" -
and
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, NJ 07652-1431
U S A
- hereinafter "SYNAPTIC" -
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Table of Contents
Page
Article 1 Definitions 3
Article 2 Cooperation, Implementation of Projects 7
Article 3 Management and Planning Projects; 14
Reports and Exchange of Information
Article 4 Early Stage of Projects 20
Article 5 Advanced Development Stage of Projects 24
Article 6 Post-Advanced Development Stage Production and Marketing 28
Article 7 Patent Protection 29
Article 8 License Grants; Restrictions on Use of Technology
and Patent Rights 31
Article 9 Reimbursement or Other Payments of Costs 32
Article 10 Records and Reports, Inspection 33
Article 11 Confidentiality 34
Article 12 Termination of Projects 35
Article 13 Term and Termination of Agreement 36
Article 14 Effect of Termination or Expiration of Agreement 37
Article 15 Governing Law and Arbitration 39
Article 16 Concluding Provisions 39
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Witnesseth
WHEREAS, SYNAPTIC and GRUNENTHAL are each actively conducting research
directed at discovering and developing a variety of therapeutic compounds;
WHEREAS, SYNAPTIC has expertise in the discovery and cloning of
receptor genes, the development of binding and functional assays that employ
cloned receptors for use in drug discovery programs, and the design and
discovery of compounds that act at the receptors of interest;
WHEREAS, SYNAPTIC has utilized its expertise to discover and clone
genes that code for receptors that have been implicated in pain, to develop
binding and functional assays that employ such receptors and to design and
discover compounds that are selective for such receptors;
WHEREAS, GRUNENTHAL has compounds that it would like to screen at
certain receptors cloned by SYNAPTIC, and has expertise in optimizing candidate
compounds and in evaluating them in pharmacological models, including in vivo
pain model systems;
WHEREAS, SYNAPTIC has compounds that it would like to have evaluated in
certain of GRUNENTHAL's pharmacological models, including in vivo pain model
systems, and has expertise in optimizing candidate compounds;
WHEREAS, GRUNENTHAL has expertise in preclinical and clinical testing
of candidate compounds, getting regulatory approval and in commercializing
pharmaceutical products;
WHEREAS, SYNAPTIC and GRUNENTHAL have expressed a mutual interest in
utilizing their skills and resources in a collaborative effort to discover and
develop agonists and antagonists of mutually agreed upon receptors for
alleviating pain; and
WHEREAS, SYNAPTIC and GRUNENTHAL may in the future determine to expand
their collaborative effort to discover and develop compounds that act at
molecular targets in addition to receptors.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties agree as follows:
Article 1
Definitions
1.1 ADVANCED DEVELOPMENT STAGE shall mean, with respect to each party and
each CANDIDATE resulting from a PROJECT, the stage of development
which (i) begins with the determination by the STEERING COMMITTEE to
commence PHASE III TRIALS involving such CANDIDATE (it being
understood that such determination
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shall be made following completion
of phase IIa clinical trials) and (ii) ends on the earlier of the date
of the termination by the applicable party of the development
activities with respect to such CANDIDATE or the receipt by such
applicable party of final approval from at least one regulatory
authority that allows marketing of such CANDIDATE to begin.
1.2 ALPHA-2 PROJECT shall have the meaning set forth in Section 2.2.4.
1.3 AVAILABLE TARGETS shall mean TARGETS, including the TARGETS identified
in Schedule I, which fall into one of the categories set forth in
Section 2.2.1 as determined by the STEERING COMMITTEE. Notwithstanding
anything contained in here to the contrary, a TARGET shall cease to be
an AVAILABLE TARGET at such time as it becomes an EXCLUDED TARGET.
1.4 BACKGROUND TECHNOLOGY shall mean, with respect to either party and any
AVAILABLE TARGET which is the focus of a PROJECT, all know-how, trade
secrets, assays, inventions, experimental data, experimental
procedures, technology, biological, compounds and other materials and
other proprietary information which were discovered or developed by
such party, which relate to such TARGET and which existed prior to the
initiation of a PROJECT relating to such TARGET. In addition,
BACKGROUND TECHNOLOGY shall mean and include, with respect to
GRUNENTHAL and any other AVAILABLE TARGET, all know-how, trade secrets,
assays, inventions, experimental data, experimental procedures,
technology, biological compounds and other materials and other
proprietary information, which were discovered or developed by
GRUNENTHAL which relate to such TARGET and which existed prior to the
initiation of a PROJECT relating to such TARGET if such PROJECT is
initiated or at any time during the term of this Agreement if such
PROJECT is not initiated.
1.5 BUDGET shall have the meaning set forth in Section 3.1.3(d).
1.6 CANDIDATE shall mean a COMPOUND which is a LEAD for which the decision
to start a Good Laboratory Practices four-week toxicology studies has
been made by the STEERING COMMITTEE during a PROJECT. Such decision
will be made at such time as the STEERING COMMITTEE determines that a
LEAD satisfies the criteria established by the STEERING COMMITTEE
regarding the desired pharmacological profile, stability,
pharmacokinetic profile, bioavailability, synthesis and safety profile
(safety pharmacology, toxicology, side-effect profile) and lack of any
blocking third party patent.
1.7 COMMON STUDIES shall have the meaning set forth in Section 3.1.3(a) and
may be conducted worldwide by each party, or its subsidiaries.
1.8 COMPOUND shall mean a chemical substance with a purity of 90% or more
where the structure is characterized by standard analytical methods
(e.g., NMR, MS, IR, etc.).
1.9 EARLY DEVELOPMENT STAGE shall mean, with respect to any CANDIDATE
resulting from a PROJECT, the stage which (i) begins with the
determination of the
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STEERING COMMITTEE to commence Good Laboratory
Practices four-week toxicology studies involving the CANDIDATE and (ii)
ends on the earlier of the date of the termination by the STEERING
COMMITTEE of the development activities with respect to such CANDIDATE
or the determination by the STEERING COMMITTEE to commence PHASE III
TRIALS involving such CANDIDATE (it being understood that any such
determination shall be made following completion of phase IIa clinical
trials).
1.10 EMEA shall mean the European Medicines Evaluation Agency.
1.11 EMEA STUDIES shall have the meaning set forth in Section 3.1.3(a) and
shall be conducted in the GRUNENTHAL TERRITORY.
1.12 EVALUATION COMMITTEE shall mean the committee formed pursuant to Section
3.3.
1.13 EXCLUDED TARGET shall mean (i) any alpha 1 adrenergic receptor, galanin
receptor, neuropeptide Y receptor (other than the Y2 and Y4 receptors)
or serotonin receptor (other than the 5HT-4 receptor), (ii) any TARGET
which was an AVAILABLE TARGET and became an EXCLUDED TARGET pursuant to
Section 2.2.7 or pursuant to a decision by the STEERING COMMITTEE prior
to the expiration of the applicable period set forth in Section 2.2.1
and (iii) any AVAILABLE TARGET which was at one time but is no longer
the focus of a PROJECT and/or is no longer the focus of ongoing drug
development activities of GRUNENTHAL pursuant to this Agreement.
1.14 EXISTING COLLABORATIVE PARTNERS shall mean Eli Lilly and Company, Merck
& Co., Inc., Novartis Pharma A.G., and the Warner-Lambert Company.
1.15 FDA shall mean the United States Food and Drug Administration.
1.16 FDA STUDIES shall have the meaning set forth in Section 3.1.3(a) and
shall be conducted in the SYNAPTIC TERRITORY.
1.17 GRUNENTHAL TERRITORY shall mean Europe (including CIS and Turkey), and
all countries of Central America and South America including the
Caribbean but excluding any country or island within SYNAPTIC
TERRITORY.
1.18 HIT shall mean a COMPOUND which exhibits affinity for a and functional
activity at a TARGET and which is approved for testing in in vivo
models by the RESEARCH COMMITTEE.
1.19 LEAD shall mean a COMPOUND which (i) is or is derived from a HIT, (ii)
belongs to a patentable class of chemical entities and/or is patentable
with regard to its preparation procedure and (iii) in experimental
animal models has an in vivo therapeutic profile that satisfies
criteria set by the STEERING COMMITTEE.
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1.20 NET SALES shall mean, 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, each of which
shall be determined in accordance with the normal accounting practices
of the party selling the PRODUCT:
(i) trade, quantity and cash discounts or rebates actually allowed
to such customers;
(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 or similar 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.
1.21 OTHER TERRITORIES shall mean all countries in the world other than
those included in the SYNAPTIC TERRITORY or the GRUNENTHAL TERRITORY.
1.22 PAIN shall mean acute or chronic, weak, moderate to severe or severe
pain (i) generated by central and/or peripheral mediators, whose action
is blocked by analgesic and/or antiphlogistic agents or (ii) is
associated with migraine headache.
1.23 PATENT RIGHTS shall mean patent applications and patents to which
either SYNAPTIC or GRUNENTHAL have rights. Claims included in PATENT
RIGHTS which are not covered by this Agreement are excluded.
1.24 PHASE III TRIALS shall mean trials that fulfill at least the following
criteria: pivotal, confirmatory, controlled trials satisfying FDA
and/or EMEA guidelines.
1.25 PRODUCT shall mean any human pharmaceutical product for alleviating
PAIN which includes as an active ingredient a CANDIDATE.
1.26 PROJECT shall have the meaning set forth in Section 2.2..
1.27 PROJECT TECHNOLOGY shall mean, with respect to any PROJECT, all
know-how, trade secrets, assays, inventions, experimental data,
experimental procedures, technology, biological, chemical and other
materials and other proprietary information which relate to therapeutic
uses of COMPOUNDS the mechanism of action of which involves the
TARGET(S) of the PROJECT and which are discovered or developed during
the PROJECT TERM of the PROJECT or during the period following the
PROJECT TERM in which development or marketing activities with respect
to a CANDIDATE resulting from or relating to such PROJECT are being
conducted.
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1.28 PROJECT TERM shall mean, with respect to any PROJECT, the period during
which such PROJECT is conducted pursuant to this Agreement.
1.29 RESEARCH COMMITTEE shall mean each of the joint research committee(s)
formed pursuant to Section 3.2.1.
1.30 RESEARCH STAGE shall mean, with respect to any PROJECT, the stage of
the PROJECT during which the parties seek CANDIDATES for the TARGET(S)
of the PROJECT.
1.31 STEERING COMMITTEE shall mean the joint steering committee formed pursuant
to Section 3.1.1.
1.32 SYNAPTIC TERRITORY shall mean the United States of America and its
territories, Canada and its territories and Mexico.
1.33 TARGET shall mean a gene product (e.g., receptor, transporter, enzyme,
transcription factor, etc.).
1.34 TERRITORIES shall mean (i) with respect to SYNAPTIC, the SYNAPTIC
TERRITORY and the OTHER TERRITORIES, (ii) with respect to GRUNENTHAL,
the GRUNENTHAL TERRITORY and the OTHER TERRITORIES, and (iii) with
respect to both parties, the SYNAPTIC TERRITORY, the GRUNENTHAL
TERRITORY and the OTHER TERRITORIES.
The plural includes the singular and vice versa when the context so
admits.
Article 2
Cooperation, Implementation of Projects
2.1 Field. During the term of this Agreement, the parties shall engage in a
cooperation focused on the identification and development of
pharmaceutical products for the alleviation of PAIN in humans.
2.2 Implementation.
2.2.1 Categorization and Reservation of Targets. Any TARGET
identified by SYNAPTIC which falls into any of the following
categories as determined by the STEERING COMMITTEE, including
each of the TARGETS set forth in Schedule I attached hereto,
shall automatically be an AVAILABLE TARGET and shall be
exclusively reserved for this cooperation with respect to the
identification and development of COMPOUNDS for the
alleviation of PAIN for a period according to its category as
set forth below:
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i) Category I:
Any TARGET with in-vivo evidence for mediation of PAIN, with
COMPOUNDS available that have a minimum affinity for such
TARGET as defined by the STEERING COMMITTEE. These TARGETS
shall be AVAILABLE TARGETS for a period of one year after
their identification by the STEERING COMMITTEE as Category I
TARGETS, unless subsequently recategorized by the STEERING
COMMITTEE, or determined by the STEERING COMMITTEE to be
EXCLUDED TARGETS.
ii) Category II:
Any TARGET with in-vitro and/or theoretical evidence for
mediation of PAIN, with COMPOUNDS available that have a
minimum affinity for such TARGET as defined by the STEERING
COMMITTEE. These TARGETS shall be AVAILABLE TARGETS for a
period of three years after their identification by the
STEERING COMMITTEE as Category II TARGETS, unless subsequently
recategorized by the STEERING COMMITTEE, or determined by the
STEERING COMMITTEE to be EXCLUDED TARGETS.
iii) Category III:
Any speculative TARGETS identified within tissue (meaning
tissue as listed in Schedule II) known to be involved in the
transmission or inhibition of PAIN, with COMPOUNDS available
that have a minimum affinity for such TARGET as defined by the
STEERING COMMITTEE. These TARGETS shall be AVAILABLE TARGETS
for a period of five years after their identification by the
STEERING COMMITTEE as Category III TARGETS, unless
subsequently recategorized by the STEERING COMMITTEE, or
determined by the STEERING COMMITTEE to be EXCLUDED TARGETS.
iv) Category IV:
Any speculative TARGET identified within tissue (meaning
tissue as listed in Schedule II) known to be involved in the
transmission or inhibition of PAIN, with no COMPOUNDS
available. These TARGETS shall be AVAILABLE TARGETS for the
term of this Agreement, unless subsequently recategorized by
the STEERING COMMITTEE, or determined by the STEERING
COMMITTEE to be EXCLUDED TARGETS.
Any AVAILABLE TARGET may be switched by determination of the
STEERING COMMITTEE from one category to another and
accordingly be an AVAILABLE TARGET for a different period of
time.
In addition, an AVAILABLE TARGET may by determination of the
STEERING COMMITTEE become an EXCLUDED TARGET prior to the
expiration of the period of time applicable to the category in
which such TARGET falls.
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Notwithstanding anything in the contrary set forth in the
first paragraph of this Section 2.2.1, if, within 90 days
following the date that GRUNENTHAL is first notified in
writing of the identification by SYNAPTIC of a new TARGET,
GRUNENTHAL provides written notice to SYNAPTIC that it is
rejecting such TARGET as an AVAILABLE TARGET, then such TARGET
shall not become an AVAILABLE TARGET and thereafter neither
party shall have any obligation to the other party with
respect to such TARGET.
2.2.2 Evaluation of Available Targets. The EVALUATION COMMITTEE
shall, on a regular basis, review the list of the AVAILABLE
TARGETS, as well as the data relating to such TARGETS that are
available at the time, and formulate for consideration by the
STEERING COMMITTEE recommendations regarding the initiation of
new PROJECTS and the appropriate prioritization of AVAILABLE
TARGETS based upon their perceived value as potential targets
of pharmaceutical products for the alleviation of PAIN. In an
effort to generate data regarding AVAILABLE TARGETS, each
party shall be obliged to perform High Throughput Screening
for a minimum number of AVAILABLE TARGETS per year as
determined by the STEERING COMMITTEE. It shall be SYNAPTIC's
responsibility to attempt to develop pharmacological tools or
design leads for Category IV TARGETS. While GRUNENTHAL
acknowledges and agrees that SYNAPTIC may seek the help of a
third party in developing the pharmacological tools and design
leads contemplated by the preceding sentence, SYNAPTIC
acknowledges and agrees that GRUNENTHAL shall have no
obligation, financial or otherwise, with respect thereto.
2.2.3 Initiation of Projects. In furtherance of the
cooperation, during the term of this Agreement, the STEERING
COMMITTEE shall, on a quarterly basis, consider the
recommendations of the EVALUATION COMMITTEE and determine
whether to initiate new joint research and development
projects with one or more AVAILABLE TARGETS as their focus.
The purpose of any such project will be to identify and
develop jointly, up to the commencement of PHASE III TRIALS,
CANDIDATES that (i) alleviate PAIN in humans and (ii) have
primary mechanism of action involving the TARGET(S). For
convenience of reference, each research and development
project initiated as contemplated by this Section 2.2 is
referred to herein as a "PROJECT". It is contemplated by the
parties that at any point in time they may be conducting
several PROJECTS pursuant to this Agreement.
The parties agree that all TARGETS and COMPOUNDS listed in
Schedule I and Schedule III shall be provided exclusively from
SYNAPTIC to GRUNENTHAL under the terms of this Agreement,
subject to any limitations imposed or contemplated by this
Agreement, including, without limitation, such limitations
imposed or contemplated by Section 2.2.1, 2.4 and/or 8.1.1.
GRUNENTHAL acknowledges and agrees that SYNAPTIC has
agreements with its EXISTING COLLABORATIVE PARTNERS which
relate to EXCLUDED TARGETS. The parties agree that EXCLUDED
TARGETS
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as defined in Section 1.13 (i) are not part of this
Agreement but available to SYNAPTIC's EXISTING COLLABORATIVE
PARTNERS.
SYNAPTIC warrants that nothing in the agreements with its
EXISTING COLLABORATIVE PARTNERS contradicts to any provision
of this Agreement, however, GRUNENTHAL acknowledges that
pursuant to such agreements, SYNAPTIC is not granting, and
will not in the future grant (unless in the future it is in a
position to do so), GRUNENTHAL a license to use its technology
to develop compounds that bind any TARGET with an affinity
which is less than ten times greater than their affinity for
any galanin receptor, any serotonin receptor (other than 5
HT-4 receptor), any alpha 1 adrenergic receptor or any
neuropeptide Y receptor (other than the Y 2 or Y 4 receptor).
The STEERING COMMITTEE, in initiation PROJECTS, in designating
CANDIDATES and in fulfillment of its other responsibilities
under this Agreement, shall act in a manner consistent with
the foregoing.
2.2.4 Initial Project. The parties have determined by mutual
agreement that the alpha-2a, -2b and -2c adrenergic receptors
are of particular interest to their cooperation and have,
accordingly, selected such receptors as the TARGETS of their
initial PROJECT. Such PROJECT (the,,ALPHA 2 PROJECT") shall be
initiated beginning as of the EFFECTIVE DATE. Set forth on
Schedule III attached hereto is a list of SYNAPTIC COMPOUNDS
and a list of GRUNENTHAL COMPOUNDS, in each case identified by
code number which may be active at one or more of such
receptors and which, as of the EFFECTIVE DATE, are, in the
judgment of each party, available as pharmacological tools or
design leads for use in the ALPHA-2 PROJECT. Also set forth in
said Schedule III is a complete list of GRUNENTHAL's and
SYNAPTIC's present PATENT RIGHTS, if any, concerning ALPHA 2
PROJECTS.
2.2.5 Other Available Targets. Schedule I attached hereto sets forth
a list of the AVAILABLE TARGETS, as of the EFFECTIVE DATE. As
of the EFFECTIVE DATE such AVAILABLE TARGETS are not to
SYNAPTIC's knowledge, covered by issued patents of third
parties and as of such date could therefore be considered by
the parties as the potential subjects of additional PROJECTS.
At such time, if ever, as any such AVAILABLE TARGET becomes an
EXCLUDED TARGET, Schedule I shall be deemed amended by
deleting such TARGET therefrom.
In case a third party patent covering an AVAILABLE TARGET is
issued to such third party by the patent office in the United
States, The European Patent Office or the patent office in
Japan, SYNAPTIC and GRUNENTHAL shall consult on the further
proceedings with respect to such AVAILABLE TARGET.
2.2.6 Other Potential Sources of Available Targets. The parties have
discussed possible sources for AVAILABLE TARGETS that could
provide the basis for additional PROJECTS, and agree that
SYNAPTIC shall present new, if any,
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AVAILABLE TARGETS to the
STEERING COMMITTEE for categorization every six month period
following the EFFECTIVE DATE. Such AVAILABLE TARGETS may
result from SYNAPTIC's molecular biology efforts. In addition,
the parties, through their representatives on the STEERING
COMMITTEE, may (a) identify AVAILABLE TARGETS which, based
upon the scientific literature, are known to exist
pharmacologically but have not yet been cloned or have been
cloned by a third party but are not proprietary to a third
party and (b) direct SYNAPTIC to attempt to clone such
receptors. Finally, it is contemplated that such AVAILABLE
TARGETS may result from certain genomics efforts on the part
of SYNAPTIC focused on spinal and supraspinal tissues.
2.2.7 Available Targets becoming Excluded Targets. In the event that
during the periods set forth in Section 2.2.1 for each
AVAILABLE TARGET the parties do not initiate a new PROJECT
with such AVAILABLE TARGET as its focus, then SYNAPTIC shall
be free to convert such AVAILABLE TARGET to an EXCLUDED TARGET
by giving GRUNENTHAL written notice. Thereafter SYNAPTIC shall
have the right to exploit such TARGET independently or with
one or more third parties in each case without further
liability or other obligation, financial or otherwise, to
GRUNENTHAL, and GRUNENTHAL's right to exploit such TARGET
using SYNAPTIC BACKGROUND TECHNOLOGY and PROJECT TECHNOLOGY
shall immediately and indefinitely cease to exist and
GRUNENTHAL's right to exploit such TARGET without the use of
such SYNAPTIC BACKGROUND TECHNOLOGY and SYNAPTIC PROJECT
TECHNOLOGY shall immediately cease to exist for a period of
two years. 2.3 Structure. Each PROJECT shall include a
RESEARCH STAGE and may include an EARLY DEVELOPMENT STAGE with
respect to one or more CANDIDATES identified during the
RESEARCH STAGE. Following the conclusion of the EARLY
DEVELOPMENT STAGE with respect to a CANDIDATE, the parties,
through the STEERING COMMITTEE, may determine to initiate an
ADVANCED DEVELOPMENT STAGE with respect to the CANDIDATE. The
rights and obligations of the parties during each of these
stages, as well as their rights and obligations with respect
to the production and marketing of each PRODUCT relating to or
arising out of a PROJECT, are described herein.
2.4 No Independent Research or Research with Third Parties within Field. It
is the intent of the parties that they be exclusive partners in the
identification and/or development of COMPOUNDS for alleviating PAIN in
humans to the extent that such COMPOUNDS act through one or more
TARGETS that are the focus of one or more PROJECTS or subsequent drug
development or marketing activities pursuant to this Agreement.
Accordingly, without the approval of the other party, during the
PROJECT TERM of any PROJECT and the period following the PROJECT TERM
in which development or marketing activities with respect to a
CANDIDATE resulting from or relating to such PROJECT are being
conducted, neither party shall conduct, either independently or with a
third party, any research directed toward the identification and/or
development of COMPOUNDS for alleviating PAIN in humans to
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the extent
that any of the TARGETS through which such COMPOUNDS act is (i) the
same as a TARGET of such a PROJECT, (ii) the same as a TARGET through
which the CANDIDATE acts, or (iii) is an AVAILABLE TARGET provided,
however, that the foregoing prohibition shall not apply to the
collaborative project being conducted by SYNAPTIC and The DuPont Merck
Pharmaceutical Company pursuant to the Collaborative Research Agreement
dated February 5, 1996; provided further, however, that the foregoing
prohibition shall not apply to SYNAPTIC's research relating to the
identification and development of pharmaceutical products that act at
one or more of the EXCLUDED TARGETS.
2.5 In-Licensing Opportunities. If, during the PROJECT TERM of any PROJECT
or during the period following the PROJECT TERM in which development or
marketing activities with respect to a CANDIDATE resulting from or
relating to such PROJECT are being conducted, either party shall become
aware of any opportunity to in-license for potential development of a
pharmaceutical product for alleviating PAIN in humans a compound the
mechanism of action of which involves a TARGET of such PROJECT or any
other AVAILABLE TARGET, such party shall inform the other party.
Neither party may consummate an agreement with respect to such compound
unless both parties agree on the terms under which the agreement will
be consummated.
2.6 Disclosure of Background Technology and Project Technology; Use of
Background Technology and Project Technology Outside Cooperation.
2.6.1 Disclosure of Background Technology and Project Technology.
If, during the PROJECT TERM of any PROJECT or during the
period following the PROJECT TERM in which development or
marketing activities with respect to a CANDIDATE resulting
from or relating to such PROJECT are being conducted, either
party should discover or develop BACKGROUND TECHNOLOGY or
PROJECT TECHNOLOGY, such party shall disclose such BACKGROUND
TECHNOLOGY or PROJECT TECHNOLOGY to the other party.
2.6.2 Use of Grunenthal Background Technology and Grunenthal Project
Technology Relating to Targets for which an Indication other
than the Alleviation of Pain has been Identified. If
GRUNENTHAL is the discovering or developing party referred to
in Section 2.6.1 and such BACKGROUND TECHNOLOGY and/or PROJECT
TECHNOLOGY was not previously known by SYNAPTIC and relates to
the use of a TARGET for an indication other than the
alleviation of PAIN (a,,new indication"), then, SYNAPTIC shall
have exclusive rights to pursue the discovery independently or
with a third party, and to seek and pursue patent protection
thereon if GRUNENTHAL has not yet filed a patent application.
In the event that SYNAPTIC independently commercializes a
product based upon such discovery and which is covered by an
issued PATENT RIGHT of GRUNENTHAL, it shall pay GRUNENTHAL a
royalty of 3 % of the NET SALES of the product for the new
indication in countries in which such issued GRUNENTHAL PATENT
RIGHT exists. In the event that SYNAPTIC licenses such issued
GRUNENTHAL PATENT RIGHT to a third party,
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SYNAPTIC shall pay
GRUNENTHAL 33 % of any royalty which SYNAPTIC receives from
the third party in respect of any such PATENT RIGHT in
countries in which such GRUNENTHAL PATENT RIGHT exists. For
COMPOUNDS provided by GRUNENTHAL Section 2.6.4 shall apply in
lieu of this Section 2.6.2.
2.6.3 Use of Grunenthal Background Technology and Project Technology
Relating to Excluded Targets for Pain. If GRUNENTHAL is the
discovering or developing party referred to in Section 2.6.1
and such BACKGROUND TECHNOLOGY or PROJECT TECHNOLOGY relates
to the use for PAIN of a TARGET which thereafter became an
EXCLUDED TARGET, then SYNAPTIC shall have exclusive rights to
pursue the discovery independently or with a third party, and
to pursue patent protection thereon, with no further
obligation to GRUNENTHAL, financial or otherwise. For
COMPOUNDS provided by GRUNENTHAL Section 2.6.4 shall apply in
lieu of this Section 2.6.3.
2.6.4 Use of Compounds Included in Grunenthal Background Technology
or Grunenthal Project Technology. In connection with the
exercise of its rights under Section 2.6.2 and/or Section
2.6.3 above, SYNPATIC shall be permitted to use COMPOUNDS
included in GRUNENTHAL BACKGROUND TECHNOLOGY and/or GRUNENTHAL
PROJECT TECHNOLOGY and to commercialize any products resulting
therefrom, without compensation to GRUNENTHAL, financial or
otherwise; provided, however, that if any such product
incorporates the compound covered by an issued GRUNENTHAL
PATENT RIGHT, SYNAPTIC shall pay GRUNENTHAL a royalty (a) 3 %
of the NET SALES of such product in countries in which such
issued GRUNENTHAL PATENT RIGHT exists if SYNAPTIC
independently commercializes such product and (b) 33 % of any
royalty which SYNAPTIC receives from a third party in respect
of any such PATENT RIGHT if SYNAPTIC licenses the issued
GRUNENTHAL PATENT RIGHT to a third party.
2.6.5 Use of Synaptic Background Technology and Synaptic Project
Technology Relating to Chemistry. GRUNENTHAL shall be
permitted to use SYNAPTIC BACKGROUND TECHNOLOGY and SYNAPTIC
PROJECT TECHNOLOGY relating to chemistry for the purpose of
developing compounds useful for the alleviation of PAIN, the
mechanism of action of which involves a TARGET which is
neither an EXCLUDED TARGET nor an AVAILABLE TARGET. In the
event that any product which incorporates any of such SYNAPTIC
BACKGROUND TECHNOLOGY or SYNAPTIC PROJECT TECHNOLOGY, whether
or not patented or patentable by SYNAPTIC, is proposed to be
commercialized, GRUNENTHAL shall promptly inform SYNAPTIC and
shall negotiate with SYNAPTIC in good faith appropriate
compensation to be paid to SYNAPTIC in respect of such
TECHNOLOGY, based upon its relative contribution and
importance to such product. In case the parties are not able
to agree within 180 days on appropriate compensation SYNAPTIC
shall be free to offer such rights on such products to
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third
parties, and any right that GRUNENTHAL may have had under this
Section 2.6.5 and any right that GRUNENTHAL may have to market
such product shall automatically be forfeited thereafter.
2.6.6 Request for Access to Blocking Technology and Patent Rights.
Prior to entering into a collaboration with a third party to
develop compounds which (a) have as their mechanism of action
a TARGET that is the focus of a PROJECT and(b) are for an
indication other than the alleviation of PAIN SYNAPTIC shall
use all reasonable efforts to seek from such party the right
to use, and to permit GRUNENTHAL to use, technology resulting
from such collaboration and related patent rights for the
development of compounds for the alleviation of PAIN. At the
time that SYNAPTIC and any such third party begin negotiating
an agreement covering such a collaboration, SYNAPTIC shall
inform GRUNENTHAL and shall thereafter regularly consult with
GRUNENTHAL regarding such negotiation as it relates to the
foregoing. SYNAPTIC shall obtain the same rights and
conditions as for itself also for GRUNENTHAL's use in the
GRUNENTHAL TERRITORY or OTHER TERRITORIES for the alleviation
of PAIN. Any costs associated with GRUNENTHAL's obtaining or
exercising such right to use such technology shall be borne by
GRUNENTHAL.
2.6.7 The rights granted in Section 2.6.2, 2.6.3, 2.6.4, 2.6.5 shall
be granted as long as such technology or PATENT RIGHTS exists
and shall survive the termination or expiration of this
Agreement regardless of the reason of termination or
expiration provided however, that the respective party has
complied with its payment obligation in connection with such
rights. In case the respective party is in breach of such
payment obligation Section 13.2 shall apply.
Article 3
Management and Planning of Projects;
Reports and Exchange of Information
3.1 Steering Committee; Management Committee.
3.1.1 Formation; Composition. A STEERING COMMITTEE shall be formed
promptly following the EFFECTIVE DATE, but in no event later
than 30 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.
3.1.2 Responsibilities. The STEERING COMMITTEE shall be responsible for
the following:
(a) designating AVAILABLE TARGETS to the categories set
forth in Section 2.2.1, designating which new
PROJECTS shall be initiated,
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determining the timing
for each PROJECT, deciding which AVAILABLE TARGET may
become an EXCLUDED TARGET prior to the applicable
time periods set forth in Section 2.2.1 and
determining the minimum number of AVAILABLE TARGETS
in category IV with respect to which each party is
obliged to perform High Throughput Screening as
contemplated in Section 2.2.2;
(b) devising, in collaboration with the RESEARCH
COMMITTEE for each PROJECT, an initial research plan
for the PROJECT setting forth the principal goals to
be achieved during the RESEARCH STAGE of the PROJECT,
the principal activities to be conducted during such
STAGE, the relative priorities of the parties and the
proposed timetables for achieving the goals and
conducting the activities;
(c) establishing criteria regarding pharmacological
profile, stability, pharmacokineticprofile,
bioavailability, synthesis and safety profile which
must be satisfied in order for a LEAD to become a
CANDIDATE;
(d) establishing criteria regarding the in vivo
therapeutic profile which must be satisfied in order
for a COMPOUND to be considered a LEAD;
(e) preparing such procedures and mechanisms as may be
necessary for the STEERING COMMITTEE and each
RESEARCH COMMITTEE to operate in a manner which will
ensure the efficient conduct of each PROJECT
hereunder;
(f) deciding to start Good Laboratory Practices four-week
toxicology studies with respect to a LEAD, thereby
rendering such LEAD a CANDIDATE;
(g) monitoring and directing the activities of each
RESEARCH COMMITTEE;
(h) preparing, for review and approval by each party, a
detailed schedule of activities proposed to be
conducted during the EARLY DEVELOPMENT STAGE with
respect to each CANDIDATE, as well as a proposed
budget of costs associated with certain of such
activities (such proposed budget to be prepared in
accordance with Section 3.1.3 below); and
(i) monitoring and directing the activities conducted
during the EARLY DEVELOPMENT STAGE with respect to
each CANDIDATE and, if determined to be appropriate,
proposing for consideration and approval by each
party, revisions to any previously approved schedule
of activities and/or budget. The STEERING COMMITTEE
shall not, in any year, withhold its approval of any
increases in a previously approved BUDGET proposed
by one party so long as the aggregate of such
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increases is less than 50% of the entire BUDGET for
such year. To the extent that the aggregate of
proposed increases in any year exceed 50% of the
entire BUDGET for such year, the STEERING COMMITTEE
shall not unreasonably withhold its approval
thereof.
(j) determining to commence PHASE III TRIALS, it being
understood that such determiantion shall be made
following the completion of phase II a clinical
trials and no party shall block such determination.
In addition, the STEERING COMMITTEE shall have such other
responsibilities as are set forth herein or contemplated hereby.
3.1.3 Three Types of Studies; Preparation of Budget Covering Common
Studies Only.
(a) It is contemplated by the parties that three types
of studies may be conducted during the EARLY
DEVELOPMENT STAGE with respect to a CANDIDATE: (i)
those studies which both parties agree should be
conducted as part of phase I and phase IIa clinical
trials with respect to the CANDIDATE in order
ultimately to satisfy both FDA and EMEA requirements
(the,,COMMON STUDIES"); (ii) those studies which
SYNAPTIC believes should be conducted as part of
phase I and phase IIa clinical trials with respect
to the CANDIDATE in order ultimately to satisfy FDA
requirements but which GRUNENTHAL does not believe
need to be conducted in order ultimately to satisy
EMEA requirements (the,,FDA STUDIES"); and (iii)
those studies which GRUNENTHAL believes should be
conducted as part of phase I and phase IIa clinical
trials with respect to the CANDIDATE in order
ultimately to satisfy EMEA requirements but which
SYNAPTIC does not believe need to be conducted in
order ultimately to satisfy FDA requirements
(the,,EMEA STUDIES").
(b) The proposed budget of costs to be prepared by the
STEERING COMMITTEE for the EARLY DEVELOPMENT STAGE
with respect to a CANDIDATE pursuant to Section 3.1.2
(i) and (h) above shall include the total estimated
cost of conducting the COMMON STUDIES only, as well
as a detailed breakdown of the costs which the
parties expect to incur in conducting the COMMON
STUDIES during the first 12 months of the EARLY
DEVELOPMENT STAGE.
(c) Within 60 days prior to the end of each 12-month
period during the EARLY DEVELOPMENT STAGE (or, if the
12-month period commences in January, then within 90
days prior to the end of such period), the STEERING
COMMITTEE shall prepare a new detailed budget of
costs expected to be incurred in conducting the
COMMON STUDIES during the subsequent 12-month period
and shall submit it to each party for its review and
approval.
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(d) The budget with respect to each CANDIDATE, as the
same may be modified from time to time and approved
by the parties as provided in this Section 3.1.3 or
in Section 3.1.2 above, shall be referred to herein
as the ,,BUDGET."
3.1.4 Initial Meetings; Initial Research Plans. The STEERING
COMMITTEE shall meet promptly following the EFFECTIVE DATE,
but in no event later than 30 days thereafter (a) to devise,
in collaboration with the RESEARCH COMMITTEE, the initial
research plan for the ALPHA-2 PROJECT and (b) to review the
available scientific data relating to the AVAILABLE TARGETS
identified in Schedule I attached hereto, so as to categorize
such TARGETS as contemplated by Section 2.2.1. The STEERING
COMMITTEE shall also meet promptly following the determination
by the parties to initiate each new PROJECT as contemplated by
Section 2.2 to devise, in collaboration with the RESEARCH
COMMITTEE for such PROJECT, the initial research plan for the
PROJECT. The initial research plan for each PROJECT shall be
subject to review and approval by each party. Modifications to
any initial research plan shall be made in accordance with
Section 3.6.
3.1.5 Additional Meetings; Agendas and Minutes. The STEERING
COMMITTEE shall meet at least quarterly and shall prepare
agendas and minutes for each of its meetings.
3.1.6 Actions; Resolution of Issues by Management Committee. All
actions taken and decisions made by the STEERING COMMITTEE
shall be made in accordance with Section 3.4. 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 GRUNENTHAL, for resolution.
The members of the MANAGEMENT COMMITTEE are currently, from
SYNAPTIC: Kathleen P. Mullinix, Chairman, President and Chief
Executive Officer; and from GRUNENTHAL: Dr. E.P. Paques. Each
of SYNAPTIC and GRUNENTHAL 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.
3.2 Research Committees.
3.2.1 Formation; Composition. A RESEARCH COMMITTEE for the ALPHA-2
PROJECT shall be formed promptly following the EFFECTIVE DATE,
but in no event later than 30 days thereafter. With respect to
each additional PROJECT initiated by the parties as
contemplated by Section 2.2, a RESEARCH COMMITTEE shall be
formed promptly, but in no event later than 30 days following
the determination by the parties to initiate such PROJECT.
Each party shall be entitled to appoint three members of its
staff to act as its representatives on each RESEARCH
COMMITTEE. Each party may from time to time change its
representation on the RESEARCH COMMITTEE(S), but shall notify
the other party promptly of any such change.
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Each RESEARCH
COMMITTEE shall report to and operate under the overall
direction of the STEERING COMMITTEE.
3.2.2 Responsibilities. Each RESEARCH COMMITTEE shall be responsible
for the following:
(a) monitoring and directing the activities of the
scientists working on its PROJECT;
(b) elaborating and coordinating action plans;
(c) the economic use of capacities;
(d) the fulfillment of the research plan for such
PROJECT; and
(e) approving COMPOUNDS which exhibit affinity for, and
functional activity at, a TARGET which is the focus
of a PROJECT for testing in in vivo models.
In addition, each RESEARCH COMMITTEE shall have such other
responsibilities as are set forth herein or contemplated hereby.
3.2.3 Initial Meetings; Initial Research Plans. The RESEARCH
COMMITTEE for the ALPHA-2 PROJECT 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 for the PROJECT.
The RESEARCH COMMITTEE shall also meet promptly following the
determination by the parties to initiate each new PROJECT as
contemplated by Section 2.2 to devise, in collaboration with
the STEERING COMMITTEE, the initial research plan for the
PROJECT. Modifications to any such plan shall be made in
accordance with Section 3.5.
3.2.4 Additional Meetings; Agendas and Minutes. Each RESEARCH
COMMITTEE shall meet at least quarterly. Each RESEARCH
COMMITTEE shall prepare agendas and minutes for each of its
meetings.
3.2.5 Actions. All actions taken and decisions made by the RESEARCH
COMMITTEE shall be made in accordance with Section 3.4. Any
issues which cannot be resolved by the RESEARCH COMMITTEE
shall be referred to the STEERING COMMITTEE.
3.3 Evaluation Committee.
3.3.1 Formation; Composition; An EVALUATION COMMITTEE shall be formed
promptly following the EFFECTIVE DATE. Each party shall appoint one
member of its staff to act as its representative. Each party may from
time to time change its representation on the EVALUATION COMMITTEE, but
shall notify the other party
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promptly of any such change. The
EVALUATION COMMITTEE shall report to and operate under the overall
direction of the STEERING COMMITTEE.
3.3.2 Responsibilities; The EVALUATION COMMITTEE shall with respect to
each AVAILABLE TARGET prior to the initiation of a PROJECT with such
AVAILABLE TARGET as its focus, be responsible for the following:
(a) monitoring and directing the activities of the scientists
working on the evaluation of any AVAILABLE TARGET;
(b) elaborating and coordinating action plans;
(c) the economic use of capacities;
(d) the fulfillment of the evaluation plan for each AVAILABLE TARGET;
(e) selecting COMPOUNDS which exhibit affinity for, and/or functional
activity at, an AVAILABLE TARGET for testing in in vivo models;
(f) preparation of yearly reviews on the AVAILABLE TARGETS including
recommendations to the STEERING COMMITTEE as to which AVAILABLE
TARGET may become an EXCLUDED TARGET and
(g) recommending to the STEERING COMMITTEE on a quaterly basis which
AVAILABLE TARGETS, if any, should be switched from one category to
another.
In addition the EVALUATION COMMITTEE shall have such other
responsibilities as are set forth herein or contemplated hereby.
3.4 Meetings.
All actions and decisions by the MANAGEMENT COMMITTEE, the STEERING
COMMITTEE each RESEARCH COMMITTEE and the EVALUATION COMMITTEE
(together referred to as ,,COMMITTEE(S)") shall be taken or made only
if (i) at least one member of the respective COMMITTEE of each party is
present and acting on behalf of such party and (ii) only by unanimous
agreement of all the COMMITTEE members present. However, it is
envisaged by the parties that all of the members of a COMMITTEE shall
be available at each meeting. The COMMITTEES 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.
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3.5 Personnel and Resources.
Each party shall commit such personnel, facilities, expertise and other
resources to each PROJECT as it may determine to be necessary to
perform its obligations under the research plan for such PROJECT, as
the same may be modified from time to time in accordance with the
provisions of this Agreement.
3.6 Modification of Research Plan(s).
The STEERING COMMITTEE will review the research plan for each ongoing
PROJECT at least quarterly and may approve any proposed changes thereto
which are not material in nature. Any material changes that the
STEERING COMMITTEE determines to be appropriate in light of changing
priorities of the PROJECT or experience gained in the course of the
PROJECT shall be subject to review and approval by each party.
3.7 Conduct of Studies.
All studies done in connection with the PROJECT(S) shall be carried out
in strict compliance with all applicable laws, regulations and
guidelines governing the conduct of research at the site where such
studies are being conducted.
Article 4
Early Stage of Projects
4.1 Research Stage.
4.1.1 SYNAPTIC Activities. During the RESEARCH STAGE of each
PROJECT, SYNAPTIC will conduct such of the following
activities as the STEERING COMMITTEE determines to be
appropriate:
(a) make its in vitro assay systems relating to the
TARGET(S) of such PROJECT available for testing
COMPOUNDS provided by GRUNENTHAL and/or SYNAPTIC as
part of the PROJECT;
(b) profile and characterize such COMPOUNDS to the extent
possible by the scope of its assay systems; and
(c) in conjunction with GRUNENTHAL attempt to generate LEADS.
4.1.2 GRUNENTHAL Activities. During the RESEARCH STAGE of each
PROJECT, GRUNENTHAL will conduct such of the following
activities as the STEERING COMMITTEE determines to be
appropriate:
(a) make its in vitro assay systems relating to the
TARGET(S) of such PROJECT available for testing
COMPOUNDS provided by GRUNENTHAL and/or SYNAPTIC as
part of the PROJECT;
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(b) profile and characterize such COMPOUNDS to the extent
possible by the scope of its assay systems;
(c) evaluate the profile (e.g., stability, side effects,
etc.) of such COMPOUNDS in its in vivo assay systems
in PAIN; and
(d) generate LEADS.
4.1.3 Responsibility for Costs. Each party shall be responsible for
its own costs incurred in connection with a PROJECT during the
RESEARCH STAGE of such PROJECT.
4.2 Early Development Stage.
4.2.1 Coordination of Activities to be Conducted.
(a) All activities to be conducted with respect to a CANDIDATE
during the EARLY DEVELOPMENT STAGE shall be subject to
monitoring and direction by the STEERING COMMITTEE. GRUNENTHAL
shall be responsible for conducting all such activities, which
may include (but shall not be limited to) the following:
(i) production of the necessary amount of Good
Manufacturing Practices (,,GMP") and non-GMP material
for safety pharmacological, toxicological and
pharmacokinetic studies, COMMON STUDIES and EMEA
STUDIES;
(ii) optimization of the synthesis route in order to allow
further clinical development and commercial
production;
(iii) development of suitable application forms;
(iv) conducting the necessary safety pharmacological,
toxicological and pharmacokinetic studies, all
according to the European guidelines, taking into
account requirements of the FDA as far as possible in
order to enable safety (i.v. and/or p.o.) trials to
enter into dose finding efficacy studies; and
(v) conducting all phase I and phase IIa COMMON STUDIES,
EMEA STUDIES and FDA STUDIES necessary for the
commencement of PHASE III TRIALS (and activities
relating thereto) .
(b) In addition to the activities referred to in subparagraph (a)
above, at SYNAPTIC's expense (as provided in Section 4.2.2
below), GRUNENTHAL will conduct at its discretion, in
accordance with FDA requirements, FDA STUDIES and related
activities requested by SYNAPTIC. Such activities may
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include
(but shall not be limited to) production of the necessary
amount of GMP and non-GMP material necessary to conduct such
FDA STUDIES.
4.2.2 Responsibility for Costs. Subject to Section 4.2.3, each party
shall be responsible for 50% of any costs incurred pursuant to
the BUDGET for a PROJECT. GRUNENTHAL shall be responsible for
100% of any costs incurred in connection with conducting EMEA
STUDIES and related activities. SYNAPTIC shall be responsible
for 100% of any costs incurred in connection with conducting
FDA STUDIES and related activities.
4.2.3 Election to Cease Participation. In case one party (the
,,nonparticipating party") determines after the identification
of a CANDIDATE by the STEERING COMMITTEE and prior to or
during the EARLY DEVELOPMENT STAGE with respect to such
CANDIDATE that it no longer desires to participate in the
development of the CANDIDATE, it may elect, by providing
written notice (the ,,nonparticipation notice") to the other
party (the ,,participating party"), to terminate its
participation, whereupon the following shall apply:
(a) The nonparticipating party shall cease to be
obligated pursuant to Section 4.2.2 for any costs
incurred in connection with the CANDIDATE following
such notification;
(b) The participating party may continue its development
activities with respect to such CANDIDATE, but shall
inform the nonparticipating party of the progress of
such activities in writing no less frequently than
quarterly. Such activities may also be performed in
the exclusive TERRITORIES of the nonparticipating
party;
(c) Subject to the other provisions of this Section 4.2.3
and Section 4.2.4, the nonparticipating party shall
cease to have any marketing or other rights with
respect to such CANDIDATE, and the participating
party shall be free to exploit the CANDIDATE in the
TERRITORIES of the nonparticipating party; and
(d) The participating party shall pay the
nonparticipating party with respect of any PRODUCT
comprising such CANDIDATE
(i) in the nonparticipating party's exclusive
part of the TERRITORY a royalty of 4 % of the
NET SALES or in the event the participating
party licenses such product to a third party,
33,3 % of any compensation payable to the
participating party by such third party
whichever is higher (determined on a
country-by-country basis) and/or
(ii) in the OTHER TERRITORIES a royalty of 2 % of the
NET SALES or in the event the participating
party licenses such product
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to a third party,
16,65 % of any compensation payable to the
participating party by such third party
whichever is higher (determined on a
country-by-country basis). Section 5.1.2.5 shall
apply mutatis mutandis.
4.2.4 Election to Recommence Participation. If, during the course of
the development of a CANDIDATE by the participating party, the
nonparticipating party wants to join in again, this shall be
possible against a reimbursement of 50% of the costs incurred
by the participating party following its receipt of the
nonparticipation notice, plus a surcharge on such costs
determined in accordance with Schedule A, plus interest on
such costs for the period from the date of the
nonparticipation notice to the date of reentry at the discount
rate, as long as the nonparticipating party's right of first
refusal has not been activated pursuant to Section 4.2.5. Such
right shall be deemed activated when the participating party
provides the notification contemplated thereby to the
nonparticipating party.
4.2.5 Right of First Refusal. In the event the participating party
negotiates an agreement with a third party pursuant to which
such third party will license the CANDIDATE with respect to
which the nonparticipating party ceded its rights pursuant to
Section 4.2.3, it shall notify the nonparticipating party of
the principal terms of such agreement and provide it with a
right of first refusal. The nonparticipating party shall have
90 days following such notification within which to provide
notice to the participating party of its acceptance of such
principal terms. In the event the nonparticipating party
provides such notice of acceptance, the parties shall use
their best efforts to conclude an agreement within 180 days
thereafter. Should this right of first refusal not be
exercised within the 90-day period or should an agreement not
be concluded within the 180-day period, the participating
party shall be free to license the CANDIDATE to the third
party on substantially the same terms provided in the
notification, subject to the payment to the nonparticipating
party of
(i) in the nonparticipating party's exclusive part of the
TERRITORY a royalty of 4 % of the NET SALES or in the
event the participating party licenses such product to
a third party, 33,3 % of any compensation payable to
the participating party by such third party whichever
is higher (determined on a country-by-country basis)
and/or
(ii) in the OTHER TERRITORIES a royalty of 2 % of the NET
SALES or in the event the participating party licenses
such product to a third party, 16,65 % of any
compensation payable to the participating party by such
third party whichever is higher (determined on a
country-by-country basis).
Section 5.1.2.5 shall apply mutatis mutandis.
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4.2.6 Access to Data Generated in Connection with Phase I, Phase IIa
or Phase IIb Clinical Trials.
(a) All data generated pursuant to COMMON STUDIES
conducted during the EARLY DEVELOPMENT STAGE or the
ADVANCED DEVELOPMENT STAGE with respect to a
CANDIDATE and all information relating to
manufacturing and formulation of such CANDIDATE and
generated prior to the commencement of the ADVANCED
DEVELOPMENT STAGE shall be provided to both parties
in the available data format at no charge.
(b) All data generated pursuant to FDA STUDIES conducted
during the EARLY DEVELOPMENT STAGE or the ADVANCED
DEVELOPMENT STAGE with respect to a CANDIDATE shall
(i) if reasonably necessary to ensure completeness
of a registration package for such CANDIDATE in
Europe and if not generated pursuant to FDA STUDIES,
be provided to GRUNENTHAL at GRUNENTHAL's request in
the available data format at no charge and (ii) if
not reasonably necessary to ensure completeness of a
registration package for such CANDIDATE in Europe
and if generated pursuant to FDA STUDIES, be
provided to GRUNENTHAL at GRUNENTHAL's request in
the available data format against reimbursement of
50% of the costs of conducting such studies, plus a
surcharge of 10%.
(c) All data generated pursuant to EMEA STUDIES
conducted during the EARLY DEVELOPMENT STAGE or the
ADVANCED DEVELOPMENT STAGE with respect to a
CANDIDATE shall (i) if reasonably necessary to
ensure completeness of a registration package for
such CANDIDATE in the United States and if not
generated pursuant to EMEA STUDIES, be provided to
SYNAPTIC at SYNAPTIC's request in the available data
format at no charge and (ii) if not reasonably
necessary to ensure completeness of a registration
package for such CANDIDATE in the United States or
if generated pursuant to EMEA STUDIES, be provided
to SYNAPTIC at SYNAPTIC's request in the available
data format against reimbursement of 50% of the
costs of conducting such studies, plus a surcharge
of 10%.
Article 5
Advanced Development Stage of Projects
5.1 Conduct of Activities During Advanced Development Stage.
5.1.1 Activities directed towards pursuing Regulatory Approval;
During the ADVANCED DEVELOPMENT STAGE with respect to a
CANDIDATE, GRUNENTHAL in the GRUNENTHAL TERRITORY and SYNAPTIC
either independently or with a third party in the SYNAPTIC
TERRITORY shall be
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responsible for diligently conducting
activities, including PHASE III TRIALS, directed towards
pursuing regulatory approval for a PRODUCT, comprising such
CANDIDATE.
The parties shall use commercially reasonable efforts to
achieve the approval for commencement of PHASE III TRIALS from
the EMEA or the FDA respectively, and thereafter to commence
such PHASE III TRIALS in Europe or the United States
respectively.
In the event SYNAPTIC intends to seek a licensee for the above
mentioned activities, it shall use commercially reasonable
efforts to cause any such licensee to commence PHASE III
TRIALS - as contemplated above - as promptly as possible,
recognizing that if any such licensee is going to undertake
manufacturing of materials or if SYNAPTIC or its licensees
commission a TOLL MANUFACTURER to manufacture such material
for such PHASE III TRIALS, certain delays may occur as a
result. Such delay shall not invoke the consequences of
Section 5.1.2, provided however, such delay is in no case
longer than 12 months following the end of the two-year period
referred to in Section 5.1.2.
GRUNENTHAL undertakes to support SYNAPTIC in its search for a
TOLL MANUFACTURER or licensee.
5.1.2 Timeframe; Consequences of Delay to Commence Phase III
Clinical Trials. In the event one party (the ,,delayed party")
has not commenced and pursued diligently PHASE III TRIALS in
its TERRITORY with respect to a CANDIDATE as contemplated in
Section 5.1.1. within two years following the commencement of
PHASE III TRIALS ("PHASE III COMMENCEMENT DATE") by the other
party (the ,,timely party") in its TERRITORY with respect to
such CANDIDATE as contemplated in Section 5.1.1. the following
shall apply:
The delayed party shall lose its rights in its exclusive
TERRITORY and the OTHER TERRITORIES for the respective
PRODUCT, giving the timely party the option to receive
worldwide exclusive rights for such PRODUCT against
5.1.2.1 reimbursement of the accumulated costs incurred by
the delayed party with respect to such PRODUCT; and
5.1.2.2 a royalty of 6 % on the NET SALES of the PRODUCT in
the exclusive TERRITORY of the delayed party; and
5.1.2.3 a royalty of 4 % on the NET SALES of the PRODUCT in
the OTHER TERRITORIES.
5.1.2.4 In the event that the timely party licenses such
PRODUCT to a third party, the delayed party shall
receive the amount calculated pursuant to Section
5.1.2.1 and either
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(i) the amounts calculated according to
Section 5.1.2.2 and Section 5.1.2.3 above
or
(ii) of any compensation which the timely party
may become entitled to receive from the third
party for such license, either 33,3 % if it
concerns a license in the delayed party's
exclusive part of the TERRITORY or 22,2 % if
it concerns a license in the OTHER
TERRITORIES whichever is higher (determined
on a country-by-country basis).
5.1.2.5 In the event that the commercialization of such
PRODUCT in the exclusive part of the TERRITORY of
the delayed party or in the OTHER TERRITORY is
dependent on intellectual property rights of another
party, then 33,3 % of any compensation payable to
such other party shall be borne by the delayed party
and 66,7 % of such compensation shall be borne by
the timely party.
The consequences set forth in this Section 5.1.2 shall not
apply in either of the following cases:
(i) Within one year following the PHASE III COMMENCEMENT
DATE, SYNAPTIC requests that GRUNENTHAL produce FDA
conformed materials pursuant to Section 5.1.3.3,
GRUNENTHAL notifies SYNAPTIC within 90 days after such
request that it will produce such materials for
SYNAPTIC, GRUNENTHAL fails to provide such materials
to SYNAPTIC prior to the second anniversary of the
PHASE III COMMENCEMENT DATE and, as a consequence,
SYNAPTIC is unable to commence PHASE III TRIALS prior
to such second anniversary; or
(ii) The delayed party fails to commence PHASE III TRIALS
prior to the second anniversary of the PHASE III
COMMENCEMENT DATE due to circumstances beyond its
control, including, without limitation, acts or
omissions of any governmental authority such as the
FDA or the EMEA.
5.1.3 Production of FDA-Conformed Materials. In order to fulfill the
obligations described in the preceding paragraphes of this Article ,
SYNAPTIC shall be required to produce FDA-conform material of any
CANDIDATE in GMP-quality and in sufficient quantity necessary for
diligently conducting PHASE III TRIALS in SYNAPTIC TERRITORY either
5.1.3.1 independently; or
5.1.3.2 with exclusive licensee, or
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<PAGE>
5.1.3.3 with GRUNENTHAL. In the event that SYNAPTIC offers
GRUNENTHAL to produce such material, GRUNENTHAL shall have
an option - to be exercised within 90 days after receipt of
notice to produce exclusively such material until the
approval of such PRODUCT comprising such CANDIDATE in the
United States. SYNAPTIC shall purchase from GRUNENTHAL such
PRODUCT against reimbursement of cost of production plus 20
% surcharge. For the purpose of this Agreement, "cost of
production" shall be calculated in accordance with standard
accounting procedures.
In case GRUNENTHAL has exercised such option, GRUNENTHAL
shall produce such FDA-material of any CANDIDATE in
GMP-quality and in sufficient quantity as mentioned in
Section 5.1.2 above, using all reasonable efforts to achieve
the upscaling of the production from the existing level to
production scale in reasonable time. 50 % of the cost of
such upscaling shall be borne by SYNAPTIC, it being
understood that such cost shall not include costs incurred
in building a facility or other building improvements.
5.1.3.4 In the event that GRUNENTHAL does not exercise such option
and SYNAPTIC desires to seek a toll manufacturer to produce
such materials, SYNAPTIC shall use best efforts to seek a
toll manufacturing organization which is under the
obligation
(i) to keep all nonpublic information relating to the
manufacturing and formulation process strictly
confidential for an unlimited period of time, and
(ii) not to produce the product for the benefit of any
person or entity other than SYNAPTIC and its
licensees
defined herewith as ,,TOLL MANUFACTURER". SYNAPTIC shall use
best efforts to seek - in cooperation with GRUNENTHAL - an
agreement for any such TOLL MANUFACTURER not to produce the
PRODUCT for any person or entity other than SYNAPTIC or its
licensees until the expiration of the fifth anniversary of
the expiration of the last blocking patent relating to the
PRODUCT in the United States.
The parties agree that the time period between the
notification pursuant to Section 5.1.3.3 and GRUNENTHAL's
decision whether to exercise such option or not shall be
added to the period refered to in Section 5.1.2.
5.1.4 Geographic Limitation on Conduct of Activities. Neither party
shall conduct any activities with respect to a CANDIDATE
outside its exclusive TERRITORY without the prior consent of
the other party.
5.2 Responsibility for Costs. Each party shall be responsible for its own
costs incurred during the ADVANCED DEVELOPMENT STAGE with respect to
any CANDIDATE. The parties recognize the possibility that the ADVANCED
DEVELOPMENT STAGE with respect to a CANDIDATE shall commence following
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<PAGE>
completion of phase IIa clinical trials but before commencement or
completion of phase II clinical trials. As a consequence, phase II
clinical trials with respect to a CANDIDATE could occur during or after
the ADVANCED DEVELOPMENT STAGE with respect to the CANDIDATE.
Notwithstanding the first sentence of this Section 5.2, costs incurred
in connection with any phase II clinical trials shall be borne by the
parties in accordance with Section 4.2.2 above.
5.3 Access to Data Generated in Connection with Phase III Clinical Studies.
Each party shall keep the other party reasonably apprised of the
results of any PHASE III TRIALS and any other activities conducted by
or on behalf of such party without the participation of the other party
during the ADVANCED DEVELOPMENT STAGE with respect to a CANDIDATE. All
data generated pursuant to such studies shall be provided to the other
party at the other party's request in the available data format against
reimbursement of 50% of the costs of conducting such studies, plus a
surcharge of 10%; provided, however, that clinical safety data shall be
provided to the other party in the available data format free of
charge.
5.4 Information on Status of Phase III Trials. The parties shall keep each
other informed on the status of their preparation and conduct of PHASE
III TRIALS on a half-yearly basis, starting six months after the
commencement of the ADVANCED DEVELOPMENT STAGE.
Article 6
Post-Advanced Development Stage Production and Marketing
6.1 SYNAPTIC Territory.
SYNAPTIC will have exclusive rights for production - if not transferred
to GRUNENTHAL according to Section 5.1.3 - and marketing in the
SYNAPTIC TERRITORY.
6.2 GRUNENTHAL Territory.
GRUNENTHAL will have exclusive rights for production and marketing in
the GRUNENTHAL TERRITORY.
6.3 Sublicensing Rights in Exclusive Territories.
Each party shall have the right to license to third parties its rights
with respect to the production and marketing of PRODUCTS in any country
within its exclusive TERRITORY.
6.4 Other Territories.
With respect to each country within the OTHER TERRITORIES both parties
shall cooperate as closely as possible in seeking regulatory approvals
for CANDIDATES but each party shall have an independent right to
produce and market PRODUCTS without obligation, financial or otherwise,
to the other party; provided, however, that prior to
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<PAGE>
the filing by one
party of regulatory approval to market a PRODUCT in each such country,
the parties shall discuss the possibility of entering such country
together, rather than proceeding independently; provided further,
however, that neither party shall market any PRODUCT in any such
country under more than one trademark or sublicense its marketing
rights to more than one party without the prior written consent of the
other party. In case of sublicense in any country within the OTHER
TERRITORIES the respective licensor shall be excluded from marketing
such PRODUCT in such country.
With respect to Japan - due to the peculiarities of the process of
regulatory approval in Japan the following shall apply: As soon as one
party starts seeking regulatory approval for a CANDIDATE, it shall
promptly inform the other party in order to allow the other party
within 90 days from such notice to establish a relationship with a
Japanese Clinical Research Organization which in close cooperation with
the first party will conduct all activities for a second regulatory
approval for such CANDIDATE. Such second regulatory approval shall be
transferred to the licensee of the second party. If the other party has
not established such a relationship the one party shall be entitled to
proceed with its activities.
6.5 Coordination of Marketing Strategy.
Each party will, to the extent reasonably practicable, take into
account the marketing strategy of the other party in formulating its
own marketing strategy.
6.6 Exchange of Information.
Each party shall provide to the other party, free of charge, all safety
data generated with respect to a CANDIDATE following the ADVANCED
DEVELOPMENT STAGE. In addition, each party shall keep the other party
reasonably apprised of any other data generated in connection with the
further development of an approved CANDIDATE as far as these data may
be relevant for registration purposes in the other party's TERRITORIES.
Such additional data shall be provided to the other party at the other
party's request in the available data format against reimbursement of
50% of the costs incurred in generating such data, plus a surcharge of
10%.
Article 7
Patent Protection
7.1 Patent Rights.
7.1.1 Inventions by Either Party. Each party shall own BACKGROUND
TECHNOLOGY and PROJECT TECHNOLOGY, including inventions, made
solely by its employees. The party which owns an invention
shall promptly inform the other party about the invention and
shall have the right to file a patent application covering
such invention. All expenses relating to the preparation,
filing, prosecution, extension and maintenance of such
application and any patent granted thereon shall be borne by
such party. In the event that
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<PAGE>
such party determines (a) not to
file a patent application for such an invention in the
TERRITORIES, (b) not to continue prosecution or maintenance
thereof in the TERRITORIES or (c) not to extend any patent
granted thereon in the TERRITORIES, it shall promptly notify
the other party and the other party shall be given the
opportunity to seek and pursue patent protection on such
invention in such territory at its own expense. In the event
the other party pursues such patent protection, ownership of
the PATENT RIGHTS for such invention in such territories shall
be assigned to such other party.
7.1.2 Joint Inventions. An invention made jointly by employees of
SYNAPTIC and employees of GRUNENTHAL shall be owned jointly by
SYNAPTIC and GRUNENTHAL. In such case, the preparation of the
priority patent application shall be carried out by counsel
mutually agreeable to the parties, with the expenses incurred
in connection with such preparation being shared by the
parties on a 50:50 basis. Each of SYNAPTIC and GRUNENTHAL,
respectively, shall be responsible for selecting counsel to
file, prosecute and ensure maintenance of such patent
applications under its name in its exclusive TERRITORIES and
for the costs associated therewith. The parties shall jointly
select counsel to file, prosecute and ensure maintenance of
such patent applications in their names in the OTHER
TERRITORIES and shall share on a 50:50 basis the costs
associated therewith. In the event a party decides not to file
a patent application or to maintain the PATENT RIGHTS in any
OTHER TERRITORIES, the other party shall have the right to
file a patent application or to maintain the PATENT RIGHTS
under its name in such territory at its own expense.
7.1.3 Assistance. If so requested by the party pursuing patent
protection in accordance with the foregoing provisions of this
Section 7.1, the other party shall provide the necessary
declarations and reasonable assistance to such party in order
to obtain the patent protection for any invention.
7.2 Availability of License to Other Party's Inventions Made during or
after Advanced Development Stage and Related Patent Rights.
Each process, formulation or new use invention relating to a CANDIDATE
made by one party during or after the ADVANCED DEVELOPMENT STAGE with
respect to such CANDIDATE, and PATENT RIGHTS relating thereto in the
other party's exclusive TERRITORIES and in the OTHER TERRITORIES, shall
be made available for license to such other party against payment of a
royalty on the NET SALES of the PRODUCT comprising such CANDIDATE in
such TERRITORIES, such royalty to be determined in accordance with the
formula set forth in Schedule B.
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Article 8
License Grants; Restrictions on Use of Technology and Patent Rights
8.1 License Relating to Products.
8.1.1 Grant by SYNAPTIC. Subject to any limitations set forth in
Section 8.1.3, SYNAPTIC grants to GRUNENTHAL an exclusive
license to use SYNAPTIC PROJECT TECHNOLOGY and SYNAPTIC
BACKGROUND TECHNOLOGY, and PATENT RIGHTS relating thereto, in
GRUNENTHAL TERRITORY and the OTHER TERRITORIES for the sole
purpose of carrying out PROJECTS initiated pursuant to this
Agreement and discovering, developing, manufacturing, having
manufactured, using and selling PRODUCTS resulting from such
PROJECTS.
8.1.2 Grant by GRUNENTHAL. GRUNENTHAL grants to SYNAPTIC an
exclusive license to use the GRUNENTHAL PROJECT TECHNOLOGY and
GRUNENTHAL BACKGROUND TECHNOLOGY, and PATENT RIGHTS relating
thereto, in SYNAPTIC TERRITORY and the OTHER TERRITORIES for
the sole purpose of carrying out PROJECTS initiated pursuant
to this Agreement and discovering, developing, manufacturing,
having manufactured, using and selling PRODUCTS resulting from
such PROJECTS.
8.1.3 Limitations on License Grant of Section 8.1.1.
(a) With respect to the alpha 2 adrenergic receptors, SYNAPTIC has
granted to The DuPont Merck Pharmaceutical Company (,,DUPONT
MERCK") a nonexclusive license. As a consequence, the license
grant to GRUNENTHAL pursuant to Section 8.1.1 to use BACKGROUND
TECHNOLOGY relating to such receptors shall be nonexclusive for
so long as DUPONT MERCK continues to have such license. The
DUPONT MERCK license will expire on February 5, 1998, unless
DUPONT MERCK notifies SYNAPTIC prior to such date that it has
decided to undertake optimization and development efforts with
respect to a compound screened against such receptors. As of the
EFFECTIVE DATE, SYNAPTIC had not received any such notification
from DUPONT MERCK and shall notify GRUNENTHAL in the event it
receives any such notification.
(b) Certain of SYNAPTIC's PATENT RIGHTS relating to alpha-2 agonists
overlap with patent rights of Procter & Gamble. As a consequence,
GRUNENTHAL's license with respect to such alpha-2 agonists cannot
be defined at the present time. In the event SYNAPTIC negotiates
with Procter & Gamble to license such PATENT RIGHT to Procter &
Gamble, it shall use all reasonable efforts to seek from Procter
& Gamble the rights to develop and rights to permit
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GRUNENTHAL to
develop such alpha-2 agonists for the alleviation of PAIN.
SYNAPTIC shall obtain the same rights and conditions with respect
to development of such compounds for the alleviation of PAIN as
for itself also for GRUNENTHAL's use in the GRUNENTHAL TERRITORY
or OTHER TERRITORIES for the allevation of PAIN. Any costs
associated with GRUNENTHAL's obtaining or exercising such rights
shall be borne by GRUNENTHAL.
8.2 Sublicense Relating to Products.
Each party shall have the right to grant sublicenses of the rights
granted to it under Section 8.1 with respect to each PRODUCT commencing
at any time after the beginning of the ADVANCED DEVELOPMENT STAGE with
respect to the CANDIDATE comprised by such PRODUCT provided, however,
that in any country of the TERRITORIES a party is only using one of
such rights either for itself or for its sublicensee. If any party
grants any such sublicense, it shall promptly provide written
notification thereof to the other party.
8.3 The rights granted in Section 8.1.1, 8.1.2 and 8.2 shall be granted as
long as such technology or PATENT RIGHTS exists and shall survive the
termination or expiration of this Agreement regardless of the reason of
termination or expiration provided however, that the respective party
has complied with its payment obligation in connection with the rights.
In case the respective party is in breach of any such payment
obligation Section 13.2 shall apply.
Article 9
Reimbursement or Other Payment of Costs
9.1 Calculation of Costs. For all purposes of this Agreement, ,,costs"
shall be calculated in accordance with the applicable party's standard
method for computing costs, applied in a manner consistent with all
other activities carried out by such party.
9.2 Reimbursement of Ongoing Costs. (a) Costs incurred pursuant to the
BUDGET for a PROJECT during the EARLY DEVELOPMENT STAGE with respect to
a CANDIDATE shall in the first instance be paid by GRUNENTHAL. At the
end of the first six months of each 12-month period for which detailed
costs are provided in any such BUDGET, SYNAPTIC shall pay GRUNENTHAL
25% of the total amount of such detailed costs. Within 60 days after
the end of each such 12-month period, GRUNENTHAL will provide to
SYNAPTIC an invoice for 50% of the total costs incurred by it during
such year pursuant to the BUDGET, net of the amount previously paid by
SYNAPTIC in respect of such BUDGET during such year, together with a
detailed accounting of all of such costs. Within 30 days after its
receipt of the invoice, SYNAPTIC shall pay GRUNENTHAL the balance due
GRUNENTHAL. In no event, however, shall SYNAPTIC be required with
respect to any year to pay GRUNENTHAL more than 50% of the total amount
of the detailed costs for such year
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reflected in the BUDGET unless
SYNAPTIC shall have approved modifications thereto.
(b) If, prior to any date as of which SYNAPTIC is required to reimburse
GRUNENTHAL for costs incurred with respect to a CANDIDATE pursuant to
Section 9.2 (a), SYNAPTIC provides written notification to GRUNENTHAL
that it is in good faith actively attempting to identify a third party
to which to license its production and marketing rights with respect to
such CANDIDATE, then SYNAPTIC's reimbursement obligations with respect
to costs associated with such CANDIDATE shall be suspended for the
period from the date of such notification until the earlier of (i) the
30th day following the consummation by SYNAPTIC of a licensing
arrangement with a third party or (ii) the first anniversary of such
notice.
9.3 Payment of Royalties. Any royalties that may be payable hereunder shall
be paid within sixty days after the close of each calendar quarter.
With each such quarterly payment, the paying party shall furnish the
other party with a 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.
9.4 Other Reimbursements and Payments. Any other reimbursements or payments
which one party is required to make to the other party shall be made
within 60 days following receipt by the paying party of an invoice
therefor.
Article 10
Records and Reports, Inspection
10.1 Maintenance of Records; Provision of Reports.
The parties agree to keep accurate records of each PROJECT. Each party
shall also keep, and shall require its permitted sublicensees to keep,
accurate books and accounts of record in connection with the
manufacture, use and/or sale by or for it of any PRODUCTS with respect
to which royalties may be payable hereunder in sufficient detail to
permit accurate determination of all figures necessary for verification
of royalty obligations.
10.2 Inspection of Records.
Each party agrees to allow an independent chartered accountant
designated by the other party and reasonably acceptable to such party
(a) to examine such party's records of each PROJECT in order to verify
the fulfillment of such party's obligations under this Agreement and
(b) to examine such party's records for the purpose of verifying
royalty statements. Such examinations shall not be conducted more
frequently than once a year.
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The chartered accountant shall be obliged to keep his findings in
strict confidence and shall inform its client only about whether the
obligations of the other party have been met and whether the royalty
amounts have been verified.
Only in case the chartered accountant finds reasonable proof of the
fact that obligations of this Agreement have not been adhered to or
that royalty payments made were less than amounts properly due shall he
provide further information.
The costs of such chartered accountant shall be borne by his client
unless the accountant establishes a violation of an obligation under
this Agreement or an underpayment of royalties, in which case the costs
shall be borne by the other party.
Article 11
Confidentiality
11.1 Obligations.
Each of SYNAPTIC and GRUNENTHAL shall use its best efforts to retain in
confidence and not use, except as provided in this Agreement, all
information received from the other party pursuant to or in connection
with this Agreement. All third parties involved, licensees,
sublicensees or TOLL MANUFACTURER shall be bound accordingly and each
party shall be responsible for the conduct of such parties. 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.
11.2 Waiver of Confidentiality Obligation.
The obligation of confidentiality set forth in Section 11.1 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.
11.3 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 any PROJECT, without the prior written
consent of the other party, which consent shall not be unreasonably
withheld.
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11.4 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.
11.5 Scientific Publications.
Neither party shall make any scientific publication concerning the
results of its studies carried out under this Agreement without the
prior approval of the other party. Each party shall provide the other
party with the opportunity to review any proposed manuscripts or
abstracts which relate to any PROJECT at least 30 days prior to their
intended submission to any scientific publisher and shall not submit
any such manuscript or abstract without the written authorization of
the reviewing party, which shall not be unreasonably withheld.
Article 12
Termination of Projects
12.1 Termination of Projects by Mutual Agreement.
The parties may at any time, by mutual agreement, terminate any
PROJECT. The rights and obligations of the parties with respect to the
subject matter of such PROJECT shall be set forth in a separate written
agreement at the time of such termination, and shall supercede in their
entirety the rights and obligations of the parties with respect to such
subject matter set forth in this Agreement.
12.2 Termination of Projects Due to Impasse at the Management Committee
Level.
In the event that pursuant to Section 3.1.6 the MANAGEMENT COMMITTEE is
presented with, but is unable within 180 days after such presentation
to resolve, an issue relating to the direction or conduct of a PROJECT,
such PROJECT shall automatically terminate. Upon any such termination,
neither party shall, at any time during the five year period
thereafter, undertake any further research or development activities
focused on the identification of any compound the primary mechanism of
action which involves any TARGET that was the focus of such PROJECT for
the alleviation of PAIN.
12.3 Termination of Project during the Research Stage.
In case one party (the ,,nonparticipating party") determines during the
RESEARCH STAGE of a PROJECT that it no longer desires to participate in
such PROJECT, it may elect, by providing written notice (the
,,nonparticipation notice") to the other party (the ,,participating
party"), to terminate its participation in the PROJECT, whereupon
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such PROJECT shall immediately terminate. In the event of any
such termination, the following shall apply:
(a) The nonparticipating party shall cease to be
obligated to conduct any activities contemplated by
either Section 5.1 or the research plan for such
PROJECT to be conducted by it following such
notification;
(b) The participating party may continue its activities
with respect to the PROJECT and shall continue to
have the right to use (i) any TARGET that is the
focus of such PROJECT, (ii) COMPOUND, (iii)
BACKGROUND TECHNOLOGY and/or (iv) PROJECT TECHNOLOGY
in connection therewith. Such activities may be
performed in any TERRITORY, including any TERRITORY
of the nonparticipating party;
(c) The nonparticipating party shall cease to have the
right to use any TARGET that is the focus of such
PROJECT, any COMPOUND the mechanism of action of
which involves such TARGET and the related BACKGROUND
TECHNOLOGY and PROJECT TECHNOLOGY for the purpose of
identifying and developing COMPOUNDS for alleviating
PAIN in humans; and
(d) The participating party shall have no liability or
other obligation, financial or otherwise, to the
nonparticipating party in respect of any PRODUCT
resulting from such PROJECT.
Article 13
Term and Termination of Agreement
13.1 Term.
This Agreement enters into force as of the EFFECTIVE DATE and continues
in full force for a period of five years thereafter, unless terminated
earlier pursuant to the other provisions of this Article 13.
Thereafter, it shall be automatically renewed every two years for an
additional period of two years, unless one party gives the other party
written notice at least 6 months prior to the expiration of the
original five-year period or the next subsequent two-year period of its
desire not to renew, in which case this Agreement shall terminate
effective upon the expiration of such period.
13.2 Termination for Breach.
If either party shall be in material default of any of its obligations
under this Agreement and shall fail to remedy such default within 90
days after written notice thereof specifying the nature of such
default, then, notwithstanding anything to the contrary contained in
this Agreement, the party not in default shall have the option of
terminating this Agreement by giving written notice of termination to
the party in
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default, which option, if it is to be exercised, must be
exercised within 60 days following the expiration of the 90 days
allowed to correct the default.
13.3 Termination due to change of control.
13.3.1 GRUNENTHAL may terminate this Agreement upon 180 days'
written notice in case any single person or entity (or group
of affiliated entities) becomes the owner directly or
indirectly of more than 50 % of shares of SYNAPTIC or acquires
otherwise comparable dominating influence on SYNAPTIC and
GRUNENTHAL has reasons to believe that the change has a
negative impact on the cooperation. The aforementioned right
to terminate shall not apply,
(i) in case Dr. Mullinix becomes 50 % owner of the
shares of SYNAPTIC or obtains otherwise comparable
dominating influence, or
(ii) in case of an acquisition by an affiliate of SYNAPTIC
in which SYNAPTIC owns more than 50 % of shares or
(iii) in case a financial institution is acquiring such
shares or dominating influence.
13.3.2 SYNAPTIC may terminate this Agreement upon 180 days'
written notice in case a third party becomes owner of directly
or indirectly more than 50 % of shares of GRUNENTHAL or
acquires otherwise comparable dominating influence on
GRUNENTHAL and SYNAPTIC has reasons to believe that the change
has a negative impact on the cooperation.The Wirtz-family or
companies belonging or controlled by members of the
Wirtz-family shall not be considered as third parties.
Article 14
Effect of Termination or Expiration of Agreement
14.1 Termination or expiration of this Agreement shall not affect the rights
and obligations of the parties under provisions which by their meaning
or intent have an effect beyond the duration of this Agreement. Such
provisions shall, except to the extent expressly limited by their
terms, survive any such termination or expiration. In addition, the
liabilities of the parties for any breach of this Agreement shall
survive expiration or termination hereof. Without in any way limiting
the foregoing, but subject to Section 14.2, PROJECTS and drug
development activities relating to CANDIDATES resulting from PROJECTS
shall not be affected by any termination of this Agreement pursuant to
Article 13 and any provisions of this Agreement relating thereto shall
survive any such termination.
14.2 The parties are aware that termination or expiration of this Agreement
has an impact on the development of PROJECTS and needs special
considerations. The parties therefore agree in clarification of Section
14.1 above on the following:
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14.2.1 Termination during Research Stage pursuant to Section 13.1,
13.2 and 13.3. At least 90 days prior to termination of this
Agreement, with regard to any PROJECT which has not at such
time progressed beyond the RESEARCH STAGE, the parties shall
discuss in good faith whether or not to continue jointly such
PROJECT. If the parties cannot agree in such discussions to
continue such PROJECT jointly within the above mentioned 90
days, such PROJECT shall terminate and then
14.2.1.1 each party shall be entitled to continue on its
own to attempt to identify and develop compounds
whose mechanism of action is the TARGET of such
PROJECT for the alleviation of PAIN and to use in
connection therewith any BACKGROUND TECHNOLOGY,
PROJECT TECHNOLOGY and PATENT RIGHTS of the other
party which exist at the time of termination,
14.2.1.2 neither party shall have any obligation to provide
any additional data or other information relating
to such TARGET or its continuing efforts to
identify and develop such compounds to the other
party and
14.2.1.3 neither party shall have any financial obligation
to the other party with respect to any product
which may result from its efforts or with respect
to its use of any technology, rights or other data
or information referred to in this Section 14.2.1.
14.2.2 Termination during Early Development Stage pursuant to Section
13.1 or Section 13.3. Upon termination due to Section 13.1 or
Section 13.3 of this Agreement with regard to any PROJECT
which has progressed at such time to the EARLY DEVELOPMENT
STAGE the parties shall continue the development of the
CANDIDATE resulting from such PROJECT until the end of phase
II a clinical trials. Thereafter Article 5 and all other
applicable provision of this Agreement shall apply. With
respect to any such PROJECT Section 12.2 shall survive if the
termination is pursuant to Section 13.1 but shall not survive
if the termination is pursuant to Section 13.3.
14.2.3 Termination during Early Development Stage pursuant to
Section 13.2
Upon termination of this Agreement pursuant to Section 13.2
with regard to any PROJECT which has progressed at such time
to the EARLY DEVELOPMENT STAGE each party shall be entitled to
continue to develop and to market on its own and any product
resulting therefrom in its exclusive TERRITORY and in the
OTHER TERRITORIES. The parties shall not be obliged to further
collaborate during this EARLY DEVELOPMENT STAGE or at any time
thereafter.
Thereafter each party shall be entitled to continue on its own
and all other applicable provisions of this Agreement shall
apply and the party shall be entitled to use in connection
therewith any BACKGROUND TECHNOLOGY, PROJECT TECHNOLOGY and
PATENT RIGHTS of the other party which
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exists at the time of
termination. The right to terminate this Agreement pursuant to
Section 13.2 shall not prevent the terminating party to claim
further damage. With respect to any such PROJECT Section 12.2
shall not survive.
Article 15
Governing Law and Arbitration
15.1 Governing Law.
This Agreement shall be exclusively governed by the laws of Switzerland
(without regard to principles of conflicts of laws).
15.2 Arbitration.
Any controversy or claim arising out of or relating to this Agreement
shall be finally settled by arbitration in accordance with the Rules of
the International Chamber of Commerce (ICC). The arbitration hearings
shall be held in Zurich, Switzerland, in English language.
Article 16
Concluding Provisions
16.1 No Agency.
It is understood and agreed that SYNAPTIC and GRUNENTHAL 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.
16.2 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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If to SYNAPTIC:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: Kathleen P. Mullinix
Chairman, President and CEO
If to GRUNENTHAL:
Grunenthal GmbH
Zieglerstr. 6
52078 Aachen
Federal Republic of Germany
Attention: Dr. Eric Paques, Geschaftsfuhrung
Any notice hereunder shall be deemed given as of the actual date of
receipt by SYNAPTIC or GRUNENTHAL.
16.3 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.
16.4 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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16.5 Indemnification.
Each party (the ,,indemnifying party") shall indemnify the other party
for, and defend and hold such other party harmless from and against,
any and all losses, claims, liabilities, costs and expenses whatsoever
(including reasonable attorneys' fees) that may be imposed upon or
asserted against such other party as a result of a wilful or negligent
conduct of the indemnifying party in testing, making, using or selling
any PRODUCT or CANDIDATE which not reasonably could have been detected
by such other party.
16.6 Assignment.
This Agreement shall not be assigned wholly or in part to third parties
or to the legal successor by either party without the prior written
consent of the other party; provided, however, that, subject to the
other party's right to terminate pursuant to Section 13.3, either party
may assign this Agreement in connection with the sale of its business
without the consent of the other party.
16.7 No Strict Construction.
This Agreement has been prepared jointly and shall not be strictly
construed against either party.
16.8 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.
16.9 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.
16.10 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.
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16.11 Severability.
In the event that any provision of this Agreement is or becomes
ineffective, the validity of the remaining provisions shall thereby not
be affected. In place of the ineffective provision the parties shall
find a provision being the nearest legally possible approach to that
which the parties have decided in consideration of the spirit and
object of this Agreement.
Date: January 12, 1998 Date: January 12, 1998
GRUNENTHAL GMBH SYNAPTIC PHARMACEUTICAL CORPORATION
/s/ Michael Wirtz
/s/ Franz Wirtz /s/ Kathleen P. Mullinix
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Schedule A
Surcharge Pursuant to Section 4.2.4
Surcharge
If nonparticipation notice
provided prior to phase I Completion 10%
If nonparticipation notice
provided Post-phase I Completion 20%
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Schedule B
Royalties for Licenses to Certain Patent Rights
Applicable Royalty
Payable only with respect to NET SALES in the years during which the market
exclusivity has been extended if the PATENT RIGHTS relate to:
Process 2 %
Formulation 3 %
New Use 3 %
The maximum cummulative percentage on two or more of the above items shall be
4%.
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Schedule I
Available Targets
1. Neuropeptide Y2 receptor
2. Neuropeptide Y4 receptor
3. Glycine transporter
4. GAT-2 transporter
5. GAT-3 transporter
6. Taurine transporter
7. Betaine transporter
8. 5HT-4 receptor
9. Orphan transporter
10. Hp 15a (orphan receptor)
11. HL-18a (orphan receptor)
12. FB41a (orphan receptor)
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Schedule II
Tissues Known to be Involved
in Transmission or Inhibition of Pain
Dorsal Root Ganglia (DRG)
Spinal Cord especially Dorsal-Horns
Thalamus
Periaqueductal Gray Matter (PAG)
Medulla especially Nucleus Raphe Magnus (NRM)
Locus coerulus
Trigeminal Ganglion
Sp 5 (Spinal trigeminal ganglion)
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Schedule III
Alpha 2 Compounds
and Alpha 2 Patent Rights
[**]
47
[** CONFIDENTIAL TREATMENT REQUESTED]
EXHIBIT 10.39
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AMENDED AND
RESTATED EMPLOYMENT
AGREEMENT dated as of
February 7, 1998, between
SYNAPTIC PHARMACEUTICAL
CORPORATION, a Delaware
corporation (the
"Company"), and LISA L.
REITER (the "Employee").
The Employee is currently employed by the Company and
possesses special and particular knowledge of the business and operations of the
Company and of the industry in which it operates. The Company and the Employee
are parties to an Employment Agreement dated as of February 7, 1994 (the
"Original Employment Agreement") the initial term of which expires on February
7, 1998. The Company and the Employee now desire to amend and restate the terms
of the Employee's employment by the Company.
ACCORDINGLY, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Employment.The Company hereby employs the Employee, and the
Employee hereby accepts such employment by the Company, on the terms and subject
to the conditions hereinafter set forth.
2. Term. Subject to earlier termination as provided herein,
the employment of the Employee hereunder shall be for a four-year period
commencing on February 7, 1998 (the "Effective Date"), and ending on the fourth
anniversary of the Effective Date; provided, however, that commencing as of such
fourth anniversary and on each anniversary thereafter, unless either party
hereto gives the other party at least 90 days' prior written notice of its or
her election not to extend the period of the Employee's employment hereunder,
such period shall automatically be extended for an additional one-year period on
the same terms and conditions set forth herein, unless otherwise agreed upon by
the parties. For convenience of reference, such period of employment, as the
same may be extended as aforesaid, is referred to herein as the "Employment
Period."
3. Duties. (a) During the Employment Period, the Employee
shall be employed as Vice President, General Counsel and Secretary of the
Company and shall perform such duties for the Company consistent with such
position as may be assigned to her from time to time by the President of the
Company.
(b) The Employee shall perform her duties hereunder at the offices
of the Company in Paramus, New Jersey; provided, however, that the Company may
require the Employee to travel in connection with the performance of such
duties. Anything contained herein to the contrary notwithstanding, if the
Company requires the Employee to be based anywhere other than within a 50-mile
radius of New York City and notifies the Employee in writing that her continued
employment by the Company is conditional upon such relocation and the Employee
refuses to so relocate, then any Termination of Employment of the Employee
resulting therefrom, whether initiated by the Company or by the Employee, shall
constitute a Termination Without Cause.
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4. Time to be Devoted to Employment. Except for vacations in
accordance with Section 5(d) and absences due to temporary illness, during the
Employment Period, the Employee shall devote all of her business time, attention
and energies to the performance of her duties under this Agreement. During the
Employment Period, the Employee shall not be engaged in any other business
activity which, in the judgment of the Company, conflicts with the duties of the
Employee under this Agreement, whether or not such activity is pursued for gain,
profit or other pecuniary advantage.
5. Compensation; Reimbursement.
(a) Base Salary. During the Employment Period, the Company shall pay
to the Employee a base salary of $170,000 per annum, subject to increase by the
Board of Directors of the Company, in its discretion. For convenience of
reference, such base salary, as the same may be increased as aforesaid, is
referred to herein as the "Base Salary." The Base Salary shall be payable in
such installments (but not less frequent than monthly) as is the policy of the
Company generally with respect to its employees.
(b) Annual Performance Bonus. The Employee shall be eligible to
receive a cash bonus of at least $25,000 with respect to each calendar year
during the Employment Period, subject to the achievement of the goals determined
at the commencement of each year by the President of the Company. Such cash
bonus, if earned, will be payable to the Employee within forty-five days after
the end of the calendar year in respect of which such bonus is earned.
Additional bonuses may be approved by the Board of Directors of the Company, in
its discretion.
(c) Benefits. During the Employment Period, the Employee shall be
entitled to such benefits as are generally made available to other employees of
the Company and to such additional benefits as are generally made available to
employees of the Company at substantially the same level of employment as the
Employee.
(d) Vacation. During each calendar year of the Employment Period, the
Employee shall be entitled to five weeks of vacation time with full pay.
(e) Reimbursement of Expenses. During the Employment Period, the
Company shall reimburse the Employee, in accordance with the policies and
practices of the Company in effect from time to time during such Period, for all
reasonable and necessary traveling expenses and other disbursements incurred by
her for or on behalf of the Company in connection with the perfor mance of her
duties hereunder (such expenses being referred to herein as "Reimbursable
Expenses") upon presentation by the Employee to the Company of appropriate
documentation therefor.
6. Termination of Employment.
(a) General. The Company may terminate the Employee's employment
hereunder at any time for any reason. The Employee may terminate her employment
hereunder pursuant to a Resignation for Good Reason, a Voluntary Termination or
a Disability Termination.
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The Employee's employment shall terminate automatically upon her death. Any
termination of the Employee's employment is referred to herein as a "Termination
of Employment."
(b) Termination Notice. The Company or the Employee may initiate a
Termination of Employment in any manner permitted hereunder by giving the other
party written notice thereof (the "Termination Notice").
(c) Termination Date. The effective date (the "Termination Date") of
any Termination of Employment shall be deemed to be the later of (i) the date on
which the Termination Notice is given and (ii) the date specified as the
effective date in the Termination Notice; provided, however, that in the case of
the Employee's death, the Termination Date shall be her date of death.
7. Termination by the Company.
(a) Termination for Cause. Any Termination of Employment initiated
by the Company upon the occurrence of an event that constitutes Cause shall be a
"Termination for Cause." For purposes of this Agreement, the term "Cause" shall
mean the Employee's (i) willful failure to perform those duties that the
Employee is required or expected to perform as an employee of the Company under
Section 3 hereof, (ii) consistent failure over a substantial period of time to
perform competently such duties, (iii) conviction of a crime involving moral
turpitude, dishonesty, theft, unethical business conduct or conduct that
significantly impairs the reputation of the Company or (iv) failure to devote
all of her business time, attention and energies to the performance of her
duties hereunder. In the event of a Termination for Cause, the Termination
Notice given to the Employee by the Company shall state that the Termination of
Employment is "for Cause."
(b) Termination Without Cause. Any Termination of Employment
initiated by the Company (other than a Termination for Cause or a Disability
Termination) shall be a "Termination Without Cause."
8. Termination by the Employee.
(a) Resignation for Good Reason. Any Termination of Employment
initiated by the Employee within 90 days following the occurrence of any of the
following events shall be a "Resignation for Good Reason":
(i) subsequent to a Change in Control, and without the
Employee's express written consent, (A) the assignment to the Employee
of any duties inconsistent with her position, duties, responsibilities
and status within the Company prior to such Change in Control, (B) any
material change in the Employee's titles or offices as in effect prior
to such Change in Control or (C) any removal of the Employee from or
any failure to re-elect the Employee to any material position held by
her prior to such Change in Control;
(ii) subsequent to a Change in Control, a reduction in the
Employee's Base Salary or a termination of the Employee's participation
in any bonus plan or program (or a
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substantial reduction in the level of such participation) as in effect
on the Effective Date or as the same may be increased after the
Effective Date and in effect at the time;
(iii) subsequent to a Change in Control, and without the
Employee's express written consent, any requirement that the Employee
be based anywhere other than within a 50-mile radius of New York City;
(iv) subsequent to a Change in Control, the failure by the
Company to continue the Employee's participation in any benefit or
compensation plan, life insurance plan, health-and- accident plan or
disability plan in which the Employee is participating at the time of
such Change in Control (or in plans providing the Employee with
substantially similar or more favorable benefits) or the taking of any
action by the Company which would materially adversely affect the
Employee's participation in or materially reduce the Employee's
benefits under any of such plans or deprive the Employee of any
material fringe benefit enjoyed by the Employee at the time of such
Change in Control; or
(v) subsequent to a Change in Control, the failure by the
Company to obtain the assumption of the agreement to perform this
Agreement by any successor as contemplated by Section 16.
In the event of a Resignation for Good Reason, the Termination Notice given to
the Company by the Employee shall state that the Termination of Employment is a
"Resignation for Good Reason."
(b) Other Termination by the Employee. Any Termination of
Employment initiated by the Employee (other than a Termination of Employment
resulting from the Employee's death, a Resignation for Good Reason or a
Disability Termination) shall be a "Voluntary Termination."
9. Termination by the Company or by the Employee -- Disability
Termination. Any Termination of Employment resulting from the Employee's
Disability shall be a "Disability Termination." For purposes of this Agreement,
the term "Employee's Disability" shall mean the Employee's illness or other
physical or mental disability that prevents the Employee from performing her
duties hereunder for a period of 90 days in any 180-day period. In the event of
a Disability Termination, the Termination Notice given to one party by the other
party shall state that the Termination of Employment is a "Disability
Termination."
10. Effect of Termination of Employment. (a) In the Event of a
Termination of Employment (other than a Termination of Employment contemplated
by Section 11(a)), neither the Employee nor her estate or beneficiaries shall
have any further rights or claims against the Company under this Agreement
except the right to receive:
(i) the portion of the Base Salary which accrued with respect
to the period prior to the Termination Date but which remained unpaid
as of the Termination Date;
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(ii) the aggregate amount of Reimbursable Expenses which were
incurred prior to the Termination Date but which were not reimbursed by
the Company as provided in Section 5(e) prior to the Termination Date;
and
(iii) any other benefits to which the Employee may be entitled
upon such Termination of Employment under the plans, programs and
policies of the Company then in effect, which benefits shall be payable
in accordance with the terms of such plans, programs and policies;
provided, however, that if the Termination of Employment is pursuant to a
Termination Without Cause, then, in addition to the amounts computed pursuant to
the foregoing provisions of this Section 10(a), the Employee shall have the
right to receive as severance compensation an amount (the "Severance Amount")
equal to 50% of one year's Base Salary, such Severance Amount to be payable at
the same times at which and in the same manner in which the Base Salary would
have been payable to the Employee had the Termination of Employment not
occurred.
(b) The Employee shall not be required to mitigate the amount of any
payment provided for in this Section 10 by seeking other employment or
otherwise, and no payment or benefit provided for in this Section 10 shall be
reduced by compensation earned by the Employee as a result of her employment by
another employer following the Termination Date, or otherwise.
11. Effect of Termination of Employment following a Change in
Control. (a) In the event that the Employee's employment with the Company is
terminated in contemplation of, or at any time within one year following, a
Change in Control, and such termination constitutes a Termination Without Cause
or a Resignation for Good Reason, neither the Employee nor her estate or
beneficiaries shall have any further rights or claims against the Company under
this Agreement other than the following:
(i) the right to receive all amounts and benefits to which the
Employee would be entitled under Section 10 upon a Termination of
Employment; and
(ii) all stock options, stock bonus awards and restricted
stock grants relating to securities of the Company held by the Employee
on the Termination Date shall become exercisable or vest, as the case
may be, on the Termination Date, notwithstanding any provisions in any
such stock options, stock bonus awards or restricted stock grants or
the plans covering the same to the contrary, and all rights to exercise
such stock options shall remain exercisable by the Employee for a
period of not less than 120 days after the Termination Date.
If the benefits payable hereunder, together with other payments in the nature of
compensation to or with respect to the Employee, would otherwise be subject to
the excise taxes imposed under Section 280G of the Internal Revenue Code of
1986, as amended ("Code"), and if the net value of such benefits and payments in
the nature of compensation, after reduction for such taxes, is less than the
aggregate value of the benefits and payments in the nature of compensation
determined as if such amounts had been $1.00 less than a maximum amount which
could be paid without imposition of
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<PAGE>
excise taxes, then the benefits payable hereunder shall be reduced to highest
amount such that such excise taxes shall not be imposed with respect to the
benefits or the other payments in the nature of compensation. It is the
intention of this provision to reduce benefits payable hereunder only if the
Employee would be in a superior position taking into account such excise taxes
than if such payments were made, and such reduction shall, in any event, be the
least amount in order that the Employee be better off with the reduction than
before such reduction. The calculation of the value of benefits payable
hereunder and other payments in the nature of compensation, and the implications
of the excise tax rules of Section 280G of the Code, shall be determined by the
Company in good faith based on written advice of a national accounting firm.
(b) The Employee shall not be required to mitigate the amount of
any payment provided for in this Section 11 by seeking other employment
or otherwise,and no payment or benefit provided for in this Section 11 shall be
reduced by compensation earned by the Employee as a result of her employment by
another employer following the Termination Date, or otherwise.
(c) As used herein, the term "Change in Control" shall mean a
change in control of the Company of a nature that would be required to be
reported in response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), if the Company were at
that time subject to such reporting requirements of the Exchange Act; provided,
however, that such term shall in any event be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
35% or more of the combined voting power of the Company's then outstanding
securities or (ii) during any one-year period or any period of two consecutive
years, individuals who at the beginning of any such period constitute the Board
of Directors of the Company cease for any reason to constitute at least a
majority thereof as of the end of such period unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors of the Company then
still in office who were directors at the beginning of such period.
12. Notices. All notices or other communications that are
required or permitted hereunder shall be in writing and shall be deemed to have
been given if (a) personally delivered or sent by telecopier, (b) sent by
nationally-recognized overnight courier or (c) sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to the Employee, to her at:
530 E. 72nd Street, Apt. #17-B
New York, New York 10021
-6-
<PAGE>
if to the Company, to it at:
215 College Road
Paramus, New Jersey 07652
Attention: President
Telecopier: 201-261-0623
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered, sent by telecopier or sent by nationally-recognized,
overnight courier and (ii) on the third Business Day following the date on which
the piece of mail containing such communication is posted, if sent by mail. As
used herein, the term "Business Day" means a day that is not a Saturday, a
Sunday or a day on which banking institutions in the city to which the notice or
communication is to be sent are not required to be open.
13. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior or contemporaneous negotiations, correspondence,
understandings and agreements between the parties with respect thereto,
including, without limitation, the Original Employment Agreement . This
Agreement may be amended only by an agreement in writing signed by both parties
hereto. Anything contained herein to the contrary notwithstanding, the
provisions of Sections 10 and 11 shall survive the expiration or early
termination of the Employment Period.
14. Assignment. This Agreement is personal in its nature.
Accordingly, neither party hereto shall, without the consent of the other,
assign this Agreement or any rights or obligations hereunder to any other person
or entity.
15. Benefits of Agreement. The provisions of this Agreement
shall be binding upon and inure to the benefit of the heirs, beneficiaries,
executors, administrators and permitted assigns of the Employee and the
successors and permitted assigns of the Company.
16. Obligation of the Company's Successors. Any successor to
substantially all of the Company's assets and business, whether by merger,
consolidation, purchase of assets or otherwise, shall succeed to the rights and
obligations of the Company hereunder. The Company shall require any such
successor, by agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. The failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Employee to receive from the Company or its
successor the same amounts and benefits that the Employee would be entitled to
receive under Sections 11(a)(i) and 11(a)(ii) upon a Resignation for Good
Reason. For purposes of implementing the immediately preceding sentence, the
date on which any such succession becomes effective shall be deemed the
Termination Date.
-7-
<PAGE>
17. Waiver of Breach. A waiver of any breach of any provision
of this Agreement shall not constitute or operate as a waiver of any other
breach of such provision or of any other provision, and any failure to enforce
any provision hereof shall not operate as a waiver of such provision or of any
other provision.
18. Execution in Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
19. Headings. The headings of sections in this Agreement are
for convenience only, are not a part of this Agreement and shall not affect the
construction of the provisions of this Agreement.
20. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New Jersey
without giving effect to principles of conflicts of laws.
21. Enforceability. In the event that any provision of this
Agreement is determined to be partially or wholly invalid, illegal or
unenforceable in any jurisdiction, then such pro vision shall, as to such
jurisdiction, be modified or restricted to the extent necessary to make such
provision valid, binding and enforceable, or, if such provision cannot be
modified or restricted, then such provision shall, as to such jurisdiction, be
deemed to be excised from this Agreement; provided, however, that the binding
effect and enforceability of the remaining provisions of this Agreement, to the
extent that the economic benefits conferred upon the parties by virtue of this
Agreement remain substantially unimpaired, shall not be affected or impaired in
any manner, and that any such invalidity, illegality or unenforceability with
respect to such provisions shall not invalidate or render unenforceable such
provision in any other jurisdiction.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinux
-----------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President and
Chief Executive Officer
/s/ Lisa L. Reiter
-----------------------------
Lisa L. Reiter
-9-
EXHIBIT 10.40
-------------
AMENDMENT NO. 4 TO
RESEARCH COLLABORATION AND LICENSE AGREEMENT
Amendment No. 4
dated and effective as of March 2, 1998 between SYNAPTIC PHARMACEUTICAL
CORPORATION, a Delaware corporation ("SYNAPTIC"), and MERCK & CO., INC., a New
Jersey Corporation ("MERCK").
WHEREAS, SYNAPTIC and MERCK are parties to a Research Collaboration
and License Agreement dated as of November 30, 1993, an Amendment No. 1 dated
February 15, 1995, a letter agreement dated August 25, 1995, an Amendment No. 2
and Supplement dated October 9, 1996 and an Amendment No. 3 and Supplement dated
December 1, 1997 (the "AGREEMENT"). Capitalized terms used and not defined in
this Amendment No. 4 shall have the meanings ascribed to them in the AGREEMENT,
and
WHEREAS, To their mutual benefit, the parties are willing for certain
rights under PATENTS to be provided to GLAXO (hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
1. Amendment to the Agreement. The AGREEMENT shall be amended as of
the date first written above as follows:
(i) In ARTICLE 1 - DEFINITIONS.
Add the following new definitions:
1.22 GLAXO shall mean Glaxo Group Limited, a company organized
and existing under the laws of the United Kingdom and having
a principal office at Glaxo Wellcome House, Berkeley Avenue,
Greenford, Middlesex, UB6 ONN UK.
1.23 GLAXO PRODUCT shall mean a BPH PRODUCT, as such term is
defined in the OPTION AND LICENSE AGREEMENT.
1.24 OPTION AND LICENSE AGREEMENT shall mean the Agreement
between SYNAPTIC and GLAXO which grants rights under
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<PAGE>
PATENTS to GLAXO, a copy of which is attached hereto and
made a part hereof.
(ii) In ARTICLE 3 - LICENSE GRANT.
Add the following Section 3.3:
3.3 MERCK hereby grants back to SYNAPTIC such rights as may be
necessary for the sole purpose of enabling SYNAPTIC to grant to
GLAXO the rights set forth in the OPTION AND LICENSE AGREEMENT.
(iii) In ARTICLE 7 - MILESTONES.
Article 7.1(b) shall be amended by inserting after "MAJOR MARKET
COUNTRY" the words:
"in the event that MERCK makes such filing of a New Drug
Application or its equivalent prior to filing by GLAXO of a New Drug Application
for a GLAXO PRODUCT with the FDA or an equivalent of a New Drug Application for
a GLAXO PRODUCT in another MAJOR MARKET COUNTRY".
(iv) In ARTICLE 9 - ROYALTIES.
Article 9.3 shall be replaced by Articles 9.3 (a) and 9.3 (b) below:
9.3 (a) In the event that GLAXO has not sold a GLAXO PRODUCT
during any portion of the calendar year in any country
of the TERRITORY and annual NET SALES of PRODUCT
exceed $500,000,000.00 (five hundred million dollars),
an additional two percent (2%) royalty will be paid by
MERCK on the excess NET SALES above $500,000,000.00
(five hundred million dollars)for that particular year.
9.3 (b)In the event that GLAXO has sold a GLAXO PRODUCT during
any portion of the calendar year in any country of the
TERRITORY and annual NET SALES of PRODUCT exceed
$300,000,000.00 (three hundred million dollars), an
additional two percent (2%) royalty will be paid by
MERCK on the excess NET SALES above $300,000,000.00
(three hundred million dollars)for that particular year.
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<PAGE>
2. Representations and Warranties. MERCK hereby represents and
warrants to SYNAPTIC that, as of the date first written above, (i) MERCK is
actively continuing to develop the Safety Assessment Candidate known as
L-771,688 (SNAP-6383) and has no intention to discontinue its development
efforts with respect thereto, (ii) MERCK has no intention to abandon its efforts
to develop a selective alpha-1a antagonist for the treatment of BPH should
MERCK's development efforts with respect to the aforementioned Safety Assessment
Candidate fail, and (iii) MERCK has no intention to terminate the AGREEMENT nor
does MERCK have any understanding with GLAXO regarding any such possible
termination. MERCK makes no representation or warranty that its conduct or
intentions in the future will be consistent with items (i), (ii) and (iii)
above.
3. Effect of Amendment. From and after the date first written
above, all references in the AGREEMENT to "this AGREEMENT," "hereunder,"
"hereof," "herein," or words of similar import, shall be a reference to the
AGREEMENT, as amended by this Amendment No. 4. Except as expressly amended by
this Amendment No. 4, the AGREEMENT shall remain in full force and effect and
unchanged.
4. Disclaimer. It is understood that the parties disagree about the
extent of sublicensing rights granted to MERCK under the AGREEMENT. Execution of
this AMENDMENT NO. 4 is not an admission by either party of the extent of such
rights and shall not be used by any party to establish or dispute the extent of
such rights.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to
be executed and delivered as of the date first written above.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinix
------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President and CEO
MERCK & CO., INC.
By:/s/ Edward Scolnik
-------------------------
Name: Edward Scolnik
Title:
EXHIBIT 10.41
-------------
OPTION
AND
LICENSE AGREEMENT
This Agreement (this "AGREEMENT") is effective as of the 2nd day
of March, 1998 (the "Effective Date") by and between Synaptic
Pharmaceutical Corporation ("SYNAPTIC"), a corporation organized and existing
under the laws of the State of Delaware and having a principal office at 215
College Road, Paramus, New Jersey 07652, and Glaxo Group Limited, a corporation
organized and existing under the laws of the United Kingdom, and having a
principal office at Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex,
UB6 ONN, U.K. ("GLAXO").
WHEREAS, SYNAPTIC possesses patent rights pertaining to (i) the use
of selective human alpha-1a adrenergic receptor compounds which may be useful
for the treatment of benign prostate hyperplasia ("BPH") and other medical
conditions and (ii) cloned human alpha-1a, -1b and -1d adrenergic receptors; and
WHEREAS, MERCK & CO., INC. One Merck Drive, P. O. Box 100,
Whitehouse Station, New Jersey 08889-0100 ("MERCK") and SYNAPTIC are parties to
a Research Collaboration and License Agreement dated November 30, 1993, as
amended ("MERCK-SYNAPTIC AGREEMENT") under which MERCK has exclusive rights
under the FUNCTIONAL USE PATENTS (as hereinafter defined), and by an amendment
thereto of even date herewith MERCK has separately granted back to SYNAPTIC such
1
<PAGE>
rights as may be necessary for SYNAPTIC to grant the rights set forth in Article
3 herein to GLAXO; and
WHEREAS, GLAXO is developing selective human alpha-1a adrenergic
receptor compounds which may be useful for the treatment of BPH and other
medical conditions and is using cloned human alpha-1 adrenergic receptors in
connection therewith; and
WHEREAS, SYNAPTIC wishes to grant GLAXO certain licenses under its
patents, as well as an option to expand the scope and extend the term of some of
such licenses, and GLAXO wishes to acquire such licenses and option on the terms
and conditions set forth herein;
NOW, THEREFORE, SYNAPTIC and GLAXO agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 AFFILIATE shall mean any corporation or business entity of
which GLAXO or SYNAPTIC owns directly or indirectly, fifty percent
(50%) or more of the outstanding stock, or any corporation over
which GLAXO or SYNAPTIC, directly or indirectly, exercises
effective control, or any parent corporation which owns, directly
or indirectly, fifty percent (50%) or more of the outstanding
stock of GLAXO or SYNAPTIC or indirectly controls GLAXO or
SYNAPTIC.
2
<PAGE>
1.2 AGENCY shall mean any governmental regulatory authority responsible
for granting health approvals, registrations, pricing and other
approvals required before a product may be tested or marketed in
the TERRITORY.
1.3 BPH COMPOUND shall mean any SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR
COMPOUND for which regulatory approval to sell for the treatment of
BPH or for the inhibition of contraction of prostate tissue has
been obtained or is being sought.
1.4 BPH PRODUCT shall mean any prescription or over-the-counter
pharmaceutical preparation containing BPH COMPOUND(S) for use in
humans.
1.5 FUNCTIONAL USE PATENT(S) shall mean the United States patents set
forth in Schedule A hereto, the foreign counterparts thereto, and
any patents that are reissues, re-examinations, continuations,
continuations-in-part, divisions, renewals, extensions, patents of
addition or the like thereof.
1.6 HUMAN ALPHA-1 ADRENERGIC RECEPTORS shall mean those receptors so
defined by references to Genbank Accession Numbers as follows:
3
<PAGE>
Subtype Genbank Accession Nos.
alpha-1a U02569, U03866, D25235
alpha-1b U03865, M99590
alpha-1d S70782, U03864
1.7 MAJOR MARKET COUNTRY shall mean any of the following
countries: the United States, France, Germany, Italy or
the United Kingdom.
1.8 MERCK PRODUCT shall mean a product being developed or marketed by
MERCK for the treatment of BPH which is subject to a license from
SYNAPTIC under any of the PATENTS.
1.9 NET SALES shall mean, with respect to each of BPH PRODUCTS and
SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR PRODUCTS which are not BPH
PRODUCTS, the gross invoice price of all such PRODUCTS sold by
GLAXO and its AFFILIATES to independent third parties, after
deducting, if not already deducted in the amount invoiced:
1. all goods returned;
2. trade discounts;
4
<PAGE>
3. rebates and allowances of invoiced
price; and
4. Seven (7%) of the gross invoice price of all sales
to cover early settlement discounts (where such
discounts are non-discretionary) and excise, sales
and other taxes which GLAXO and its AFFILIATES have
to pay or absorb.
1.10 PATENTS shall mean the FUNCTIONAL USE PATENT(S) and RECEPTOR
PATENT(S), or any of the foregoing.
1.11 RECEPTOR PATENT(S) shall mean the United States patent set forth in
Schedule B hereto, the foreign counterparts thereto, and any
patents that are reissues, re-examinations, continuations,
continuations-in-part, divisions, renewals, extensions, patents of
addition or the like thereof.
1.12 SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR COMPOUND shall mean any
compound which has an affinity for the human alpha-1a adrenergic
receptor which is more than ten (10) times greater than its
affinity for another Human Alpha- 1 Adrenergic Receptor and the
mechanism of action of which in vivo involves the human alpha-1a
adrenergic receptor.
5
<PAGE>
1.13 SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR PRODUCT shall mean any
prescription or over-the-counter pharmaceutical preparation
containing SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR COMPOUND(S) for
use in human or non-human animals.
1.14 TERRITORY shall mean all countries of the world.
1.15 THERAPEUTIC INDICATION shall mean, with respect to any SELECTIVE
ALPHA-1a ADRENERGIC RECEPTOR PRODUCT, the main therapeutic use as
classified in the 2nd level of the World Health Organization
Anatomical, Therapeutic, Clinical (ATC) drug classification system.
1.16 VALID PATENT shall mean, with respect to any of the PATENTS, an
issued and unexpired patent, at least one of the claims of which
has not been (a) declared invalid or unenforceable by a court of
competent jurisdiction from which no appeal can be or is taken or
(b) admitted by SYNAPTIC to be invalid.
ARTICLE 2 - OPTION GRANT; OPTION AND LICENSE FEES
2.1 SYNAPTIC grants to GLAXO an option (the "Option") to obtain the
non-exclusive license described in Article 3.2 below upon the terms
and conditions set forth in this Agreement.
6
<PAGE>
2.2 As consideration for the Option and the nonexclusive licenses
described in Article 3.1, GLAXO shall make to SYNAPTIC a
non-refundable, noncreditable payment of $2,000,000 (two million
dollars) within 10 days of receipt of an invoice from Synaptic
following execution of this Agreement.
2.3 The Option shall be exercisable by GLAXO in accordance with Article
2.4 at any time from execution of this Agreement until May 22, 1999
(the "EXPIRATION DATE") after which date it shall automatically
expire.
2.4 The Option shall be exercisable by delivery of written notice from
GLAXO to SYNAPTIC prior to the EXPIRATION DATE along with the
payment of [**] by GLAXO to SYNAPTIC.
GLAXO shall provide MERCK with a copy of the written notice to
SYNAPTIC.
ARTICLE 3 - LICENSE GRANTS
3.1 (a) SYNAPTIC hereby grants to GLAXO and its AFFILIATES
throughout the TERRITORY, for the sole purpose of
developing, making, having made, using and selling
SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR PRODUCTS
which are not BPH PRODUCTS, a non-
7
[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
exclusive license under any of the RECEPTOR PATENTS.
The license grant in this Article 3.1(a) shall extend
back in time to apply to acts by GLAXO prior to
the Effective Date of this AGREEMENT.
(b) For the period beginning on the Effective Date and
ending on the EXPIRATION DATE, SYNAPTIC hereby grants to
GLAXO and its AFFILIATES, throughout the TERRITORY, for
the sole purpose of developing,
making, having made and using but not selling BPH
PRODUCTS a non-exclusive license under the RECEPTOR
PATENTS. The license grant in this Article 3.1(b) shall
extend back in time to apply to acts by GLAXO prior to
the Effective Date of
this AGREEMENT.
(c) For the period beginning on the Effective Date and
ending on the EXPIRATION DATE, SYNAPTIC hereby grants to
GLAXO and its AFFILIATES, throughout the TERRITORY, for
the sole purpose of developing, making, having made and
using but not selling BPH PRODUCTS a non-exclusive
license under the FUNCTIONAL USE PATENTS.
3.2 Upon exercise of the Option, SYNAPTIC grants to GLAXO and its
AFFILIATES throughout the TERRITORY, for the sole purpose
8
<PAGE>
of developing, making, having made, using and selling BPH
PRODUCT(S) a non-exclusive license under the PATENTS.
ARTICLE 4 - WARRANTIES AND PATENT VALIDITY
4.1 SYNAPTIC represents and warrants to GLAXO that as of the
Effective Date it possesses the rights required to grant the
licenses under Article 3 hereof.
4.2 SYNAPTIC and GLAXO each shall immediately give notice
to the other of any certification of which they become
aware filed under the U.S. "Drug Price Competition and
Patent Term Restoration Act of 1984" claiming that a
FUNCTIONAL USE PATENT or a RECEPTOR PATENT covering a
SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR PRODUCT
(including a BPH PRODUCT) is invalid or that
infringement will not arise from the manufacture, use
or sale of BPH PRODUCT by a third party. The parties
agree to discuss and cooperate on an appropriate
course of subsequent action.
4.3 SYNAPTIC shall promptly give notice to GLAXO of the grant,
lapse, revocation, surrender, invalidation or intentional
abandonment of any PATENTS licensed to GLAXO for which SYNAPTIC
is responsible for the filing, prosecution and maintenance.
9
<PAGE>
4.4 GLAXO acknowledges that the licenses and options granted
hereunder do not convey the right under any PATENTS to develop,
make, have made, use or sell any compound whose mechanism of
action does not involve an
alpha-1a adrenergic receptor. GLAXO warrants that it shall not
infringe any VALID PATENT owned by SYNAPTIC by activities as to
which SYNAPTIC has not expressly granted rights to GLAXO
hereunder or under any other agreement.
ARTICLE 5 - MILESTONE AND OTHER PAYMENTS
5.1 In consideration of the rights granted under this
AGREEMENT, the following non-creditable and non-
refundable payments will be made by GLAXO on only
the first achievement of the following milestones,
regardless of the number of times thereafter that
such milestones are again achieved, provided that
GLAXO has a license under the FUNCTIONAL USE PATENTS
at the time the applicable milestone is achieved:
(a) [**] due within thirty
(30) days of the filing of a New Drug
Application for BPH PRODUCT with the United
States Food and Drug Agency (FDA) or the filing
of its equivalent with an AGENCY in another
MAJOR MARKET COUNTRY in the event that
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[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
GLAXO or an AFFILIATE makes such filing of a New Drug
Application or its equivalent prior to such a
filing by MERCK on a MERCK PRODUCT.
(b) If the MERCK-SYNAPTIC AGREEMENT is terminated prior to
December 31, 2000 then GLAXO shall pay SYNAPTIC
[**] within thirty (30) days
of entry into Phase III of a BPH PRODUCT or the
equivalent entry in another
MAJOR MARKET COUNTRY.
5.2 If the MERCK-SYNAPTIC AGREEMENT is terminated
subsequent to May 22, 1999, but prior to December 31,
2000 then GLAXO shall have the option to obtain
exclusive rights under the FUNCTIONAL USE PATENT(S),
if available at the time of termination, by payment
of an additional [**] to
SYNAPTIC provided that the Option has been exercised
under and in accordance with Article 2.4. If the
MERCK-SYNAPTIC AGREEMENT is terminated prior to May
23, 1999, then GLAXO shall have the option to obtain
exclusive rights under the FUNCTIONAL USE PATENT(S),
if available at the time of termination, by payment
of an additional [**] to
SYNAPTIC, provided that the Option is exercised under
and in accordance with Article 2.4 prior to the
exercise of the option contemplated by this Article 5.2.
SYNAPTIC shall promptly notify GLAXO of any such termination
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[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
if
exclusive rights under the FUNCTIONAL USE PATENT(S) are then
available. GLAXO's option under this Article 5.2 shall be
exercisable by the delivery of written notice of exercise to
SYNAPTIC, together with the [**]
payment, within 60 days following GLAXO's receipt of SYNAPTIC's
notification. Promptly upon receipt of the written notice of
exercise and the [**] payment, SYNAPTIC and GLAXO shall
enter into good faith negotiations concerning the terms of the
exclusive license. SYNAPTIC shall not enter into negotiations
with a third party with respect to a license to the FUNCTIONAL
USE PATENT(S) during the 180-day period following SYNAPTIC's
receipt of the notice of exercise and payment. GLAXO's option to
obtain exclusive rights under the FUNCTIONAL USE PATENT(S) under
this Article 5.2 shall automatically expire at the end of the
aforementioned 60-day period if not exercised within such period
in accordance with this Article 5.2 or if an agreement is not
consummated within the aforementioned 180-day period.
In the event SYNAPTIC and GLAXO are unable to reach an
agreement concerning the terms of an exclusive license and
GLAXO's option to obtain such a license thus expires at the end
of the 180-day period, SYNAPTIC shall promptly return to GLAXO
the [**] payment previously received from GLAXO.
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[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
ARTICLE 6 - ROYALTIES
6.1 (a) In any country in the TERRITORY in which the
manufacture, use or sale of a BPH PRODUCT would
infringe a VALID FUNCTIONAL USE PATENT but for
a license hereunder, GLAXO shall pay to SYNAPTIC
a royalty on NET SALES of such BPH PRODUCT of
[**] percent [**].
(b) In the event that GLAXO has more than one product
subject to royalties under Section 6.1(a) for a
single THERAPEUTIC INDICATION on sale in any
country within the TERRITORY during any calendar
quarter, GLAXO shall pay to SYNAPTIC (i) the
royalty in 6.1(a) on only the product for such
therapeutic indication of highest NET SALES in
such country calculated for that calendar
quarter and (ii) a royalty on NET SALES of each other
product for such therapeutic indication of [**] percent
[**].
6.2 (a) For any SELECTIVE ALPHA-1A ADRENERGIC RECEPTOR
PRODUCT the manufacture, use or sale of which is
not within Section 6.1 above, GLAXO shall pay to
SYNAPTIC a royalty of [**] percent [**] on NET
SALES of such PRODUCT until expiration of the
last to expire of the RECEPTOR PATENTS, provided
that there is a VALID
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[** CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
RECEPTOR PATENT in a
MAJOR MARKET COUNTRY at the relevant date.
(b) In the event that GLAXO has more than one product
subject to royalties under Section 6.2(a) for a
single THERAPEUTIC INDICATION, on sale in any
country within the TERRITORY during any calendar
quarter, GLAXO shall pay the royalty in 6.2(a)
on only the product for such therapeutic
indication of highest NET SALES in such country
calculated for that calendar quarter.
6.3 In the event that MERCK has not sold MERCK PRODUCT
during any portion of a calendar year in any country
in the TERRITORY and annual NET SALES of BPH PRODUCT
exceed $500,000,000.00 (five hundred million
dollars), an additional two percent (2%) royalty will
be paid by GLAXO to SYNAPTIC on the excess NET SALES
of BPH PRODUCT above $500,000,000.00 (five hundred
million dollars) for that calendar year, provided
that there is an existing royalty obligation under
Article 6.
6.4 In the event that MERCK has sold MERCK PRODUCT
during any portion of a calendar year in any country
in the TERRITORY and annual NET SALES of BPH PRODUCT
exceed $300,000,000.00 (three hundred million
dollars), an additional two percent (2%) royalty will
be paid by GLAXO to SYNAPTIC on
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<PAGE>
the excess NET SALES
of BPH PRODUCT above $300,000,000.00 (three hundred
million dollars) for that calendar year, provided
that there is an existing royalty obligation under
Article 6.
6.5 Sales between GLAXO and its AFFILIATES, or among such
AFFILIATES, for subsequent sales to an independent third party
shall not be subject to royalty, but in such cases royalty shall
be calculated upon GLAXO's or its AFFILIATE's NET SALES to such
independent third party.
6.6 The obligation to pay royalties is imposed only once with
respect to the same unit of product.
ARTICLE 7 - ACCOUNTING AND REPORTS
7.1 GLAXO shall deliver to SYNAPTIC within sixty (60) days after the
end of each calendar quarter a written account, including value,
of GLAXO's and GLAXO's AFFILIATES' NET SALES subject to royalty
payments and the amount of the royalty payment due to SYNAPTIC
for such quarter on a country by country basis.
7.2 When GLAXO delivers the accounting to SYNAPTIC, GLAXO
shall also deliver all royalty payments due to
SYNAPTIC for the calendar quarter, provided however
that any additional royalty
15
<PAGE>
payable under Article 6.4
may be payable within 60 days following GLAXO's
receipt of notification by SYNAPTIC that MERCK has
sold MERCK PRODUCT during any portion of the calendar
year in any country in the TERRITORY.
7.3 GLAXO shall keep accurate records in sufficient
detail to enable the amounts due to SYNAPTIC to be
determined. Upon SYNAPTIC's request, GLAXO shall
permit an independent, certified public accountant
selected by SYNAPTIC, except one to whom GLAXO has
reasonable objection, to have access during ordinary
business hours to GLAXO's records necessary to
determine the correctness of any report or payment
made in respect to any calendar quarter and obtain
information as to the amount payable to SYNAPTIC for
any such period in case of GLAXO's failure to report
or make payment. Such examination shall be at
SYNAPTIC's expense and shall not take place more than
once each year; provided, however, that in the event
it is determined that amounts paid to SYNAPTIC were
more than five percent (5%) less than the amounts to
which SYNAPTIC was entitled, the expenses of such
examination shall be borne by GLAXO and GLAXO shall
pay SYNAPTIC the amounts due but not previously paid
within thirty (30) days following notice of such
determination, together with interest thereon from
the date as of which such amounts were originally
payable to the date of payment at the prime rate plus
two percent (2%). These rights
16
<PAGE>
with respect to any year shall terminate three (3) years after
the end of any such year. Information supplied to SYNAPTIC by
such independent, certified public accountant shall not include
any proprietary information not required to be disclosed under
other sections of this AGREEMENT.
7.4 All payments to be made by GLAXO to SYNAPTIC under
this AGREEMENT shall be made in United States
dollars by bank wire transfer in immediately
available funds. In the case of sales outside the
United States, the rate of exchange to be used in
computing the amount of currency equivalent in
United States dollars due SYNAPTIC shall be made at
the rate of exchange utilized by GLAXO in its
worldwide accounting system, prevailing on the
fourth-to-the last business day of the calendar
quarter.
7.5 During the term of this AGREEMENT, GLAXO shall
notify SYNAPTIC within 30 days of achievement of
any of the milestones referred to in Article 5.1 in
respect of a BPH PRODUCT and within 30 days of the
filing of a New Drug Application for any other
SELECTIVE ALPHA-1a ADRENERGIC RECEPTOR PRODUCT with
the United States Food and Drug Agency (FDA) or its
equivalent with an AGENCY in another MAJOR MARKET
COUNTRY and on which royalties would be due pursuant
to this AGREEMENT.
17
<PAGE>
7.6 Any income tax or other tax which GLAXO is required
by law to pay or withhold with respect to royalties
payable under this Agreement shall be deducted from
the amount of royalties otherwise due provided that
in regard to any such deduction GLAXO shall give
SYNAPTIC such assistance as may reasonably be
necessary to enable or assist SYNAPTIC to claim
exemption therefrom and shall provide to SYNAPTIC
promptly proper evidence as to the payment of the
tax.
7.7 Distribution of products as free samples by GLAXO and its
AFFILIATES to independent parties shall not be subject to
royalties as long as in any calendar year the aggregate amount
of such products provided as free samples does not exceed two
percent (2%) of the units of such products on which royalties
are paid.
ARTICLE 8 - CONFIDENTIALITY
8.1 All SYNAPTIC or GLAXO confidential information which
is disclosed by either party and identified as
confidential information at the time of disclosure
during the term of this Agreement shall be
maintained in confidence by the receiving party and
shall not be disclosed to any other person, firm, or
agency, governmental or private, without the prior
written
18
<PAGE>
consent of the disclosing party, except to
the extent that such SYNAPTIC or GLAXO information:
(a) is or becomes part of the public domain through no
fault of the receiving party; or
(b) is subsequently disclosed to the receiving party by a
third party not under an obligation of confidentiality
to the disclosing party; or
(c) is known at the time of its receipt by the receiving
party as documented by written records; or
(d) is independently developed by the receiving party as
documented by written records; or
(e) is legally required to be disclosed.
8.2 The obligations of this Article 8 shall survive termination or
expiration of this AGREEMENT for a period of ten (10) years.
ARTICLE 9 - DURATION
9.1 This AGREEMENT becomes effective as of the day and year
first above written and may be terminated as set forth in
Article 10 hereof. If GLAXO does not exercise the option in
19
<PAGE>
accordance with ARTICLE 2, this AGREEMENT shall expire upon the
expiration of the last RECEPTOR PATENT to expire. If GLAXO
exercises the Option in accordance with Article 2, the AGREEMENT
expires upon the later of the expiration of the last FUNCTIONAL
USE PATENT or the last RECEPTOR PATENT to expire. At such time,
the rights and licenses granted to GLAXO under this AGREEMENT
shall be fully paid up and shall continue in full force and
effect and no further payments shall be due under the terms of
this AGREEMENT.
ARTICLE 10 - TERMINATION
10.1 Upon any material breach by either party under this AGREEMENT,
in addition to any other remedy it may have, the other party may
terminate this AGREEMENT by ninety (90) days written notice to
the breaching party, specifying the material breach, default or
other defect. The termination shall become effective at the end
of the ninety (90) day period unless the breaching party cures
the breach during the ninety (90) day period.
10.2 Either party may terminate this AGREEMENT with notice if the
other party becomes insolvent, makes an assignment for the
benefit of creditors, is the subject of proceedings in voluntary
(other than for re-organization) or involuntary bankruptcy
20
<PAGE>
instituted on behalf of or against such party, or has a receiver
or trustee appointed for all or substantially all of its
property; provided that in the case of an involuntary bankruptcy
proceeding such right to terminate shall only become effective
if the party consents to the involuntary bankruptcy or such
proceeding is not dismissed within ninety (90) days after the
filing thereof.
10.3 Any expiration or early termination of this AGREEMENT shall be
without prejudice to the rights of either party against the
other accrued or accruing under this AGREEMENT prior to
termination, including the obligation to pay royalties for
product sold prior to such termination.
ARTICLE 11 - GOVERNING LAW
11.1 This AGREEMENT shall be construed and the respective rights of
the parties hereto determined according to the substantive laws
of the State of New Jersey, notwithstanding the provisions
governing conflict of laws under such law to the contrary. In
the event of any controversy or claim relating to this AGREEMENT
or breach thereof, the parties shall use reasonable efforts to
develop practical solutions of mutual benefit to settle
conflicts amicably between themselves.
21
<PAGE>
ARTICLE 12 - ASSIGNMENT
12.1 Neither party may assign this AGREEMENT in whole or in part
without the prior written consent of the
other, except that no such consent shall be required in the case
of GLAXO if GLAXO assigns this AGREEMENT to an AFFILIATE whose
obligations GLAXO guarantees and in the case of SYNAPTIC if
SYNAPTIC assigns this AGREEMENT to a third party who acquires
all or substantially all of its business.
ARTICLE 13 - SEVERANCE
13.1 If any provision of this Agreement is held to be invalid or
unenforceable, all other provisions shall nevertheless continue
in full force and effect, unless there is a material change in
the benefits and/or rights received under this AGREEMENT.
ARTICLE 14 - AMENDMENT
14.1 This AGREEMENT and all Schedules appended hereto constitute the
entire agreement between the parties and supersede all previous
arrangements whether written or oral. Any amendment or
modification to this AGREEMENT shall be made in writing and
signed by both parties.
22
<PAGE>
ARTICLE 15 - NOTICE
15.1 Notices to SYNAPTIC shall be addressed to:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: President
Notices to GLAXO shall be addressed to:
Glaxo Group Limited
Glaxo Wellcome House
Berkeley Avenue
Greenford
Middlesex
UB6 ONN
UNITED KINGDOM
Attention: Company Secretary
Either party may change its address by
giving notice to the other party in the
manner herein provided. Any notice required or provided for by
the terms of this AGREEMENT shall be in writing and sent by
registered or certified mail, return receipt requested, postage
prepaid or by express courier services providing evidence of
delivery and properly addressed in accordance with the paragraph
above. The effective date of notice shall be the actual date of
receipt by SYNAPTIC or GLAXO.
23
<PAGE>
ARTICLE 16 - FORCE MAJEURE
16.1 No failure or omission by the parties hereto 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 arise
from any cause or causes beyond the control of the parties,
including, but not limited to, the following: 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; fire; storm;
flood; earthquake; accident; war; rebellion; insurrection; riot;
invasion; strikes; and lockouts and provided that such failure
or omission resulting from one of the above causes is cured as
soon as is practicable after the occurrence of one or more of
the above-mentioned causes.
ARTICLE 17 - INDEMNIFICATION
17.1 GLAXO will indemnify and hold SYNAPTIC and MERCK harmless with
respect to any injury, loss or cost resulting from exercise
by GLAXO of the licenses granted to GLAXO by SYNAPTIC under this
AGREEMENT.
24
<PAGE>
ARTICLE 18 - PUBLIC ANNOUNCEMENTS
18.1 Any public announcements or similar publicity with respect to
this AGREEMENT or the rights granted hereunder shall be at such
time and in such manner as SYNAPTIC and GLAXO shall agree;
provided that nothing herein shall prevent either party upon
notice to the other from making such public announcements as
such party's legal obligations require.
ARTICLE 19 - MISCELLANEOUS
19.1 It is expressly agreed that GLAXO and SYNAPTIC shall be
independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or
agency. Neither GLAXO nor SYNAPTIC shall have the authority to
make any statements, representations or commitments of any kind,
or to take any action, which shall be binding on the other party
without the prior written consent of such other party.
25
<PAGE>
19.2 This AGREEMENT may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
GLAXO GROUP LIMITED SYNAPTIC PHARMACEUTICAL CORPORATION
By: /s/Jeremy Strachaw By:/s/Kathleen P. Mullinix
------------------ -----------------------
Title: Director Title: Chairman, President & CEO
Date: March 5, 1998 Date:
26
<PAGE>
SCHEDULE A
FUNCTIONAL USE PATENTS
USP 5,403,847
USP 5,578,611
27
<PAGE>
SCHEDULE B
RECEPTOR PATENTS
USP 5,556,753
28
EXHIBIT 23.1
------------
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333- 05793) pertaining to the 1988 Amended and Restated Incentive Plan,
1996 Incentive Plan and the 1996 Nonemployee Director Stock Option Plan of
Synaptic Pharmaceutical Corporation of our report dated January 30, 1998 (except
for the second paragraph of Note 11 as to which the date is March 2, 1998), with
respect to the financial statements of Synaptic Pharmaceutical Corporation
included in the Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
Hackensack, NJ
March 26, 1998
EXHIBIT 24
----------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Kathleen P. Mullinix and Lisa L. Reiter,
or either of them, such person's true and lawful attorney-in-fact and agent with
full power of substitution and re- substitution for such person and in his or
her name, place and stead, in any and all capacities, to sign this Annual Report
on Form 10-K and any or all amendments thereto and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission and the National Association of Securities
Dealers, granting unto said attorney-in-fact and agent full power and authority,
to do and perform each and every act and thing requisite or necessary to be done
in and about the premises, to all intents and purposes and as fully as he or she
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or her substitutes may lawfully do or cause to be
done by virtue hereof.
Signature Title Date
- ------------------------------ ---------------------- --------------
/s/ Kathleen P. Mullinix Chairman of the Board, March 13, 1998
- ------------------------------ President, and Chief
Kathleen P. Mullinix Executive Officer
/s/ Robert L. Spence Senior Vice President, March 12, 1998
- ------------------------------ Chief Financial Officer,
Robert L. Spence and Treasurer
/s/ Jonathan J. Fleming Director March 13, 1998
- ------------------------------
Jonathan J. Fleming
/s/ Zola P. Horovitz, Ph.D Director March 13, 1998
- ------------------------------
Zola P. Horovitz, Ph.D
/s/ Eric R. Kandel, M.D Director March 13, 1998
- ------------------------------
Eric R. Kandel, M.D
/s/ John E. Lyons Director March 13, 1998
- ------------------------------
John E. Lyons
/s/ Sandra Panem, Ph.D Director March 13, 1998
- ------------------------------
Sandra Panem, Ph.D
/s/ Alison Taunton-Rigby, Ph.D Director March 13, 1998
- ------------------------------
Alison Taunton-Rigby, Ph.D
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,113,000
<SECURITIES> 38,987,000
<RECEIVABLES> 40,000
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<CURRENT-ASSETS> 34,437,000
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0
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<COMMON> 105,000
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<TOTAL-LIABILITY-AND-EQUITY> 69,402,000
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<TOTAL-REVENUES> 10,307,000
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