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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 18, 1997
RIBOZYME PHARMACEUTICALS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware Commission file number 0-27914 34-1697351
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(State of incorporation) (I.R.S. Employer
Identification No.)
2950 Wilderness Place
Boulder, Colorado 80301
(Address of principal executive offices)
Registrant's telephone number: (303) 449-6500
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ITEM 5. Other Events
On April 9, 1997, Ribozyme Pharmaceuticals, Inc. ("RPI") entered into a
research collaboration with Schering AG, Germany ("Schering"), focusing on the
use of ribozymes for therapeutic target validation, as well as the development
of ribozymes as therapeutic agents.
The collaboration will utilize the special selectivity of ribozymes to
validate new molecular therapeutic targets, and to discover new therapeutic
agents based on those targets. RPI will provide its expertise in ribozyme
design, synthesis and delivery, and Berlex Laboratories, Inc., a U.S.
subsidiary of Schering, will provide candidate targets, cell culture screens,
animal models and development and commercialization expertise to the
collaboration. It is anticipated that hundreds of potential targets will be
examined over a five year period, and Berlex will have options to commercialize
products from validated targets.
Schering will make an equity investment of up to $5 million over the
next year and will separately provide loans of up to $2 million for each of the
next five years. These loans are convertible into equity at the option of
Schering under certain circumstances. In addition, Schering will make research
payments of $2 million a year for the next five years and RPI may earn success
fees and product development milestones, and will manufacture synthetic
ribozyme products and receive royalties on both ribozyme and non-ribozyme
products resulting from the collaboration. All such payments are subject to
certain restrictions, including receipt of certain third party consents. The
research collaboration may be terminated at Schering's option after April 9,
1998.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
RIBOZYME PHARMACEUTICALS, INC.
Dated: September 18, 1997 By: /s/ Lawrence E. Bullock
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Lawrence E. Bullock
Vice President and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT INDEX
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Number
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1.1* Research, License, Supply and Royalty Agreement Between Schering
Aktiengesellschaft and the Company, dated April 9, 1997.
1.2* Purchase Agreement dated as of April 9, 1997 among the Company, Schering
Berlin Venture Corporation and Schering Aktiengesellschaft.
</TABLE>
* The confidential portions ( [ ] ) of these exhibits have been omitted
pursuant to regulation 240.25b-2(b) of the Securities Exchange Act of 1934, and
have been filed separately with the Commission.
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EXHIBIT 1.1
THE CONFIDENTIAL PORTION OF THIS CONTRACT HAS BEEN OMITTED PURSUANT TO
REGULATION 240.25B-2(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AND HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
RESEARCH, LICENSE, SUPPLY AND ROYALTY AGREEMENT
BETWEEN
SCHERING AKTIENGESELLSCHAFT
AND
RIBOZYME PHARMACEUTICALS INCORPORATED
APRIL 9, 1997
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TABLE OF CONTENTS
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Page No.
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Section I DEFINITIONS 2
Section II RESEARCH DILIGENCE; DELIVERABLES 11
Section III COMMERCIALIZATION; OWNERSHIP OF
REGULATORY APPLICATIONS 11
Section IV JOINT RESEARCH COMMITTEE AND
RESEARCH PLAN 13
Section V DESIGNATION LISTING OF SCHERING
SEQUENCES 16
Section VI OWNERSHIP OF TECHNOLOGY; GRANT OF
LICENSES 17
Section VII RESEARCH PAYMENTS AND SECURED LOAN 21
Section VIII MILESTONE PAYMENTS 21
Section IX ROYALTY PAYMENTS; THIRD PARTY
ROYALTIES; CROSS-ROYALTIES 24
Section X MANUFACTURING AND SUPPLY 33
Section XI PAYMENTS 44
Section XII TAX MATTERS 44
Section XIII PATENTS 45
Section XIV CONFIDENTIALITY 52
Section XV REPRESENTATIONS AND WARRANTIES OF RPI 59
Section XVI REPRESENTATIONS AND WARRANTIES OF
SCHERING 60
Section XVII SURVIVAL AND INDEMNIFICATION 60
Section XVIII TERM, TERMINATION, AND EXPIRATION 64
Section XIX MISCELLANEOUS 68
</TABLE>
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EXPANDED TABLE OF CONTENTS
<TABLE>
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ARTICLE I - DEFINITIONS
Affiliate
Bonus Royalty
Cech Patents
Change in Control
Clinical Transfer Price
COGS
Control or Controlled
CTI
Designation
Developed Technology
Disclosing Party
Drug Approval Application
Endogenous Ribozyme
Environmental Law
Exogenous Ribozyme
FDA
Field
First Commercial Sale
First Milestone Payment
Gene Target
GLP
Hazardous Materials
IND
Information
Laboratory Notebooks
Live Claim
Manufacturing Term
Milestone Payments
Net Sales
NDA
Non-Ribozyme Product
Phase II Clinical Trials
Pivotal Clinical Trials
Purchase Agreement
[ ] Product
[ ] Technology
Recipient
Regulatory Approval
Research Committee
</TABLE>
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<TABLE>
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Research Payment
Research Plan
Research Transfer Price
Ribozyme
Ribozyme Product
Ribozyme Technology
Royalty
Royalty Term
RPI Royalty Term
RPI Base Technology
Schering Base Technology
Schering Screens
Schering Sequences
Sublicensees
Term
Third Party
Transfer Price
Validation Period
Worldwide Target
</TABLE>
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<TABLE>
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ARTICLE II - RESEARCH DILIGENCE; DELIVERABLES
2.1 Diligence
2.2 Number of Scientists
2.3 Laboratory Notebooks
2.4 Deliverables
ARTICLE III - COMMERCIALIZATION; OWNERSHIP OF REGULATORY
APPLICATIONS
3.1 Commercialization
3.2 Ownership of IND and Drug Approval Applications
3.3 No Obligation to Develop Ribozyme Products or Non-Ribozyme Products
3.4 Commercialization Status
ARTICLE IV - JOINT RESEARCH COMMITTEE AND RESEARCH PLAN
4.1 Research Plan
4.2 Changes to the Research Plan
4.3 Establishment of Joint Research Committee
4.4 General Functions
4.5 Decisions
4.6 Visit to Facilities
4.7 Disclosure of Schering Sequences and Schering Screens
4.8 Reports
ARTICLE V - DESIGNATION AND LISTING OF SCHERING SEQUENCES
5.1 Designation and Listing of Schering Sequences
5.2 Rights of RPI
ARTICLE VI - OWNERSHIP OF TECHNOLOGY; GRANT OF LICENSES;
ASSIGNMENT OF RIGHTS TO [ ] AND ITS PATHWAY
6.1 Schering Base Technology
6.2 RPI Base Technology
6.3 Developed Technology
6.4 Ribozyme Products and Non-Ribozyme Products
6.5 Licenses to Schering
6.6 Schering Grant of Non-Exclusive License; Research
6.7 Schering Grant of a Exclusive License to Developed Technology
6.8 Additional RPI Reduction
6.9 Assignment of Contract Rights to [ ]
6.10 [ ] Product
</TABLE>
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<TABLE>
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6.11 Schering Grant of Non-Exclusive License to [ ] Technology
6.12 RPI Payment to Schering for any [ ] Ribozyme Product
ARTICLE VII - RESEARCH PAYMENTS & SECURED LOAN
7.1 Research Payments
7.2 Convertible Loan Note
ARTICLE VIII - MILESTONE PAYMENTS
8.1 Milestone Payments; Ribozyme and Non-Ribozyme Products
8.2 First Milestone
8.3 Product Election
8.4 Milestone Payments; Ribozyme Products
8.5 Milestone Payments; Non-Ribozyme Products
8.6 No Double Milestone Payments
8.7 Milestone Credits
ARTICLE IX - ROYALTY PAYMENTS; THIRD PARTY ROYALTIES; CROSS-
ROYALTIES
9.1 Royalty Term
9.2 Royalties on Ribozyme Products
9.3 Royalties Non-Ribozyme Products
9.4 RPI Payment of Third Party Royalties
9.5 Schering's Right to Procure Third Party Licenses
9.6 Cross Royalties for Ribozyme Products
9.7 Payment of Royalties
9.8 Reports on Net Sales Exclusions
ARTICLE X - MANUFACTURING AND SUPPLY
10.1 RPI Right to Manufacture Exogenous Ribozymes
10.2 Schering Right to Manufacture Ribozymes
10.3 Non-Commercial Research and Clinical Supply
10.4 Commercial Supply
10.5 Condition of RPI Becoming Schering's Worldwide Supplier of Exogenous
Ribozymes Products
10.6 Worldwide Target Defined
10.7 Ordering Generally
10.8 Approval
10.9 Rolling Forecasts
10.10 Quarterly Orders
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10.11 Reports
10.12 Supply Shortfalls; Capacity Planning
10.13 Subcontractors
10.14 Manufacturing Procedures
10.15 Delivery
10.16 Inspection
10.17 Additional Testing
10.18 Right to Review Processes
10.19 Labelling
10.20 Investigation of Complaints
10.21 FDA Regulation of "Ownership"
ARTICLE XI - PAYMENTS
11.1 Payment on Delivery or Completion
11.2 Indigent and Rebate Vials
ARTICLE XII - TAX MATTERS
12.1 Tax Matters
ARTICLE XIII - PATENTS
13.1 Disclosure by Employees, Agents or Independent Contractors
13.2 Patent Prosecution and Related Activities
13.3 Cooperation
13.4 Permitted Disclosures
13.5 Third Party Infringement
13.6 Third Party Infringement; RPI Right
13.7 Infringement Claims by Third Parties
ARTICLE XIV - CONFIDENTIALITY
14.1 Confidentiality
14.2 Publications
ARTICLE XV - REPRESENTATIONS AND WARRANTIES OF RPI
15.1 RPI Represents and Warrants
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<TABLE>
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ARTICLE XVI - RESEARCH AND WARRANTIES OF SCHERING
16.1 Schering Represents and Warrants
16.2 Disclaimer
ARTICLE XVII - SURVIVAL AND INDEMNIFICATION
17.1 Survival of Representations, Warranties, Covenants, and Agreements
17.2 Indemnification By RPI
17.3 Indemnification By Schering
17.4 Notices, Etc.
17.5 Environmental Indemnification; Permits
17.6 "Environmental Matters"
ARTICLE XVIII - TERM, TERMINATION, AND EXPIRATION
18.1 Term
18.2 Termination
18.3 Effect of Breach or Termination
ARTICLE XIX - MISCELLANEOUS
19.1 Assignment
19.2 Retained Rights
19.3 Consents Not Unreasonably Withheld or Delayed
19.4 Force Majeure
19.5 Further Actions
19.6 No Trademark Rights
19.7 Notices
19.8 Waiver
19.9 Severability
19.10 Ambiguities
19.11 Governing Law
19.12 Headings
19.13 Counterparts
19.14 Entire Agreement: Amendments
19.15 Independent Contractors
19.16 Negation of Agency
19.17 Publicity
19.18 Registration and Filing of the Agreement
19.19 Beneficiaries
19.20 Affiliates of Parties
19.21 Compliance with Laws
19.22 Patent Marking
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
1. Purchase Agreement
2. Cost of Goods Sold
4.1 Research Plan
5.1 List of Designated Schering Sequences
15.1(h) List of Excluded Sequences
15.1(j) No Prior Grants
15.1(k) No Sublicense Royalties
15.1(m) List of Third Parties to whom RPI has granted broad pathway
licenses.
</TABLE>
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THIS RESEARCH, LICENSE, SUPPLY AND ROYALTY AGREEMENT (the "Agreement") is made
and entered into as of April 9, 1997, (hereinafter "Effective Date") by and
between Schering Aktiengesellschaft, a German corporation ("Schering") and
Ribozyme Pharmaceuticals Incorporated, a Delaware corporation ("RPI"). Each of
Schering on the one hand and RPI on the other hand, is referred to as a "Party"
and collectively as the "Parties".
WHEREAS, RPI, is the exclusive sublicensee for all uses of technology, patents
and patent applications and improvements to such patents and patent
applications defined herein as the Cech Patents assigned to University of
Colorado Foundation, Inc.;
WHEREAS, RPI is the exclusive licensee from University of Colorado Foundation,
Inc. and from Thomas Cech, Ph.D. as a consultant to RPI, to all discoveries,
improvements, patent applications and patents arising out of such improvements
to the Cech Patents and has full rights to and wishes to license the Cech
Patents to Schering for certain therapeutic uses.
WHEREAS, RPI has further researched, developed, and has the capacity to
manufacture ribozymes to use in assays to screen for relevant gene sequences;
WHEREAS, Schering has the capacity to research, develop, manufacture and market
pharmaceuticals, including certain skills and experience with respect to
ribozymes;
WHEREAS, Schering and RPI wish to collaborate on the screening of gene
sequences chosen by Schering for the purpose of elucidating gene function;
WHEREAS, Schering Berlin Venture Corporation, a Delaware corporation, an
Affiliate of Schering ("SBVC"), and Schering entered into a Purchase Agreement
(attached as Exhibit 1) with RPI as of the Effective Date; and
NOW THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth in this Agreement, the Parties hereby agree as follows:
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
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DEFINITIONS
Defined Terms. The following terms when used herein shall have the following
meanings:
"Affiliate" means any company controlled by, controlling, or under common
control with Schering or RPI and shall include any company fifty percent (50%)
or more of whose voting stock or participating profit interest is owned or
controlled, directly or indirectly by Schering or RPI, and any company which
owns or controls, directly or indirectly fifty (50%) percent or more of the
voting stock of Schering or RPI, and any company which Schering or RPI or a
company owned or controlled by or owning or controlling Schering or RPI at the
maximum control or ownership right permitted in the country where the company
exists.
"Bonus Royalty" is defined in Section 9.2.
"Cech Patents" means any invention which is a work product of or relating to
Ribozyme Technology Controlled as of the Effective Date and during the Term by
Thomas Cech, Ph.D., University of Colorado, or University of Colorado
Foundation and the work product of the various collaborations through the Term
of this Agreement among Thomas Cech, Ph.D., University of Colorado, or
University of Colorado Foundation, United States Biochemical Corporation, RPI
and Thomas Cech, Ph.D., and also means "RNA Ribozyme Polymerase
Dephosphorylases Restriction Endoribonucleases and Methods", U.S. Pat. No.
4,987,071; "RNA Polymerase Dephosphorylases Restriction Endoribonucleases and
Methods", U.S. Pat. No. 5,093,246 (Division of U.S. Pat. No. 4,987,071); "RNA
Ribozyme Polymerases and Methods", U.S. Pat. No. 5,037,746 (Continuation-in-
part of U.S. Pat. No. 4,987,071), and all foreign equivalents, counterparts,
patents and patent applications throughout the world that may issue thereon,
including any extensions, renewals, divisions, continuations, continuations-in-
part, patents of addition and reissues thereof.
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof), (as such terms are defined in the
Purchase Agreement), of shares representing more than 40% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of RPI; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of RPI by Persons who were neither (i) nominated by the
board of directors of RPI nor (ii) appointed by directors so nominated; or (c)
the acquisition of direct or indirect Control (as defined in the Purchase
Agreement) of RPI by any Person or group.
"Clinical Transfer Price" is defined in Section 10.3.
"COGS" means RPI's costs of supplying Exogenous Ribozymes and Exogenous
Ribozyme Products calculated in accordance with RPI's accounting methods
consistently applied which methodology shall be calculated in compliance with
U.S. generally accepted accounting principles.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
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Expenses include but are not limited to RPI's manufacturing costs as listed in
Exhibit 2. COGS includes idle capacity to the extent that the portion of
facility and equipment which is idle, completed and received Regulatory
Approval for such Exogenous Ribozyme Product.
"Control" or "Controlled" shall refer to possession of the ability to grant a
license or sublicense of patent rights, know-how or other intangible rights as
provided for herein without violating terms of any agreement or other
arrangement with any Third Party.
"CTI" means Competitive Technologies, Inc. with whom that certain exclusive
sublicense agreement effective as of November 20, 1996, was entered into by RPI
concerning the Cech Patents and the Ribozyme Technology.
"Designation" is defined in Section 5.1 and includes "Designated" where
appropriate.
"Developed Technology" means all technology and know-how, including, but not
limited to, patents, patent applications, continuations and continuations-in-
part, divisional and provisional patent applications, trade secrets, methods,
processes, techniques, materials, compositions, information, data, results of
tests or studies and expertise which are used or useful for the research,
development, manufacture, use or sale of products in the Field which are
conceived of and reduced to practice solely in performance of the Research Plan
during the Term either (i) solely by RPI, by a Third Party on RPI's behalf,
jointly by RPI and a Third Party as permitted by this Agreement, or jointly by
Schering and RPI or (ii) solely by Schering if conceived solely in connection
with Schering's performance of the Research Plan; provided however, Developed
Technology does not include any inventions or discoveries arising out of the
use by RPI or Schering of the Schering Screens.
"Disclosing Party" is defined in Section 14.1(a) and in the definition of
"Information".
"Drug Approval Application" means an application for Regulatory Approval
required to be approved before marketing and commercial sale of a Ribozyme
Product or Non-Ribozyme Product in humans as a biologic or a drug in a
regulatory jurisdiction and includes NDA and ELA/PLA for the United States.
"Endogenous Ribozyme" means a Ribozyme expressed inside a cell.
"Environmental Law" means any treaty, law, ordinance regulation or order of any
jurisdiction, relating to environmental matters, including, but not limited to,
matters governing air pollution; water pollution, the use, handling, reporting,
release, storage, transport, or disposal of Hazardous Materials; exposure to or
discharge of Hazardous Materials; occupational safety and health; and public
health.
"Exogenous Ribozyme" means a Ribozyme which has been chemically synthesized
outside a cell.
"FDA" means the United States Food and Drug Administration of the Department of
Health and Human Services, and any successor entities. References herein to
the FDA shall include to the
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 13
extent applicable any comparable foreign regulatory authority that has the
authority to grant full Regulatory Approval.
"Field" means any indication for the diagnosis, cure, mitigation, treatment or
prevention of disease in humans.
"First Commercial Sale" means the date Schering or an Affiliate or a
Sublicensee of Schering first sells commercially, pursuant to Regulatory
Approval, a Ribozyme Product or a Non-Ribozyme Product in the United States,
Japan or any country of the EU, provided that where such a First Commercial
Sale has occurred in a country for which pricing or reimbursement approval is
necessary for widespread sale, then such sale shall not be deemed a First
Commercial Sale until such pricing or reimbursement approval has been obtained.
"First Milestone Payment" is defined in Section 8.2.
"Gene Target" means the full length gene associated with the Designated
Schering Sequence or Ribozyme Product or Non-Ribozyme Product.
"GLP" means the current Good Laboratory Practices promulgated by the FDA,
published in 21 CFR Part 58, as amended from time to time, or equivalent
foreign laws or regulations.
"Hazardous Materials" includes, but is not limited to, any air contaminant,
water pollutant, hazardous material, hazardous waste, hazardous substance,
toxic medical waste, infectious waste, chemicals known to cause cancer or
reproductive toxicity, asbestos and PCB's, as such substances are defined under
any applicable federal, state or local statute, regulation, rule or ordinance.
"IND" means the document filed by Schering pursuant to 21 CFR 312, as such
regulations may be amended with the United States Federal Food and Drug
Administration to test Ribozyme Products and Non-Ribozyme Products in humans or
foreign equivalent.
"Information" means the non-public, proprietary or otherwise confidential
information, specifications, know-how, materials, data and other
communications, oral or written, disclosed or provided to either Party (the
"Recipient") by or on behalf of the other Party (the "Disclosing Party")
pursuant hereto or in connection herewith, together with all portions of
analyses, studies and other documents prepared by or for the benefit of the
Recipient which contain or otherwise reflect any of the foregoing.
"Laboratory Notebooks" means the laboratory notebooks of RPI or Schering
designated specifically and solely for the research conducted pursuant to the
Research Plan.
"Live Claim" means a claim of a pending patent application or of an unexpired
patent included within the RPI Base Technology or the Developed Technology
solely invented by RPI, which has not been held unenforceable, unpatentable or
invalid by a decision of a court, or a governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed to appeal,
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
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and which has not been admitted to be invalid or unenforceable though re-issue,
re-examination, disclaimer or otherwise.
"Manufacturing Term" is defined in Section 10.1.
"Milestone Payments" is defined in Section 8.1.
"Net Sales" shall be defined as amounts invoiced by a Party, its Affiliates or
Sublicensees from worldwide sales of each Ribozyme Product and Non-Ribozyme
Product to Third Parties, less deductions for: (i) transportation charges,
charges, such as, insurance relating thereto; (ii) sales and excise taxes or
customs duties paid by the selling party and any other governmental charges
imposed upon the sale of the Ribozyme Products and Non-Ribozyme Products; (iii)
distributors fees, rebates or allowances actually granted, allowed or incurred;
(iv) quantity discounts, cash discounts or chargebacks actually granted,
allowed or incurred in the ordinary course of business in connection with the
sale of the Ribozyme Products and Non-Ribozyme Products; (v) allowances or
credits to customers, not in excess of the selling price of the Ribozyme
Products and Non-Ribozyme Products, on account of governmental requirements,
rejection, outdating, recalls or return of the Ribozyme Products and Non-
Ribozyme Products; (vi) costs of customer programs such as patient assistance
programs designed to aid in patient compliance to maintain medication schedules
and (vii) an estimate for bad debts based on historical data for each Royalty
period. For the purpose of calculating a Party's Net Sales, the Parties
recognize that (a) a Party's customer may include persons in the chain of
commerce who enter into agreements with a Party as to price even though title
to the Ribozyme Product and Non-Ribozyme Product does not pass directly from a
Party to such customers, and even though payment for such Ribozyme Product and
Non-Ribozyme Product is not made by such customers directly to a Party and (b)
in such cases charge backs paid by a Party to or through a Third Party (such as
a wholesaler) can be deducted by a Party from gross revenue in order to
calculate a Party's Net Sales. Any deductions listed above which involve a
payment by a Party shall be taken as a deduction against aggregate sales for
the Royalty period in which the payment is made. Sales of the Ribozyme
Products and Non-Ribozyme Products between a Party and its Affiliate solely for
the research or clinical testing purposes shall be excluded from the
computation of Net Sales.
"NDA" means a new drug application or foreign equivalent filed with the FDA
pursuant to 21 CFR 200, or foreign equivalent as such regulations may be
amended for approval by such agency for the sale of Ribozyme Product or Non-
Ribozyme Product in the United States. References herein to NDA shall include,
to the extent applicable, any ELA/PLA, and any Drug Approval Application.
"Non-Ribozyme Product" means any substance in the Field that (i) is sold
commercially, (ii) is not a Ribozyme Product, (iii) was researched pursuant to
the Research Plan, (iv) arose out of a Designated Schering Sequence Designated
pursuant to Section 5.1, and (v) for which a First Milestone Payment was made
pursuant to Section 8.2.
"Phase II Clinical Trials" means the second phase of human clinical trials of a
Ribozyme Product or a Non-Ribozyme product to gain evidence of effectiveness in
the target population as described in 21 CFR 211 et seq.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
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"Pivotal Clinical Trials" means clinical trials which when completed will have
demonstrated that the Ribozyme Product(s) and Non-Ribozyme Product(s) (i) are
safe and efficacious, (ii) have an established dose, (iii) have an established
route of administration and (iv) have a treatment schedule in the target
population, all sufficient for the purpose of supporting a Drug Approval
Application.
"Purchase Agreement" means the Purchase Agreement dated as of the date hereof
between Schering, Schering Berlin Venture Corporation and RPI which shall be
substantially in the form attached as Exhibit 1 or in such other form as the
Parties thereto may agree, as such agreement from time to time may be amended,
supplemented or otherwise modified in accordance with its terms.
[ ] is defined in Section 6.10.
[ ] is defined in Section 6.9.
"Recipient" is defined in Section 14.1(a) and in the definition of
"Information".
"Regulatory Approval" means any approvals, product and/or establishment
licenses, registrations or authorizations of any federal, state or local
regulatory agency, department, bureau or other governmental entity, necessary
for the manufacture, use, storage, importation, export, transport, or sale of
Ribozyme Products and Non-Ribozyme Products in a regulatory jurisdiction.
"Research Committee" is defined in Section 4.3.
"Research Payments" is defined in Section 7.1.
"Research Plan" means a written plan agreed to by Schering and RPI which
outlines the joint effort of the Parties in conducting research for the
screening of Schering Sequences for the purpose of Designating Schering
Sequences and validating Ribozymes for targets. The initial Research Plan is
attached as Exhibit 4.1.
"Research Transfer Price" is defined in Section 10.3.
"Ribozyme" means a ribonucleic acid based molecule able to cause catalytic
cleavage of itself or another molecule independent of protein.
"Ribozyme Product" means any substances in the Field that (i) are sold
commercially, (ii) contain Exogenous or Endogenous Ribozyme, (iii) were
researched pursuant to the Research Plan, (iv) target a Schering Sequence
Designated pursuant to Section 5.1, and (v) for which a First Milestone Payment
was made pursuant to Section 8.2.
"Ribozyme Technology" means all inventions, improvements or other developments
relating to Ribozymes, including the identification, manufacture, synthesis,
delivery, use, enhancement and control of Ribozymes conceived or reduced to
practice by Thomas Cech, Ph.D., or others who are
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 16
employed at the University of Colorado or which is Controlled by the University
of Colorado or by RPI, University of Colorado Foundation, United States
Biochemical Corporation, and CTI.
"Royalty" is defined in Section 9.2.
"Royalty Term" is defined in Section 9.1(b) and (c).
"RPI Base Technology" means all technology and know-how, including, but not
limited to, patents, patent applications, continuations and continuations-in-
part, divisional and provisional patent applications, trade secrets, methods,
processes, techniques, materials, compositions, information, data, results of
tests or studies and expertise which are used or useful for the research,
development, manufacture, use or sale of products in the Field that may arise
from or are related to the Research Plan or in conducting research and
development pursuant to this Agreement which: (a) are under the Control of RPI
as of the Effective Date, including but not limited to the technology disclosed
in the Cech Patents and Ribozyme Technology; (b) are invented, developed,
acquired or otherwise comes within the Control of RPI after the Effective Date
within the Term which RPI can demonstrate does not constitute Developed
Technology.
"RPI Royalty Term" is defined in Section 9.6.
"Schering Base Technology" means (a) all technology and know-how, including but
not limited to patents, patent applications, continuations and continuations-
in-part, divisional and provisional applications, trade secrets, methods,
processes, techniques, products, materials, compositions, Schering Sequences,
Schering Screens, equipment, information, data, results of tests or studies and
expertise Controlled by Schering, which is used in conducting research pursuant
to the Research Plan, and (b) all technology and know-how, of the kind
described in (a) above, invented, developed or acquired without RPI's
intellectual contribution which is conceived and reduced to practice during the
Term and which is not Developed Technology which is controlled by Schering
during the Term and which is used in conducting research pursuant to the
Research Plan.
"Schering Screens" means the technology Controlled by Schering concerning the
use of Endogenous and Exogenous Ribozymes, retrovirus vectors, human carcinoma
cells and any other Schering assay systems for use to determine the function of
Schering Sequences.
"Schering Sequences" means nucleotide sequences selected by Schering for
conducting research pursuant to the Research Plan.
"Sublicensees" means, with respect to Ribozyme Products and Non-Ribozyme
Products, a Third Party to whom Schering or RPI has granted a sublicense under
this Agreement to make, have made, use or sell, import or offer to import such
Ribozyme and Non-Ribozyme Products.
"Term" is defined in Section 18.1.
"Third Party" means an entity other than Schering, RPI or any of their
respective Affiliates.
"Transfer Price" is defined in Section 10.4.
"Worldwide Target" is defined in Section 10.6.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 17
II
RESEARCH DILIGENCE; DELIVERABLES
2.1 Diligence. The Parties hereto agree to diligently conduct research
pursuant to the Research Plan.
2.2 Number of Scientists. Schering is making the payments described in
Section VII based on the requirement that RPI shall provide an average
of eight (8) full-time research positions, to conduct research pursuant
to the Research Plan in each year of the Term, and RPI agrees to provide
eight (8) full-time research positions for this purpose. These eight
individual positions shall include only scientists performing research
at the laboratory bench.
2.3 Laboratory Notebooks. Upon the request of a Party, the other Party will
provide copies of its Laboratory Notebooks.
2.4 Deliverables. Schering will provide Schering Sequences, and RPI will
construct Exogenous Ribozymes and assay Ribozymes. RPI will provide
Exogenous Ribozymes to Schering and all assay results. Schering and RPI
will use Ribozymes for high capacity screening to find targets. The
number of Exogenous Ribozymes to be manufactured by RPI and the specific
duties with respect to assays shall be stated in the Research Plan.
III
COMMERCIALIZATION; OWNERSHIP OF
REGULATORY APPLICATIONS
3.1 Commercialization. Schering is solely responsible for the preparation
and filing of all Drug Approval Applications and all activities
necessary for such Drug Approval Applications relating to the
manufacture, marketing and sale of the Ribozyme Products and Non-
Ribozyme Products. Such Drug Approval Applications will be filed in the
name of Schering. With respect to such activities, Schering will use
due diligence in product development in accordance with international
pharmaceutical industry standards using commercially reasonable efforts
in an attempt to commercialize Ribozyme Products and Non-Ribozyme
Products.
3.2 Ownership of IND and Drug Approval Applications. Schering owns the
regulatory submissions including all IND's and Drug Approval
Applications for all Ribozyme Products and Non-Ribozyme Products.
3.3 No Obligation to Develop Ribozyme Products or Non-Ribozyme Products.
With respect to any Ribozyme Products or Non-Ribozyme Products, and
except as provided in Section 3.4, RPI agrees that Schering (i) is not
under any obligation to obtain an approval or consents to market, or any
other consent or approval from any Regulatory Authority, or to reach
particular Net Sales thresholds, (ii) shall not be prohibited from
withdrawing any such
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 18
Ribozyme Products or Non-Ribozyme Products from the market for any
reason, and (iii) shall not have any liability to RPI if any such
consents or approvals are not obtained or are withdrawn, or if obtaining
or reaching the same may be delayed.
3.4 Commercialization Status. If Schering is developing a Ribozyme Product
or Non-Ribozyme Product, for the period from the end of the Term to the
First Commercial Sale of a Ribozyme Product or Non-Ribozyme Product, or
at such time Schering makes the decision to stop development of such
Ribozyme Product or Non-Ribozyme Product, Schering shall keep RPI
informed of its development activities with respect to Ribozyme Product
or Non-Ribozyme Product, including without limitation, the
commercialization of Ribozyme Product or Non-Ribozyme Product, by semi-
annually providing RPI with a written report stating the status of
development of each such Ribozyme Product or Non-Ribozyme Product.
Schering shall notify RPI of the achievement of Milestones within thirty
(30) days thereof and shall promptly inform RPI when Schering terminates
development or commercialization of a Ribozyme Product or Non-Ribozyme
Product.
IV
JOINT RESEARCH COMMITTEE AND RESEARCH PLAN
4.1 Research Plan. The Research Plan shall detail the research activities
to be undertaken by the Parties, shall set forth the personnel
commitments of RPI and shall account for how the payments made by
Schering pursuant to Section VII shall be spent. The Research Plan
shall require that both Parties will provide the Research Committee with
quarterly written reports describing and reporting the research done
pursuant to the Research Plan and RPI will account for the funds spent
on the research. The initial Research Plan, attached as Exhibit 4.1,
has been finalized by the Parties and adopted on the Effective Date.
The Parties recognize that initially the number of Schering Sequences
screened may be limited by RPI's capacity to manufacture and deliver
Exogenous Ribozymes and by the Parties' capacity to conduct assays.
4.2 Changes to the Research Plan. The Parties may change the Research Plan
at any time by mutual written agreement by the Parties.
4.3 Establishment of Joint Research Committee. The Parties will form a
joint research committee (the "Research Committee") to be in existence
during the Term to coordinate certain activities under this Agreement as
set forth below. The Research Committee shall have an equal number of
members from each Party. Regardless of the number of individuals on the
Research Committee, each Party shall have only one vote.
4.4 General Functions. The functions of the Research Committee shall be to:
(a) oversee the scope of work done by RPI pursuant to the
Research Plan;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 19
(b) prepare for and coordinate research and manpower
commitments of RPI pursuant to the Research Plan;
(c) engage in exchanges of information and joint planning
activities and review quarterly written reports on the status of
the research performed by RPI pursuant to the Research Plan;
(d) set criteria for defining successful results of screening
of Schering Sequences including whether the First Milestone has
been met;
(e) notify the Parties of inventions arising out of research
conducted pursuant to the Research Plan; and
(f) set time and place for meetings of the Research Committee
which shall be at least quarterly or as agreed and alternate such
meetings between Richmond, California and Boulder, Colorado.
4.5 Decisions. (a) All changes to the Research Plan must be in writing and
signed by the Parties. All non-material administrative matters of the
Research Plan are the prerogative of the Research Committee. All
administrative decisions to be made under the Research Plan or decisions
referred to the Research Committee in writing by the mutual agreement of
the Parties will be made by unanimous agreement of the Research
Committee, and, if the Research Committee cannot reach agreement on any
matter, it shall be referred to (i) the Vice President, Head of
Discovery Research for Berlex Biosciences, a division of Berlex
Laboratories, Inc., an Affiliate of Schering and Vice President of
Research for RPI to attempt to reach an agreement, and if they cannot
agree, (ii) then to the President of Berlex Biosciences, a division of
Berlex Laboratories, Inc., an Affiliate of Schering and the President of
RPI, (iii) if the President of Berlex Biosciences and the President of
RPI cannot resolve the matter, then to the Chairman of Berlex
Laboratories, Inc. an Affiliate of Schering and the Chairman of RPI,
(iv) if the Chairman of Berlex and the Chairman of RPI cannot resolve
the matter either Party may terminate this Agreement pursuant to Section
18.2 (c). (b) A non-unanimous vote of the Research Committee concerning
whether the First Milestone has been met is considered a non-decision by
the Research Committee until the earliest of (i) a unanimous agreement
by the Research Committee, (ii) Schering's notification to RPI that it
will pay the First Milestone Payment on such Ribozyme or Non-Ribozyme
Product or (iii) ninety (90) days after RPI provides Schering and the
Research Committee with a written notice which states reasons and data
why RPI believes the First Milestone has been met if Schering then
agrees to make such First Milestone Payment. If Schering does not agree
to make such First Milestone Payment pursuant to Section 4.5(b)(iii),
then RPI and Schering may refer such matter through the steps provided
in Section 4.5(a)(i) through (iv).
4.6 Visit to Facilities. Representatives of each Party may, upon reasonable
notice and at times reasonably acceptable to the other Party, (i) visit
the facilities where the Research Plan is
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 20
being conducted, and (ii) consult informally, during such visits and by
telephone, with personnel of the other Party performing work on the
Research Plan. If requested by the other Party, Schering and RPI shall
cause appropriate individuals working on the Research Plan to be
available for meetings at the facilities where such individuals are
employed at times reasonably convenient to the Party responding to such
request.
4.7 Disclosure of Schering Sequences and Schering Screens. During the Term,
Schering may disclose Schering Sequences and Schering Screens to RPI,
solely for the purpose of conducting research pursuant to the Research
Plan.
4.8 Reports. Each Party shall maintain records in sufficient detail and in
good scientific manner appropriate for patent and Regulatory Authority
purposes and so as to properly reflect all work done and results
achieved in the performance of this Agreement. Such records shall
include books, records, reports, research notes, charts, graphs,
comments, computations, analyses, recordings, photographs, computer
programs and documentation thereof, samples of materials and other
graphic or written data generated by RPI in connection with the Research
Plan, including any data required to be maintained pursuant to
applicable governmental regulations. During the Term each Party shall
respond to reasonable requests from the other Party for information
based on data generated by RPI pursuant to the Research Plan.
V
DESIGNATION AND LISTING OF SCHERING SEQUENCES
5.1 Designation and Listing of Schering Sequences. From time-to-time during
the Term, Schering will propose Schering Sequences by written notice to
the Research Committee, which specifically describes the Schering
Sequence being proposed ("Designation"). If RPI has not previously
granted a license to a Third Party that would prohibit RPI from granting
Schering the licenses contemplated by Section 6.5(b) and 6.5(c) for such
Schering Sequence or, unless within fifteen (15) business days from the
receipt of such notification by Schering, RPI notifies Schering in
writing that it has undertaken a substantial internal program with
respect to such Schering Sequence as clearly and convincingly
demonstrated in RPI's prior existing written records, such Schering
Sequence will become a Designated Schering Sequence and will be listed
on Exhibit 5.1. Such Designated Schering Sequence will be added to
Exhibit 5.1 hereto provided that there may be no more than [ ]
Designated Schering Sequences at any one time. Until Schering notifies
RPI it wishes to replace a particular Designated Schering Sequence with
another Schering Sequence, RPI shall not grant any licenses to Third
Parties, or take any action itself or with or on behalf of Third Parties
that would conflict with or be inconsistent with the exclusive licenses
granted in Section 6.5(b) and (c) with respect to such Designated
Schering Sequences. Schering may Designate no more than [ ] different
Designated Schering Sequences during the Term. At any time, pursuant to
this Section 5.1, Schering may change the Designated Schering Sequences
listed in Exhibit 5.1 by replacing a particular Designated Schering
Sequence with another Designated Schering Sequence or by removing and
abandoning a Designated
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 21
Schering Sequence upon written notice to RPI. In addition, a Designated
Schering Sequence shall be removed from Exhibit 5.1 after Schering has
made the product election provided for in Section 8.3 unless Schering
elects to maintain such Designated Schering Sequence for a possible
future Ribozyme Product against such Designated Schering Sequence as
provided in Section 8.3.
5.2 Rights of RPI. Subject to Section 6.8, RPI shall have the right to
research, develop, make, have made, and sell products, and to license
Third Parties to research, develop, make, have made and sell products,
directed against Schering Sequences unless such Schering Sequence is at
that time a Designated Schering Sequence or there is a Ribozyme Product
then being developed, or sold by Schering directed against such Schering
Sequence.
VI
OWNERSHIP OF TECHNOLOGY; GRANT OF LICENSES; ASSIGNMENT
OF RIGHTS TO [ ] FOR [ ]
6.1 Schering Base Technology. Schering owns all rights in Schering Base
Technology.
6.2 RPI Base Technology. RPI owns all rights in RPI Base Technology.
6.3 Developed Technology. Schering owns all of Schering solely invented
Developed Technology and an undivided one-half interest In jointly
invented Developed Technology, and RPI owns all RPI solely invented
Developed Technology and an undivided one-half interest in jointly
invented Developed Technology. Inventorship is determined by United
States patent law.
6.4 Ribozyme Products and Non-Ribozyme Products. Subject to this Agreement,
specifically Section 6.6, Schering owns all Ribozyme Products and Non-
Ribozyme Products.
6.5 Licenses to Schering. RPI hereby agrees to grant and hereby grants, the
following licenses to Schering:
(a) [ ] the RPI Base Technology and Developed Technology owned
by RPI, to make and use Ribozymes during the Term;
(b) [ ] under the RPI Base Technology and by RPI, to make, have
made (except as provided in Section 6.5 (d) below), and use
Endogenous, and Exogenous Ribozymes with respect to Designated
Schering Sequences pursuant to the Research Plan;
(c) [ ] under the RPI Base Technology and Developed Technology
owned by RPI to make, have made, (except as provided in Section
6.5(d) below), use, sell, offer to sell and import Ribozyme
Products and Non-Ribozyme Products;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 22
(d) subject to Section X "Manufacturing", RPI reserves the
right to make, and to have made Exogenous Ribozymes for use
pursuant to the Research Plan and Exogenous Ribozyme Products
solely for Schering, its Affiliates, or its Sublicensees.
6.6 Schering Grant of [ ]; Research. Subject to this Agreement, and solely
for purposes of conducting research pursuant to the Research Plan,
during the Term, Schering grants RPI a [ ], in the United States, [ ],
to all its rights in Developed Technology and Schering Base Technology
necessary for the conduct of such research; provided however, RPI may
request that it be able to use certain Developed Technology, whether
owned by RPI or Schering, as positive controls in research RPI is
conducting with Third Parties. It shall be in Schering's sole
discretion whether and to what extent to grant such permissions which
shall not be unreasonably withheld.
6.7 Schering Grant of an [ ] to Developed Technology. Schering grants to
RPI [ ] on a country-by-country basis to Developed Technology to make,
have made, use, sell, offer to sell, and import any Ribozyme or Non-
Ribozyme Product upon which Schering terminates development or
commercialization as provided in Section 3.3, 3.4 or 9.6 and products
against former Designated Schering Sequences which have been removed
from Exhibit 5.1 pursuant to Section 5.1 hereof and a nonexclusive right
to refer to data in Schering's regulatory filings for such Ribozyme or
Non-Ribozyme Product.
6.8 Additional RPI Restrictions. RPI understands that an important basis
for Schering to enter into this Agreement and a Purchase Agreement is
the right to exploit Developed Technology and not be blocked by licenses
granted now or in the future by RPI to Third Parties; therefore, (a) as
of the Effective Date, RPI intends not to enter into any agreement or
arrangements with Third Parties or grant any licenses to any Third Party
with respect to the RPI Base Technology at a time that would provide
rights to Third Parties in the making, using, selling, offering to sell
or importing Ribozymes for broad use in pathways that could be common
intermediary biochemical pathways which are common to present or future
Designated Schering Sequences listed on Exhibit 5.1 at that time; (b)
RPI has granted licenses to a Third Party with respect to RPI Base
Technology that provides such Third Party broad pathway rights or
physically contiguous rights that could be or are in common intermediary
biochemical pathways which are common to or the same as present to
future Designated Schering Sequences or Ribozyme Products. RPI
represents that it is attempting to renegotiate such broad pathway
license with such Third Party. (c) If RPI does grant such license
referred to in Section 6.8 (a), it will notify such Third Parties that
it has granted certain licenses to Schering with respect to Designated
Schering Sequences and Ribozyme and Non-Ribozyme Products that will be
excluded from such licenses to such Third Parties.
6.9 Assignment of Contract Rights to [ ]. RPI hereby hires Schering to
conduct research, development and clinical trials of a [ ] for [ ] at
Schering's sole cost and sole discretion. If Schering does proceed to
conduct clinical trials on a [ ] its duties and rights are governed by
RPI's rights in the agreement between RPI and [ ] dated [ ]. RPI agrees
that any technology
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 23
created, invented or developed by Schering pursuant to such research,
development and clinical trials [ ] shall be owned by Schering subject to
the license grant in Section 6.11.
6.10 [ ] means the Endogenous Ribozyme Product mutually agreed to by the
Parties which Schering develops through Phase II clinical trials.
6.11 Schering Grant of [ ]. Subject to this Agreement, Schering grants RPI a
[ ] to all its rights in the [ ] to make, have made, use, sell, offer to
sell and import any [ ] and any Endogenous Ribozyme product directed to
any gene found in the [ ] either solely or in conjunction with [ ]
pursuant to the [ ] or any RPI agreements with [ ]
6.12 RPI Payments to Schering for any [ ] Ribozyme Product. If Schering
researches, develops and conducts clinical testing through Phase II
clinical trials of the [ ] then RPI will pay Schering [ ] of all profits
it receives on the [ ] for [ ] and [ ] of all profits on all present and
future Endogenous Ribozyme products directed towards the [ ] that are
sold pursuant to the [ ] or any RPI agreements with [ ] Provided
however, if RPI does not receive payments and in lieu receives other
value RPI shall provide [ ] of the profits related to such value to
Schering.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 24
VII
RESEARCH PAYMENTS AND SECURED LOAN
7.1 Research Payments.
(a) Subject to the terms and conditions of this Agreement, and
due diligence and good faith efforts of RPI in meeting the goals
of the Research Plan, Schering shall pay RPI US$2,000,000
("Research Payments") per year of the Term at the rate of
US$500,000 at the beginning of each quarter.
(b) Except for the last quarter of the Term, Research Payments
shall be made quarterly at the beginning of each quarter. The
last quarterly Research Payment shall be made thirty (30) days
after receipt by Schering of the final written research report
from RPI.
7.2 Convertible Loan Note. As of the Effective Date Schering will loan
funds to RPI pursuant to Exhibit 1 attached to this Agreement.
VIII
MILESTONE PAYMENTS
8.1 Milestone Payments; Ribozyme and Non-Ribozyme Products. Subject to this
Agreement, Schering shall make milestone payments on each Ribozyme and
Non-Ribozyme Product as stated below ("Milestone Payments"). No
Milestone Payments shall be made on any [ ] Milestone Payments are met
and paid only once for each Ribozyme and Non-Ribozyme Product regardless
(i) if the Milestone is met more than once in different countries, and
(ii) if the same Ribozyme or Non-Ribozyme Product is used for different
indications which requires separate regulatory filings and separate and
distinct Regulatory Approvals. Except for the First Milestone Payment,
if Milestone Payments are made on a Ribozyme or Non-Ribozyme Product and
such Ribozyme or Non-Ribozyme Product does not reach the point of First
Commercial Sale, then Schering shall have a credit for the total of
Milestone Payments applied to any subsequent Milestone Payments due on
any Ribozyme or Non-Ribozyme Product directed to the same Gene Target as
the Ribozyme or Non-Ribozyme Product that did not reach First Commercial
Sale. Furthermore, pursuant to the Purchase Agreement as of the
Effective Date, Schering may offset any Milestone Payment except for the
First Milestone Payment as provided in the Purchase Agreement.
8.2 First Milestone. Schering shall pay RPI US [ ] upon completion of a
relevant animal efficacy model, as discussed by the Research Committee,
that in the unanimous opinion of the Research Committee demonstrates
that a particular Ribozyme (i) will most likely be a Ribozyme Product
with efficacy in man with an acceptable, appropriate therapeutic ratio
or (ii) provides sufficient information to enable Schering to design and
conduct the research
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 25
and development of a Non-Ribozyme Product with efficacy in man with an
acceptable, appropriate therapeutic ratio ("First Milestone Payment").
8.3 Product Election. Prior to the initiation of GLP toxicity studies for
an IND, Schering will send RPI written notice stating whether it will
proceed with a Ribozyme Product or Non-Ribozyme Product. If Schering
elects a Non-Ribozyme Product, RPI will have the right to research and
develop a Ribozyme Product directed at the same sequence as the Schering
Non-Ribozyme Product subject to negotiating licenses from Schering to
Schering Base Technology unless Schering agrees to pay for such Non-
Ribozyme Products the amount of Milestones provided for in Section 8.4
rather than Section 8.5 notwithstanding that it is a Non-Ribozyme
Product and maintains the Schering Sequence. In such event, RPI shall
not develop a Ribozyme Product directed against such Schering Sequence
as long as such Schering Sequence is a Designated Schering Sequence. If
Schering elects to proceed with a Ribozyme Product, RPI may not research
or develop a Non-Ribozyme Product directed at the same Schering Sequence
as the Schering Ribozyme Product.
8.4 Milestone Payments for Ribozyme Products. Subject to this Agreement,
Schering shall make additional Milestone Payments on each Ribozyme
Product as stated below:
(a) [ ] upon initiation of GLP toxicity studies for an IND;
(b) [ ] upon IND or equivalent acceptance by a Regulatory
Authority;
(c) [ ] upon initiation of Phase II Clinical Trials;
(d) [ ] upon successful completion of Pivotal Clinical Trials;
(e) [ ] upon Regulatory Approval; and
(f) [ ] upon First Commercial Sale.
8.5 Milestone Payments; Non-Ribozyme Products. Subject to this Agreement,
Schering shall make additional Milestone Payments on each Non-Ribozyme
Product as stated below:
(a) [ ] upon initiation of GLP toxicity studies for an IND;
(b) [ ] upon IND or equivalent acceptance by a Regulatory
Authority;
(c) [ ] upon initiation of Phase II Clinical Trials;
(d) [ ] upon successful completion of Pivotal Clinical Trials;
(e) [ ] upon Regulatory Approval; and
(f) [ ] upon First Commercial Sale.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 26
8.6 No Double Milestone Payments. Schering shall pay Milestone Payments once
per final Ribozyme or Non-Ribozyme Product. If Schering pays Milestone
Payments for a Ribozyme Product or a Non-Ribozyme Product and then
develops and sells a Non-Ribozyme Product or a Ribozyme Product for the
same clinical indications as the Ribozyme Product, or Non-Ribozyme
Product, Schering is not obligated to pay a second set of Milestone
Payments.
8.7 Milestone Credits. If a Non-Ribozyme Product is developed first
followed by a Ribozyme Product against the same Gene Target, Schering
will pay RPI the difference between the Milestones paid for the Non-
Ribozyme Product and the Ribozyme Product as such Milestones are
achieved. Conversely, if a Ribozyme Product is developed first followed
by a Non-Ribozyme Product against the same Gene Target, RPI will provide
credit to Schering against future Milestones for such Ribozyme Product,
an amount equal to the difference between the Milestones paid for the
Ribozyme Product and Milestone payments owed on the Non-Ribozyme
Product.
IX
ROYALTY PAYMENT; THIRD PARTY ROYALTIES; CROSS-ROYALTIES
9.1 Royalty Term. (a) Schering shall pay RPI royalties on Net Sales of
Ribozyme Products and Non-Ribozyme Products, on a country-by-country
basis.
(b) The "Royalty Term" for each Non-Ribozyme Product shall be
fifteen (15) years from the date of the First Commercial Sale of
each such Non- Ribozyme Product.
(c) The "Royalty Term" for each Ribozyme Product shall be from
the date of the First Commercial Sale of each such Ribozyme
Product, until the later of [ ] from First Commercial Sales of
each such Ribozyme Product. Upon the expiration of the patents in
RPI Base Technology or Developed Technology owned by RPI which
specifically claim such Ribozyme Product on a country-by-country
basis, the Royalty shall drop from [ ] as follows:
(i) If Annual Net Sales are [ ]
(ii) If Annual Net Sales are greater than;]
(iii) If Annual Net Sales are greater than [ ]
(iv) If Annual Net Sales are greater than [.]
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 27
(b) Paid-Up License. At the end of the Royalty Term for each
Ribozyme or Non-Ribozyme Product Schering shall have a [ ] by RPI
to make, have made, use, sell, offer to sell or import Ribozyme
Products and Non- Ribozyme Products.
9.2 Royalties on Ribozyme Products. Subject to the limitation of payments
to be made by Schering pursuant to Section 10.4(b) and (c) during the
Royalty Term, Schering shall pay to RPI a royalty of (i) [ ] on Net
Sales of each Ribozyme Product ("Royalty"), provided however, if,
pursuant to Sections 9.4 and 9.5, Schering is required to pay any Third
Party a royalty on a Ribozyme Product or for the use of Ribozyme
pursuant to this Agreement and such royalty is paid for a license
because of such use or because the Ribozyme Product contains a Ribozyme
or because the Ribozyme Product was made using a Ribozyme then one
hundred (100%) percent of such royalty shall be deducted from the
percentage Royalty paid to RPI; (ii) plus for Exogenous Ribozyme
Products manufactured by RPI ("Bonus Royalty"):
(a) [ ] if:
(i) Annual Net Sales are less than [ ] and RPI's
Transfer Price to Schering as a percentage of Net Sales
is [ ]
(ii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net is Sales greater than [ ]
(b) [ ] if:
(i) Annual Net Sales are [ ] and RPI's Transfer
Price to Schering as a percentage of Net Sales is greater
than [ ] but less or equal to [ ]
(ii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering is
greater than [ ] but less than, or equal to [ ]
(iii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is greater than [ ] but less than
[ ] or
(c) [ ] if:
(i) Annual Net Sales are less than [ ] and RPI's
Transfer Price as a percentage of Net Sales is less than or
equal to [ ]
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 28
(ii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is greater than [ ] but less than
or equal to [ ]
(iii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales are greater than [ ] but less than
or equal to [ ]
(iv) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is greater than [ ], but less than
[ ]
(d) [ ] if:
(i) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is less than or equal to [ ]
(ii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is greater than [ ] but less than
or equal to [ ]
(iii) Annual Net Sales are greater than [ ] but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales are greater than [ ] but less than
or equal to [ ]
(iv) Annual Net Sales are greater than [ ] and
RPI's Transfer Price to Schering as a percentage of Net
Sales is greater than [ ], but less than [ ]
(e) [ ] if Annual Net Sales are greater than [ ] and RPI's
Transfer Price to Schering as a percentage of Net Sales is greater
than [ ] but less than or equal to [ ]
(f) [ ] if:
(i) Annual Net Sales greater than [ ] but less
than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is less than or equal to [ ]
(ii) Annual Net Sales are greater than [ ], but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is greater than [ ], but less than
or equal to [ ]
(g) [ ] if:
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 29
(i) Annual Net Sales are greater than [ ], but
less than [ ] and RPI's Transfer Price to Schering as a
percentage of Net Sales is less than or equal to [ ]
(ii) Annual Net Sales are greater than [ ] and
RPI's Transfer Price to Schering as a percentage of Net
Sales is greater than [ ] but less than or equal to [ ]
(h) [ ] if Annual Net Sales are greater than [ ] and RPI's
Transfer Price to Schering as a percentage of Net Sales is less
than or equal to [.]
Each Product shall meet its own Net Sales threshold for purposes
of calculating the royalties due under this Section 9.2. The Bonus
Royalty is applied to the increment of Net Sales to which it
applies and not the entire Net Sales amount. The Bonus Royalty
referred to in Sections 9.2 (a) through (h) shall not be paid on
Net Sales of Exogenous Ribozyme Products during any period there
are no issued patents in RPI Base Technology or Developed
Technology owned by RPI which specifically claim such Exogenous
Ribozyme Product.
(i) This chart is intended to be read in conjunction with
Section 9.2 (a) through (i). If there is any ambiguity between
Section 9.2 (i) and Sections 9.2 (a) through (h), Section 9.2 (a)
through (h) controls.
[ ]
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</TABLE>
9.3 Royalties on Non-Ribozyme Products. During the Royalty Term according
to Section 9.1(b), Schering shall pay to RPI a royalty of [ ] on Net
Sales of each Non-Ribozyme Product.
9.4 RPI Payment of Third Party Royalties. RPI is solely responsible for all
fees, payments, royalties, up-front payments concerning the Cech Patents
and Ribozyme Technology including but not limited to any royalties to
the University of Colorado, University of Colorado Foundation, Inc.,
CTI, Thomas Cech, Ph.D., and CTI. If such royalties become due and
payable, and RPI has failed to make such payments in a timely manner,
Schering
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 30
may pay such royalties to Third Parties to which a royalty from RPI is
due and credit such payments against any royalties due RPI pursuant to
this Agreement.
9.5 Schering's Right to Procure Third Party Licenses. Except as provided in
Section 9.4, Schering shall be responsible for procuring such licenses
as it deems, in its sole discretion, appropriate for the manufacture,
use, marketing, sale or distribution of Ribozyme Products or Non-
Ribozyme Products by Schering and its Sublicensees.
9.6 Cross Royalties. In the event Schering pays the First Milestone Payment
and then terminates the development of a Ribozyme Product or Non-
Ribozyme Product or terminates this Agreement pursuant to Section
18.2(c) or (f), and RPI proceeds with the development and marketing of
such Ribozyme or Non-Ribozyme Product, RPI shall pay Schering a royalty
of [ ] with respect to Ribozyme Products or [ ] with respect to Non-
Ribozyme Products on Net Sales by RPI or any RPI assignee, Sublicensee
or any successor in interest of RPI of such Ribozyme or Non-Ribozyme
Product that are claimed by one or more issued patents or patent
applications in Developed Technology jointly or solely owned by
Schering. In all circumstances, RPI shall pay all royalties due
pursuant to any Third Party. Royalties will be paid on the Net Sales of
each such Ribozyme or Non-Ribozyme Product for a period from the date of
the first commercial sale by RPI of such Ribozyme or Non-Ribozyme
Product on a country-by-country basis until the last to expire issued
Live Claim in the Developed Technology which claims such Ribozyme or
Non-Ribozyme Product, or in the case of a Live Claim in a pending patent
application in Developed Technology until the earlier of (i)
abandonment, cancellation, withdrawal or disclaiming of such Live Claim
or (ii) the ten (10) year anniversary of filing such patent application
or (iii) if parent of such patent application exists the ten (10) year
anniversary of the filing of the earliest such patent application;
provided however, if such pending Live Claim should subsequently issue,
RPI's royalty obligation shall revive, and RPI shall pay Schering a
royalty pursuant to this Section 9.6 ("RPI Royalty Term").
9.7 Payment of Royalties.
(a) Royalty Report. Each Party owing Royalties or royalties
to the other Party under this Agreement shall provide a royalty
report and, if applicable, a royalty payment to the other Party
on a quarterly calendar basis. The report relating to Net Sales
within the U.S. shall be provided within ninety (90) days after
the end of the calendar quarter to which such report and payment
apply and the report relating to Net Sales for countries other
than the U.S. shall be provided within one-hundred and twenty
(120) days after the end of the calendar quarter to which such
report and payment apply.
(b) Records Retention. Each Party shall keep, and require any
Sublicensee to keep, for a period of not less than seven (7)
years, complete and accurate records of all Net Sales of Ribozyme
Products and Non-Ribozyme Products. Each Party shall have the
right, at its respective sole expense, through a certified public
accountant reasonably acceptable to the other Party, and
following reasonable notice, to
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 31
examine records of Net Sales and COGS during regular business
hours during the Royalty Term or RPI Royalty Term; provided
however, that such examination shall not (i) be of records for
more than the prior three (3) years, (ii) take place more often
than once a year, and (iii) cover any records which date prior to
the date of the last examination, and provided further that, such
accountants shall report to the auditing Party only as to the
accuracy of the royalty statements and payments and the amount of
any underpayment or the accuracy of COGS statements. Copies of
such reports shall be supplied to the non-auditing Party. In the
event the report demonstrates that Schering or RPI has underpaid
Royalties or royalties or RPI overstated COGS then Schering or
RPI shall promptly pay such Royalties or royalties as the case
may be or credit differences caused by overstatement of COGS. In
addition, if the amount of underpayment of Royalty or royalties
due pursuant to this Agreement or over statement of COGS by [ ]
or more than the paying or crediting Party shall also pay
interest at the prime rate as stated in the Wall Street Journal
under "Money Rates" ("Prime") applied to the amount unpaid from
the date due to the date paid. If Schering or RPI has overpaid
Royalties or royalties or RPI has overstated COGS, Schering or
RPI may credit such overpayments against future Royalties or
royalties owed the other Party. If RPI has understated COGS,
except as provided in Section 10.4, Schering shall pay the amount
of such underpayment.
(c) Tax on Royalties. Any tax paid or required to be withheld
by a Party for the benefit of the other Party on account of
royalties payable to the other Party under this Agreement shall
be deducted from the amount of royalties otherwise due. The
paying Party shall secure and send to the other Party proof of
any such taxes withheld and paid by the paying Party for the
benefit of the other Party and shall, at the other Party's
request, provide reasonable assistance in recovering said taxes,
if possible.
(d) Form of Payment. All payments to a Party hereunder shall
be made in United States Dollars, for such Party's account, by
wire transfer to a bank in the United States designated in
writing by such Party; provided that where payments in respect of
Net Sales are based on Net Sales in non-U.S. currencies, the
amount of Net Sales and any deductions used to calculate Net
Sales, if any, shall be converted monthly to United States
Dollars at the average of the average daily "bid" and "asked"
exchange rates as provided by Reuters (or a different independent
wire service providing international spot exchange rates agreed
to by the Parties) for the applicable month.
9.8 Reports on Net Sales Exclusions. In the event that Schering or its
Sublicensees distributes Ribozyme Products or Non-Ribozyme Products to
any entity for research or clinical testing purposes, or indigent or
other public support programs, and determines that such distributions
shall be excluded from the computation of Net Sales, then Schering shall
provide RPI an annual written report on February 15 of each calendar
year describing such distribution of all such Ribozyme Products or Non-
Ribozyme Products, the purpose for which such Ribozyme Products or Non-
Ribozyme Products were distributed, and the
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 32
quantities of Ribozyme Products or Non-Ribozyme Products so distributed
in the preceding calendar year.
X
Manufacturing and Supply
10.1 RPI Right to Manufacture Exogenous Ribozymes. Pursuant to Section 10.5,
RPI has the right to manufacture Exogenous Ribozyme Products and shall
manufacture Exogenous Ribozymes for research pursuant to the Research
Plan. The manufacturing term is the same as the Royalty Term according
to Section 9.1(c) on a country-by-country basis (hereinafter referred to
as "Manufacturing Term").
10.2 Schering Right to Manufacture Ribozymes. (i) Schering shall manufacture
Endogenous Ribozyme Products, and shall manufacture Endogenous Ribozyme
for research pursuant to the Research Plan and, (ii) pursuant to Section
10.5, the backup right to manufacture Exogenous Ribozyme Products.
10.3 Non-Commercial Research and Clinical Supply. Prior to the First
Commercial Sale, RPI will manufacture Exogenous Ribozymes for the
requirements of Schering for (i) research purposes as ordered by
Schering at a price equal to [ ] ("Research Transfer Price") [ ] (ii)
clinical purposes as ordered by Schering at a price equal to [ ] per
vial ("Clinical Transfer Price"). The Clinical Transfer Price shall be
deemed to include the final form of the product and final packaging as
described in the IND.
10.4 Commercial Supply. (a) Subject to the terms and conditions of this
Agreement, and except to the extent and amounts that it is necessary for
Schering or its Sublicensees to maintain levels of production to be a
viable backup manufacturer for Exogenous Ribozyme Products, RPI shall
supply to Schering, and Schering shall purchase from RPI, all of the
worldwide requirements for Exogenous Ribozyme Products of Schering and
its Affiliates and Sublicensees at a price equal to [ ] ("Transfer
Price"). Such Exogenous Ribozyme Products shall be in final package and
final labeling form, and such Transfer Price shall include all raw
material, direct labor, overhead, quality control, testing, stability
testing, labels, package inserts, cartons, labeling which accompanies
the vials, and primary and secondary packaging all as described in the
NDA. (b) Provided however, under no circumstances shall such Transfer
Price plus Royalty plus Bonus Royalty on Net Sales exceed [ ] (c) The
Transfer Price will not exceed [ ] of Schering's Net Sales. If this
creates a problem for RPI, the Parties agree to meet to discuss
opportunities to further reduce COGS; however, in no event will the
Transfer Price exceed [ ] of Schering's Net Sales. (d) If at any time
RPI is unable or otherwise fails to provide Exogenous Ribozyme Product
in the quantities ordered pursuant to Section 10.10, Schering shall be
entitled to obtain that shortfall amount of Exogenous Ribozyme Products
from any other supplier or manufacturer as set forth in Section 10.12,
and in such case RPI shall just receive the applicable [ ] Royalty on
Net Sales.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 33
10.5 Condition of RPI Becoming Schering's Worldwide Supplier of Exogenous
Ribozymes Products. If the conditions set forth in this Section 10.5
have been satisfied, RPI will be Schering's worldwide supplier of
Exogenous Ribozyme Products. The conditions precedent to RPI becoming
Schering's worldwide supplier of final Exogenous Ribozyme Products are
as follows:
(a) As of the initiation of Pivotal Clinical Trials for a
putative Exogenous Ribozyme Product: RPI shall not be in breach
of this Agreement in any material respect (or if it is in breach
it shall cure such breach within sixty (60) days of notice
thereof); (x) RPI shall have established production facilities
which: (i) in the aggregate shall be capable of meeting the
supplies for Pivotal Clinical Trials; (ii) shall comprise at
least one RPI facility whose capacity is planned to provide
Worldwide Target supplies at the time of first Regulatory
Approval of each Ribozyme and Non-Ribozyme Product. (y) RPI shall
have, (i) during the previous four calendar quarters, timely
delivered substantially all amounts of Exogenous Ribozyme
Products for testing as to which orders timely placed pursuant
hereto were accepted, and (ii) substantially achieved the
delivery targets recited in Schering purchase orders.
(b) If any of the foregoing conditions have not been
satisfied, then, upon written notice from Schering, (i) RPI and
Schering will meet at least once to discuss what steps RPI should
take to assure Schering that RPI has taken and will take all
steps necessary to assure Schering that RPI has the capacity and
capability to become Schering's worldwide supplier of Exogenous
Ribozyme Products; (ii) the Parties will in good faith discuss
such steps and assurances; (iii) if after such discussions,
Schering in good faith believes RPI does not have the capacity
and capability to become Schering's worldwide supplier of
Exogenous Ribozymes, RPI has an additional six (6) months from
the meeting referred to in Section (i) of this paragraph to cure
the matters set forth in such meeting. If RPI has not cured to
Schering's good faith judgment then RPI at Schering's cost will
train Schering personnel and shall transfer all manufacturing
trade secrets to Schering to ensure that Schering can manufacture
Exogenous Ribozyme Products and RPI shall be the backup supplier
of Exogenous Ribozyme Products. Schering will thereafter be
entitled to have all of its other requirements for Exogenous
Ribozyme Products supplied by any other supplier or manufacturer,
including Schering, and notwithstanding any other term of this
Agreement RPI shall receive as sole compensation on account of
Net Sales of Exogenous Ribozyme Products an amount as provided in
Section 9.2 of this Agreement.
(c) RPI shall advise Schering as soon as practicable if it is
unable or does not elect to supply Exogenous Ribozyme Products
outside the United States.
10.6 Worldwide Target Defined. The Worldwide Target shall be agreed to
between the Parties annually at the date set by Schering (the "Fixing
Date"). The "Worldwide Target" shall
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 34
represent a reasonable estimate, based on information available to the
Parties as of the Fixing Date, of the total expected worldwide demand
for Exogenous Ribozyme Products. Such estimate shall be based upon
prior sales history, market demand in excess of current capacity, the
size of the potential patient population for approved indications (or
indications which are in the final stages of receiving approval) and
expected rates of use by such patients, prior and current forecasts
(which shall be considered in light of the accuracy of prior forecasts),
and such other factors as are reasonably considered in forecasting
demand on a long-range basis. The establishment of a Worldwide Target
shall not relieve RPI of any best efforts obligation to meet demand in
excess of that amount. The calculation of the Worldwide Target shall not
include potential sales arising from as-yet unapproved indications, nor
shall it be reduced by the mere possibility of restricted sales due to
factors such as the actions of a competitor not yet in the market or
contemplated governmental actions.
10.7 Ordering Generally. As set forth specifically below, the Parties shall
cooperate in the forecasting of demand for Exogenous Ribozyme Product
and in providing for worldwide capacity for the manufacture thereof.
10.8 Approval. Upon notification of FDA approval, Schering shall confirm its
then-current rolling forecast, and the Parties shall confer as to the
possibility of increasing Schering's order in accordance with RPI's
manufacturing capacity. The Parties recognize that during the first
year after First Commercial Sale there may exist some uncertainties
concerning demand for Exogenous Ribozyme Product and agree to meet to
confer about these uncertainties on a regular basis, but any
modification to the terms hereof shall be only as agreed in writing by
the Parties.
10.9 Rolling Forecasts. Upon the initial order for First Commercial Sale of
final Exogenous Ribozyme Product, and thereafter on the first business
day of each calendar quarter during the term that RPI is manufacturing
Exogenous Ribozyme Products for Schering, Schering shall deliver to RPI
a non-binding written forecast of the quantities of vials that Schering
expects in good faith to order in each of the three consecutive calendar
quarters following the quarter for which the most recent order has been
placed. Such forecasts shall represent Schering's best estimate of its
anticipated orders. At RPI's request Schering shall confer with RPI as
to the basis for such forecasts and shall disclose to RPI any underlying
data for such forecasts.
10.10 Quarterly Orders. Beginning with the purchase order for the first
calendar quarter prior to the First Commercial Sale, Schering shall
place written purchase orders for vials or what ever form of the final
container for such Exogenous Ribozyme Product (hereinafter referred to
as "vials") on a quarterly basis, not less than one hundred eighty (180)
days prior to the commencement of the calendar quarter for which the
vials are desired. Each purchase order shall specify requested delivery
dates and, if appropriate, divide the vials intended for U.S. and non-
U.S. markets, and shall be net of (although it shall identify) any vials
to be supplied
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 35
by other suppliers as permitted hereunder. Unless otherwise agreed by
the Parties in writing, such purchase orders shall specify delivery
dates that ratably distribute the delivery of vials among each of the
months included in such calendar quarter. No less than 150 days before
the commencement of the quarter in which the product is to be delivered,
RPI shall, in writing, advise Schering, in good faith, of the number of
vials which it accepts for delivery during that period, and Schering
shall be entitled to rely on such delivery during that period, and
Schering shall be entitled to rely on such advice for purposes of
obtaining alternate supplies of Exogenous Ribozyme Products to make up
any shortfall in such supplies. Any orders placed hereunder shall be
rounded upward, if necessary, to a reasonably whole lot. RPI shall use
its best efforts to accept purchase orders consistent with its capacity
and to its best efforts to deliver the number of vials that it has
accelerated for delivery. To the extent Schering places orders other
than such regular quarterly orders, or to the extent that any orders
accelerate the estimated delivery schedule, RPI shall use reasonably
diligent efforts to supply such quantities so ordered. At the request
of either Party, the Parties shall meet and confer in good faith
regarding the establishment of a different ordering schedule to take
account of market conditions, regulatory approval lag times, or
manufacturing time. If, RPI having accepted an order, fails timely to
deliver the full amount of such order, then Schering shall (without
limiting any other rights hereunder) be reimbursed for the additional
costs and expenses reasonably incurred by Schering and directly arising
from such failure.
10.11 Reports. RPI will report quarterly to Schering its progress in the
manufacture of vials hereunder and RPI shall promptly notify Schering if
it appears that RPI will be unable to timely deliver any amounts
accepted for delivery.
10.12 Supply Shortfalls; Capacity Planning.
(a) At any time during the term of this Agreement Schering
shall be entitled to qualify or license any reasonable supplier
or manufacturer (including Schering) to manufacture Exogenous
Ribozyme Products in any jurisdiction, and shall be entitled to
enter into an agreement with such supplier or manufacturer to act
as an alternate source of supply of Exogenous Ribozyme Products
to Schering in any jurisdiction; provided that Schering shall not
order or purchase Exogenous Ribozyme Products from such supplier
(other than non-commercial quantities of Exogenous Ribozyme
Products used solely for regulatory licensing of such supplier)
except under circumstances permitted under this Agreement.
(b) If at any time RPI is unable or otherwise falls to supply
(or notifies Schering that it cannot supply) Schering with the
Exogenous Ribozyme Product for a particular calendar quarter
ordered pursuant to Section X, Schering shall be entitled, upon
notice to RPI, to obtain the shortage in its requirements for
such calendar quarter from any other licensed supplier or
manufacturer (including Schering). RPI's sole compensation for
Exogenous Ribozyme Product manufactured by such supplier (or
Schering) pursuant to this Section shall be the royalty set forth
in Section 9.2.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 36
10.13 Subcontractors. RPI may subcontract with one or more Third Parties for
the performance of one or more major processing steps provided that each
subcontracting agreement for any major processing steps shall contain
the following provisions: (a) in the event of a Change of Control,
Schering shall be permitted to assume all of RPI's rights and
obligations under such subcontracting agreement; (b) the manufacture of
Exogenous Ribozyme Products by each subcontractor shall be approved by
the FDA or other appropriate governmental agency; (c) the Exogenous
Ribozyme Products or services to be supplied by each subcontractor and
the manufacturing process therefor shall comply with all specifications
and warranties under this Agreement; and (d) Exogenous Ribozyme Product
will be required to be supplied on reasonable commercial terms,
including an obligation on the part of each subcontractor to pay damages
for breach of its supply obligations, which damages shall include at
least the cost of securing alternate supplies. Notwithstanding any such
subcontracting agreement, RPI shall remain fully responsible for all of
its obligations under this Agreement.
10.14 Manufacturing Procedures. In the manufacturing of the vials, RPI shall
adhere to the specifications and shall utilize such additional or
modified procedures, facilities, equipment and labeling which may from
time-to-time be agreed upon in advance and in writing by the Parties and
as required by the FDA or other appropriate governmental regulatory
authority. Any amendment to the release specifications shall be by
agreement of the Parties not to be unreasonably withheld. RPI, at its
sole cost, shall maintain and retain samples required by Current Good
Manufacturing Practices as defined in 21 CFR 211 et seq. or any other
applicable regulations ("GMP"). In addition RPI will, at its sole cost,
select and retain samples of each lot of Exogenous Product and conduct
an ongoing stability program as mutually agreed to by the Parties, will
maintain all stability records for such period as is required by the FDA
or other regulatory agency and furnish Schering with copies of all such
records at Schering's request and will undertake any lot-by-lot testing
required by the FDA or other regulatory agency, or as requested and paid
for by Schering pursuant to budgets agreed in advance.
10.15 Delivery. Promptly upon completion of quality assurance testing by RPI
of each lot ordered hereunder, RPI shall notify Schering of the
completion thereof and shall provide Schering with appropriate
certificates of analysis for such lot. The vials shall comply with all
of RPI's warranties under this agreement. Schering shall have final
authority to accept the vials from RPI on a lot-by-lot basis, based on
whether the lot complies with all of RPI's warranties under this
Agreement, and Schering shall have the right to review batch records as
well as quality assurance results. If RPI and Schering disagree as to
whether a lot has been rightfully rejected then the Parties shall submit
the matter to a mutually acceptable third party, such as testing
laboratory in the case of a dispute over analysis of the vials. The
costs and fees of such third party shall be shared equally by the
Parties. Within five business days of notification of completion and
provision of the certificates of analysis, unless Schering has properly
rejected such lot, Schering shall cause such lot to be removed at
Schering's own cost from the premises where such lot was finished. If
Schering requires
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 37
longer than such five (5) day period to arrange for removal due to
special circumstances, including the reasonable need to review batch
records prior to acceptance, Schering shall so notify RPI and the
Parties shall discuss in good faith a reasonable extension of such five
(5) day period, and prior to delivery RPI shall store Exogenous Ribozyme
Product at its own expense. Except for vials intended for distribution
in the United States, title to and risk of loss for all vials shall pass
to Schering upon delivery to a carrier at RPI. Title to and risk of
loss for vials intended for distribution in the United States shall pass
to Schering's United States Affiliate upon delivery to a carrier at the
RPI site.
10.16 Inspection. Schering may inspect each lot shipped by RPI and shall
notify RPI of any non-conformance to specifications (or other proper
reason for rejection) within thirty (30) days after receipt of the
shipment and the relevant batch records being made available to
Schering. Any delivery not rejected by Schering within such thirty (30)
days shall be deemed accepted unless Schering informs RPI that
Schering's testing or investigation is still under way, in which case
the time shall be extended for a reasonable period to allow completion
of the testing or investigation; provided however, if a lot is
subsequently rejected by the FDA or other applicable regulatory agency
(or by Schering in the event the quality control testing of the
Exogenous Ribozyme Products necessarily requires more than thirty (30)
days), payment for that lot by Schering shall be suspended by Schering,
or, if already paid, the next payment to RPI by Schering shall be
reduced by crediting the amount Schering had advanced for the non-
conforming lot. If such lot is subsequently accepted by the FDA, or
other agency, with at least six months remaining prior to the expiration
date of such lot, then Schering will, upon Schering's acceptance of such
lot, pay RPI according to this Agreement.
10.17 Additional Testing. Schering shall have the right to request any
additional testing of the vials (in addition to testing necessary to
determine whether to accept the vials) that Schering reasonably believes
necessary and, if requested, RPI shall use best efforts to promptly
perform such testing and inform Schering of the results; provided
however, that all such additional testing shall be at Schering's sole
cost and expense, and Schering shall reimburse RPI for its costs
(according to agreed budgets) incurred in performing such additional
testing within thirty (30) days after RPI submits an invoice for such
costs.
10.18 Right to Review Processes. RPI shall maintain all quality assurance
manufacturing records and batch production records directly related to
the manufacture of Exogenous Ribozyme Products, or copies thereof, as
required by FDA or other applicable regulation. Schering's personnel
have the right to review and audit compliance with manufacturing
specifications during regular business hours at reasonable intervals,
and shall have the right to visit and inspect each RPI site at such
times as required for the purpose of review of batch records and
manufacturing and quality assurance procedures with respect to Exogenous
Ribozyme Products, provided that such review or audit does not impede
RPI's manufacture and release processes. Schering personnel shall not
have access to any records, information, or data concerning other RPI
products and Schering personnel having access to any RPI site shall
execute reasonable confidentiality agreements to prevent disclosure of
such information that may be discovered inadvertently. Schering's
personnel may make general inquiries the
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 38
answers to which will be held in confidence by them, concerning such
matters as manufacturing scheduling, and equipment cleaning of any other
RPI's site to insure that Exogenous Ribozyme Products is being
manufactured under GMP.
10.19 Labeling. RPI shall produce all vials in a finished and packaged form,
using labels, cartons, package inserts and trade pack shippers in
accordance with the format prepared by Schering. Unless the Parties
agree otherwise and the law so permits, RPI (as appropriate) shall be
identified as the manufacturer on the labels. Schering shall give
reasonable advance notice of any label, labeling, or packaging change to
enable RPI to switch labels, labeling, or packaging without interrupting
RPI's production schedule or incurring unreasonable expense, and unless
required by the FDA or other regulatory agency, such changes shall not
significantly increase the RPI COGS without RPI's approval, unless
Schering agrees to pay for such significant increase. To the extent
consistent with FDA or other applicable regulations, and according to
Schering's instructions Schering or its Affiliates, shall have its name
placed as prominently as possible on the label of the final product.
The cost of packaging and labels shall be borne by RPI, provided that if
Schering provides packaging or labels for any vials, the actual
reduction in the RPI's COGS shall be credited to Schering with respect
to such vials against payment to be made upon delivery.
10.20 Investigation of Complaints. Schering shall have the primary right and
responsibility to investigate and answer all complaints concerning
Exogenous Ribozyme Products. If permitted by law, Schering shall have
the primary right and responsibility to report to the FDA or other
applicable regulatory agency all complaints and corrective actions with
respect to Exogenous Ribozyme Products, but if so required by law, RPI
shall perform such reporting. In this regard, Schering will supply RPI
with a copy of any completed investigation report as required by GMP as
well as any other report needed by RPI to comply with the law. RPI will
promptly notify Schering of any adverse events, complaints or problems,
or any inquiries made by healthcare providers, or any actual or
threatened legal or regulatory action of the FDA or other regulatory
agency relating to Exogenous Products hereunder of which RPI has notice.
10.21 FDA Regulation of "Ownership". If it is determined by the FDA that
Exogenous Ribozymes are to be regulated as biologics then:
(a) Schering shall make all decisions and have regulatory
responsibility in respect of the ELA/PLA (Establishment License
Application/Product License Application as defined by FDA
regulations as amended and foreign equivalents) and (b) the
ELA/PLA shall be designate so that Schering or its Affiliate as
named as the "Responsible Head" thereof.
(b) Schering has sign-off authority with respect to all batch
records (including in-process batch records) at Schering's sole
cost, risk and expense.
(c) If, in the reasonable opinion of Schering based on issued
or proposed regulations, or correspondence or statements of the
FDA it appears that transferring
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 39
certain responsibilities for Exogenous Ribozyme Products quality
control or approval to Schering personnel, including final
authority for manufacturing approval of Exogenous Ribozyme
Product would materially enhance the ability of Schering to be
named in the ELA/PLA as the "Responsible Head", then RPI shall
allow Schering, at its sole cost, risk, and expense, to test and
release for sale Exogenous Ribozyme Products manufactured at the
RPI site(s), and, if it reasonably appears necessary, to place
such personnel with such final authority for approval of
Exogenous Ribozyme Product in the RPI site(s) to the extent
permitted by the Federal Food, Drug and Cosmetic Act and Public
Health Act as amended. RPI shall not be liable for any error or
omission of such personnel or in such testing, including the
erroneous approval of Exogenous Ribozyme Products.
XI
PAYMENTS
11.1 Payment on Delivery or Completion. Within ninety (90) days after the
later of the delivery of each shipment of Exogenous Ribozyme Products to
Schering by RPI or receipt of the related invoice Schering shall pay for
such Exogenous Ribozyme Products, provided if any portion of the
shipment is not accepted Schering shall pay for only that portion of the
shipment that is accepted.
11.2 Indigent and Rebate Vials. To the extent, that vials are provided
without charge by Schering pursuant to an "indigent program" or as a
non-cash rebate with respect to certain purchases of Exogenous Ribozyme
Products, Schering shall not pay Royalties or Bonus Royalties on such
free Ribozyme and Non-Ribozyme Products.
XII
TAX MATTERS
12.1 Tax Matters. (a) RPI agrees that Schering is entitled to all tax
benefits, including in particular, tax credits and/or tax deductions
attributable to amounts Schering has funded hereunder. RPI shall file
its federal, state, and local tax returns on a basis consistent with
this Agreement, and shall not take any action inconsistent with
Schering's entitlement to such tax benefits.
(b) In the event that Schering, in its judgment, determines
that it must obtain information and verification regarding the
use or application of such expenditures in order to prepare
Schering tax returns or to respond to an inquiry during a tax
audit or any other inquiry relating to such treatment of its tax
return, or to defend its tax position in any proceeding including
litigation, RPI shall reasonably cooperate with Schering and
furnish it with such information as it may reasonably require at
Schering's request and expense.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 40
XIII
PATENTS
13.1 Disclosure by Employees, Agents or Independent Contractors. Schering and
RPI agree that as to any employees, agents, or independent contractors
of Schering and RPI presently in their employ or who are hired or
retained by Schering or RPI to perform, manage performance of, or
participate in the research done pursuant to this Agreement, Schering
and RPI will ensure that such employees, agents, or independent
contractors will promptly disclose and assign to the Party engaging them
any and all rights to inventions, developments, or improvements,
(whether patentable or not) conceived and/or reduced to practice during
the course of their duties, Each Party will notify the other Party
promptly of any sole or joint inventions in Developed Technology, or RPI
Base Technology pursuant to the Research Plan. lnventorship will be
determined using United States patent laws.
13.2 Patent Prosecution and Related Activities.
(a) RPI Inventions. RPI shall be responsible, at its sole
expense, for preparing, filing, prosecuting and maintaining in
such countries it deems appropriate, patent applications and
patents relating to all solely owned RPI inventions within the
RPI Base Technology and RPI solely invented Developed Technology
("RPI Inventions") and conducting any interferences, re-
examinations, reissues and oppositions relating to such patent
applications and patents.
(b) Schering Inventions. Schering shall be responsible, at
its sole expense, for preparing, filing, prosecuting and
maintaining in such countries it deems appropriate, patent
applications and patents relating to all solely owned Schering
inventions within the Schering Base Technology, and solely
invented Schering Developed Technology ("Schering Inventions")
and conducting any lnterferences, re-examinations, reissues and
oppositions relating to such patent applications and patents.
(c) Joint Inventions. Schering shall be responsible, at its
sole expense, for preparing, filing, prosecuting and maintaining
in the Core Countries patent applications and patents relating to
all inventions jointly made by the Parties included within the
Developed Technology ("Joint Inventions"), and conducting any
interferences, re-examinations, reissues and oppositions relating
to such Developed Technology. As used in this Agreement, "Core
Countries" shall mean the United States, Canada, Europe (members
of the European Patent Convention via European Patent Office
applications), Japan and Australia. No Party shall have the
right to file any patent application relating to a Joint
Invention within the Developed Technology except in accordance
with this Section XIII.
(d) (i) Within ninety (90) days following the first actual
reduction to practice of a Joint Invention, or following receipt
of notice by RPI of its desire to have a patent application filed
for a Joint Invention or such later time as the Parties may
agree,
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 41
Schering shall provide RPI with a first draft of a patent
application disclosing and claiming such invention, subject to
Section 13.2(d)(ii) below. RPI shall have the right to propose
any modifications or additions to such patent applications within
thirty (30) days of receipt of the draft. If Schering objects to
any such modification or addition, the Parties shall discuss the
problem in a good faith effort to resolve it. If within forty-
five (45) days of receipt of such draft by RPI, the problem
remains unresolved or if at any time the Parties cannot agree
whether to file a patent application in the U.S. or any other
country relating to a Joint Invention, such matters will be
submitted to the Research Committee for resolution. If the
Research Committee cannot resolve the issue, Schering shall be
entitled to make the final decision. Schering shall keep RPI
informed of prosecution of such Joint Inventions and provide
drafts of prosecution documents to RPI for comment. RPI may make
suggested changes; if Schering objects to any such suggested
changes, the Parties shall discuss the problem in a good faith
effort to resolve it. If within five (5) days of receipt of such
draft by RPI, the problem remain unresolved, such matters shall
be referred to the Chairman of each Party for resolution. If
they fail to agree, Schering shall make the final decision.
(ii) Notwithstanding Section 13.2 (d) (i) above, in
the event that RPI in good faith believes that a patent
application should not be filed with respect to a Joint
Invention, prior to the end of such ninety (90) day period,
within sixty (60) days of the beginning of such ninety (90)
day period it shall provide the Research Committee with a
written explanation of why such a filing is not desirable.
The Research Committee shall then determine whether such an
application should be filed. In the event that it
determines that it should, Schering shall have an
additional forty-five (45) days to provide the Research
Committee with a draft patent application.
(e) Election Not to Prosecute. Schering may elect with ninety
(90) days prior notice to RPI to discontinue the prosecution of
any patent applications filed pursuant to Section 13.2 (b), (c)
or (d) above or not to file or conduct any further activities
with respect to the patent applications or patents subject to
such Sections. RPI may elect upon ninety (90) days prior notice
to Schering to discontinue the prosecution of any patent
applications filed pursuant to Section 13.2 (a) above or not to
file or conduct any further activities with respect to the patent
applications or patents subject to such Section. In the event
Schering or RPI respectively decline to file or having filed fail
to further prosecute or maintain any patent applications or
patents subject to this Agreement, or conduct any interference's,
re-examinations, reissues, oppositions with respect thereto, the
other Party shall have the right to prepare, file, prosecute and
maintain such patent applications and patents in such countries
worldwide as it deems appropriate, and conduct any interferences,
re-examinations, reissues or oppositions at its sole expense.
13.3 Cooperation. Each of Schering and RPI shall keep the other fully
informed as to the status of patent matters described in this Section
XIIl including, without limitation, by providing
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 42
the Research Committee the opportunity to fully review and comment on
any documents which will be filed in any patent office as far in advance
of filing dates as feasible, and providing the other copies of any
documents that such party receives from such patent offices promptly
after receipt, including notice of all interference's, reissues, re-
examinations, oppositions or requests for patent term extensions.
Schering and RPI shall each reasonably cooperate with and assist the
other at its own expense in connection with such activities, at the
other Party's request.
13.4 Permitted Disclosures. Following a written notice from the other Party
hereto, the Parties shall in good faith grant each other permission, not
to be unreasonably withheld, to disclose in the specification of a
patent application filed by the other Party pursuant to this Agreement,
any RPI Base Technology, Schering Base Technology, or Developed
Technology necessary to support and enable claims in such patent
applications.
13.5 Third Party Infringement.
(a) Schering Right. Schering, at its sole expense, shall have
the right, but not the obligation, to initiate and conduct legal
proceedings to enforce against any infringement or defend any
declaratory judgment action involving a patent within the
Developed Technology or Schering Base Technology covering
Ribozyme Products or Non-Ribozyme Products.
(b) RPI Obligation. RPI has the obligation to initiate and
conduct legal proceedings to enforce any patent in the RPI Base
Technology of or related to Ribozyme Products or Non-Ribozyme
Products or to defend any declaratory judgment actions involving
any such patent in the RPI Base Technology of or related to
Ribozyme Products or Non-Ribozyme Products against any
infringement at its sole expense.
(c) Failure to Enforce. If within six (6) months following
receipt of written notice of an infringement of Developed
Technology or RPI Base Technology which the Party receiving
notice has the right to enforce pursuant to this Section XIII,
the Party having such right fails to take such action to halt
such an alleged infringement or misappropriation or defend such a
declaratory judgment action, the other Party may, at its expense,
take such legal action as it deems appropriate, in its own name,
to halt such an alleged infringement, or misappropriation or
defend such a declaratory judgment action. Each Party agrees to
render such reasonable assistance as the prosecuting party may
request.
(d) Division of Recoveries.
(i) Any recovery received in connection with a
suit brought by Schering or RPI pursuant to Section 13.5(a)
or (b) shall be used first to reimburse the Party
conducting such suit for expenses (including attorneys',
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 43
professional and expert fees) incurred in such suit, and
any remainder treated as set forth below:
(a) The remainder of the recovery shall be
divided with Schering receiving [ ] and RPI
receiving [.]
(e) No Settlement without Consent. Neither Party shall enter
into any settlement of any claim, suit or proceeding under
Sections 13.5(a) or (b) above which admits or concedes that any
aspect of the Developed Technology or RPI Base Technology
licensed from the other Party is invalid or unenforceable without
the prior written consent of such other Party.
(f) Cooperation. Each Party shall keep the other reasonably
informed of the progress of any claim, suit or proceeding subject
to this Section 13.5 and cooperate reasonably in connection with
such activities at the request and expense of the Party involved
in such claim, suit or proceeding.
13.6 Third Party Infringement; RPI Right. (a) If RPI is selling a Ribozyme
Product or Non-Ribozyme Product and RPI owes Schering cross royalties
pursuant to Section 9.6, then RPI at its sole expense, shall have the
right, but not the obligation, to initiate and conduct legal proceedings
to enforce against any infringement or defend any declaratory judgment
action involving a patent within the Developed Technology or RPI Base
Technology covering such Ribozyme Product or Non-Ribozyme Product.
(b) Division of Recoveries.
(i) Any recovery received in connection with a
suit brought by RPI pursuant to this Section 13.6 shall be
used first to reimburse the Party conducting such suit for
expenses (including attorneys', professional and expert
fees) incurred in such suit, and any remainder treated as
set forth below:
(a) The remainder of the recovery shall
be divided with Schering receiving [ ] and RPI
receiving [.]
(c) No Settlement without Consent. RPI shall not enter into
any settlement of any claim, suit or proceeding under Section
13.6 which admits or concedes that any aspect of the Developed
Technology, licensed to Schering is invalid or unenforceable
without the prior written consent of Schering.
(d) Cooperation. RPI shall keep Schering reasonably informed
of the progress of any claim, suit or proceeding subject to this
Section 13.6.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 44
13.7 Infringement Claims by Third Parties.
(a) Schering Control. If the manufacture, sale or use of any
Ribozyme Product or Non-Ribozyme Product results in any claim,
suit or proceeding alleging patent infringement against Schering,
its Affiliates or its Sublicensees, Schering shall promptly
notify RPI in writing setting forth the facts of such claim in
reasonable detail. Except for RPI Base Technology, Schering
shall have the exclusive right to defend and control the defense
of any such claim, suit or proceeding, at its own expense, using
counsel of its own choice; provided however, without the prior
written consent of RPI, Schering shall not enter into any
agreement or settlement which admits or concedes that any aspect
of the Developed Technology owned by RPI is invalid,
unenforceable or not infringed. Schering shall keep RPI
reasonably informed of all material developments in connection
with any such claim, suit or proceeding.
(b) Royalty Escrow. If the manufacture, sale or use of any
Ribozyme Product or Non-Ribozyme Product pursuant to this
Agreement results in any claim alleging patent infringement
against a Party paying a Royalty or royalty to the other Party
(or its Sublicensees) based specifically on the practice of the
RPI Base Technology or Developed Technology, during the pendency
of such claim, the Party paying the Royalty or royalty may place
fifty (50%) percent of the Royalties or royalties otherwise due
hereunder attributable to such an alleged infringement in escrow.
Such escrowed amounts including any interest earned thereon shall
be returned to the paying Party in the event a final judgment of
infringement is rendered against the paying Party on such a
claim; otherwise, such amounts shall be paid to RPI, within
thirty (30) days following the dismissal of such a claim.
XIV
CONFIDENTIALITY
14.1 Confidentiality.
(a) Term of Confidentiality. Information is provided by the
"Disclosing Party" and received by the "Recipient". The
Recipient will keep all Information provided by the Disclosing
Party confidential for the Term and seven (7) years thereafter.
Without the prior written consent of the Disclosing Party, not to
be unreasonably withheld, the Recipient will not disclose any
Information to any Third Party, except to the officers,
employees, agents, or representatives of the Recipient or the
Recipient's Affiliates (collectively "Representatives"), who, in
each case, need to know any such Information for purposes of the
implementation and performance by the Recipient of this
Agreement, and will use the Information provided by the
Disclosing Party only for such limited purposes.
(b) Warranty of Obligation. Each Party warrants that each of
its Representatives to whom any Information provided by the
Disclosing Party is
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 45
revealed shall previously have been informed of the confidential
nature of the Information and shall have agreed to be bound by
the terms and conditions of this Agreement applicable to the
Recipient. The Recipient shall ensure that the Information
provided by the Disclosing Party is not used or disclosed by such
Representatives except as permitted by this Agreement and shall
be responsible for any breach of this Agreement.
(c) Ownership of Information. All Information shall remain
the property of the Disclosing Party. Upon the written request
of the Disclosing Party (i) all tangible Information provided by
the Disclosing Party (including all copies thereof and all unused
samples) except for Information consisting of analysis, studies
and other documents prepared by or for the benefit of the
Recipient, shall be promptly returned to the Disclosing Party,
and (ii) all portions of such analysis, studies and other
documents prepared by or for the benefit of the Recipient
(including all copies thereof) which are within the definition of
Information shall be destroyed, with such destruction certified
in writing to the Disclosing Party by the Recipient; provided
however, a Party may retain Information of the other Party that
is necessary or useful for the making, using or selling of
Ribozyme Products or Non-Ribozyme Products.
(d) Obligation of Confidentiality. The obligations of
confidentiality and non-use set forth in this Agreement shall not
apply to any portion of the Information which:
(i) is or becomes public or available to
the general public otherwise than through the act or
default of the Recipient or its Representatives; or
(ii) is obtained by the Recipient from a
Third Party who is lawfully in possession of such
Information and Is not subject to an obligation of
confidentiality or non-use owed to the Disclosing
Party or others; or
(iii) is previously known to the Recipient
prior to disclosure to the Recipient by the
Disclosing Party under this Agreement, as shown by
written evidence, and is not obtained or derived
directly or indirectly from the Disclosing Party; or
(iv) is disclosed by the Recipient
pursuant to the requirement of law, provided that
the Recipient has complied with the provisions set
forth In this Section XIV; or
(v) is independently developed by
Recipient without the use of or reliance on any
Information provided by the Disclosing Party
hereunder, as shown by contemporaneous written
evidence.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 46
(e) Legal Disclosure or Disclosure to Investment Bankers. If
the Recipient becomes legally required to disclose any
Information provided by the Disclosing Party, or if Recipient
wishes to disclose Information to investment bankers the
Recipient will give the Disclosing Party prompt notice of such
fact so that the Disclosing Party may (i) obtain a protective
order or other appropriate remedy concerning any such disclosure
and/or waive compliance with the non-disclosure provision of this
Agreement or (ii) discuss such proposed disclosure with
Recipient. Recipient will reasonably cooperate with the
Disclosing Party in connection with the Disclosing Party's
request for changes to the proposed disclosure. If any such
order or other remedy does not fully preclude disclosure or the
Disclosing Party waives such compliance, Recipient will make such
disclosure only to the extent that such disclosure is legally
required and will use its reasonable efforts to have confidential
treatment according to the disclosed Information or with respect
to disclosure to investment bankers ensure that such investment
bankers enter into confidentiality agreements with the Disclosing
Party prior to the Recipient making such disclosure.
(f) No Warranty As To Reliability. Each of the Parties
acknowledges that neither Party makes any representation or
warranty as to the reliability, accuracy or completeness of any
of the Information, except for any specific representation or
warranty made in other sections of this Agreement. Recipient
agrees that neither the Disclosing Party nor any of the
Disclosing Party's Representatives shall have any liability to
Recipient arising from the Information provided by the Disclosing
Party except as otherwise provided herein.
(g) No Implied License. Except as otherwise set forth in this
Agreement, nothing herein shall be construed as giving Recipient
any right, title, interest in or ownership of the Information
provided by the Disclosing Party, and with respect to any portion
thereof which is or becomes public information and is now or
hereafter becomes covered by any patent, Recipient's rights with
respect thereto shall be subject to all rights of the patent
owner and/or licenses.
(h) Public Domain. For the purpose of this Agreement,
specific Information disclosed as part of Information shall not
be deemed to be in the public domain or in the prior possession
of Recipient merely because it is embraced by more general
information in the public domain or by more general information
in the prior possession of Recipient.
14.2 Publications. The Research Committee will discuss and review proposed
publications describing the scientific results of the Research Plan.
Either Party may, in its sole discretion, decide not to permit
publication by the other Party of any scientific results related to the
Developed Technology. Such permission shall not be unreasonable
withheld. Authorship of publications shall be determined by custom and
practice in the scientific community.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 47
XV
REPRESENTATIONS AND WARRANTIES OF RPI
15.1 RPI represents and warrants to Schering as follows:
(a) Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
(b) Authority. It has full corporate power and authority to
execute and deliver this Agreement and the other agreements and
Instruments to be executed and delivered by RPI pursuant hereto
and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be
taken to authorize such execution, delivery, and consummation
have been duly and properly taken and obtained.
(c) Enforceability. This Agreement has been duly executed and
delivered by RPI and constitutes, and such other agreements and
instruments contemplated hereby or in connection herewith when
duly executed and delivered by RPI will constitute, legal, valid,
and binding obligations of RPI enforceable against RPI in
accordance with their respective terms.
(d) Approvals, Consents, Etc. No approval, authorization,
consent, order, action, or filing with any court, administrative
agency or other governmental authority is required for the
execution and delivery by RPI of this Agreement and the execution
and delivery by RPI of such other agreements and instruments or
the consummation.
(e) No Conflicts. None of the execution, delivery, or
performance of this Agreement or the other agreements and
instruments to be executed and delivered by RPI (i) conflicts
with or results in a breach under the charter documents or any
material contractual undertaking of RPI or its Affiliates, (ii)
conflicts with or results in a violation of any of the laws of
the jurisdiction of incorporation of RPI, or conflicts with any
agreements among the following parties: University Patents, Inc.,
University of Colorado Foundation, Inc., United States
Biochemical Corporation, University Research Corporation,
University Technology Corporation, National Institutes of Health,
Howard Hughes Medical Institute, University of Colorado, CTI and
Chiron Corporation. RPI will not knowingly enter into any
written or oral agreement after the Effective Date that would be
inconsistent with its obligations under this Agreement or deprive
Schering of the benefits of this Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 48
(f) Title. As of the Effective Date, it has good title to or
valid leases or licenses for all its properties, rights, and
assets necessary for the fulfillment of its obligations and
responsibilities under this Agreement.
(g) Patent Infringement. To the best of RPI's knowledge, as
of the Effective Date, and except as disclosed to Schering as of
the Effective Date it is not aware of any patent or other
intellectual property right of any other person that would be
infringed by the research contemplated under the Research Plan.
(h) Sufficient Rights. Except as stated in Exhibit 15.1(h)
listing licenses and excluded sequences, pathways, physically
contiguous sequences and currently active RPI internal programs
as of the Effective Date, it owns or possesses adequate licenses
or other rights to use all patents, patent rights, inventions,
and know-how including an exclusive license to the Cech Patents
and Ribozyme Technology to conduct research, to grant rights and
licenses granted herein to Schering, and to fulfill its other
duties and obligations pursuant to this Agreement. To the
knowledge of RPI, as of the Effective Date the rights and
licenses granted to Schering hereunder do not violate the RPI
licenses to the Cech Patents and Ribozyme Technology or the
rights of any Third Party to which RPI has granted a license.
RPI has not, to the best of its knowledge as of the Effective
Date, entered into any contract, agreement, or other arrangement
with a Third Party inconsistent with this Agreement.
i) Licenses to the Cech Patents and Ribozyme Technology. It
has fully complied, and will use its best efforts to remain in
material compliance with, and is not in breach of, and this
Agreement will not materially breach, any terms, conditions or
obligations of all the RPI licenses to the Cech Patents and
Ribozyme Technology.
(j) No Prior Grant or Patents. As of the Effective Date, and
except as listed in Exhibit 15.1(j) RPI has not (i) knowingly
granted any licenses to Third Parties, or (ii) filed any patent
application inconsistent with the licenses granted to Schering
pursuant to Section VI or (iii) granted any licenses to Third
Parties inconsistent to Section 6.8(b).
(k) No Sublicense Royalties Under RPI Base Technology. As of
the Effective Date, and except as provided in Exhibit 15.1(k)
there are no licenses in the RPI Base Technology that would
require Schering to pay a royalty to make, have made, use, sell,
offer to sell and import Ribozyme Products and Non-Ribozyme
Products between RPI and Third Parties.
(l) Hypothecation Of Cech Patents. As of the Effective Date,
the Cech Patents are not available for hypothecation to Schering.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 49
(m) Broad Pathway Licenses. Other than as listed in Exhibit
15.1(m) there are no Third Parties other than Chiron Corporation
to whom RPI granted broad pathway or physically contiguous
licenses that could claim rights to a Designated Schering
Sequence or Ribozyme Product. Furthermore, RPI represents it
will use its best efforts to renegotiate such broad pathway
license with Chiron.
(n) Purchase Agreement. The representations and warranties
made in Article IV of the Purchase Agreement are true and correct
and are incorporated herein by reference.
XVI
REPRESENTATIONS AND WARRANTIES OF SCHERING
16.1 Schering represents and warrants to RPI as follows:
(a) Organization. It is a corporation duly organized and
validly existing under the laws of Germany.
(b) Authority. It has full corporate power and authority to
execute and deliver this Agreement and the other agreements and
instruments to be executed and delivered by Schering pursuant
hereto and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be
taken to authorize such execution, delivery, and consummation
have been duly and properly taken and obtained.
(c) Enforceability. This Agreement has been duly executed and
delivered by Schering and constitutes, and such other agreements
and instruments when duly executed and delivered by Schering will
constitute, legal, valid, and binding obligations of Schering
enforceable against Schering in accordance with their respective
terms.
(d) Approvals, Consents, Etc. No approval, authorization,
consent, or other order or action of or filing with any court,
administrative agency or other governmental authority is required
for the execution and delivery by Schering of this Agreement and
the execution and delivery by Schering of such other agreements
and instruments or the consummation by Schering of the
transactions contemplated hereby or thereby.
(e) No Conflicts. None of the execution, delivery, or
performance of this Agreement or the other agreements and
instruments to be executed and delivered by Schering, (i)
conflict with (or will conflict with) or result in a breach under
(or will result in a breach under) the charter documents or any
material contractual undertaking of Schering or (ii) conflict
with (or will conflict with) or result in a
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 50
violation of (or will result in a violation of) any of the laws
of the jurisdiction of incorporation of Schering.
(f) Title. As of the Effective Date, it has good title to or
valid leases or licenses for all its properties, rights, and
assets necessary for the fulfillment of its obligations and
responsibilities under this Agreement.
16.2 Disclaimer. Schering and RPI specifically disclaim any guarantee that
the research will be successful, in whole or in part. The failure of
the Parties to successfully research and develop Ribozyme Products or
Non-Ribozyme Products will not constitute a breach of any representation
or warranty or other obligation under this Agreement. Neither Schering
nor RPI makes any representation or warranty or guarantee that the
Research Plan will be sufficient for the successful completion of the
research. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
RPI AND SCHERING MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR
CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE
DEVELOPED TECHNOLOGY, RIBOZYME PRODUCTS AND NON-RIBOZYME PRODUCTS
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, VALIDITY OF RPI BASE OR SCHERING BASE
TECHNOLOGY, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
XVII
SURVIVAL AND INDEMNIFICATION
17.1 Survival of Representations, Warranties, Covenants, and Agreements. The
representations, warranties, covenants, and agreements contained in this
Agreement, and in other agreements and instruments to be executed and
delivered by the Parties pursuant to this Agreement, shall survive the
Term and the completion of the other actions set forth herein and shall
remain in full force and effect. Except as expressly provided herein,
the representations, warranties, covenants, and agreements contained
herein, and in the other agreements and instruments to be executed and
delivered by the Parties hereto confirm that they have not relied upon
any other representations, warranties, covenants, and agreements as an
inducement to enter into this Agreement or the other agreements and
instruments to be executed and delivered by the Parties pursuant to this
Agreement.
17.2 Indemnification By RPI. RPI hereby agrees to indemnify and hold
Schering, its Affiliates and their respective officers, directors,
stockholders, employees, agents, and representatives (collectively, the
"Schering Indemnities") harmless on an after-tax basis from and against
any and all claims, liabilities, losses, damages, costs and expenses in
respect of claims against the Schering Indemnities by parties other than
the Schering Indemnities, including fees and disbursements of counsel
and expenses of reasonable investigation (collectively, "Schering
Losses"), arising out of, based upon or caused by: (i) the inaccuracy of
any representation or the breach of any warranty, covenant or agreement
of RPI contained in
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 51
this Agreement or in any other agreement or instrument delivered by RPI
pursuant to this Agreement; (ii) any negligence or intentional
wrongdoing in the research conducted by RPI, its Affiliates or
designees; or (iii) any act, method, or other technology employed by RPI
in producing, using, or researching that violates any Third Party or any
licenses to the Cech Patents and Ribozyme Technology entered by RPI
prior to the Effective Date or during the Term, (iv) the manufacture of
Exogenous Ribozyme Products, or (v) the development, pre-clinical
testing, and clinical testing, manufacture, sale and/or use (including,
but not limited to product liability claims) of any Ribozyme Product or
Non-Ribozyme Products made, used or distributed by RPI or its licensees
in the event RPI proceeds with the development and marketing of any
Ribozyme or Non-Ribozyme Product pursuant to Section 6.7 (except in each
case to the extent that any Schering Loss is due to the negligence or
willful misconduct of Schering Indemnities).
17.3 Indemnification By Schering. Schering hereby agrees to indemnify and
hold RPI, its Affiliates, subcontractors and their respective officers,
directors, stockholders, employees, agents, and representatives
(collectively, the RPI Indemnities") harmless on an after-tax basis from
and against any and all claims, liabilities, losses, damages, costs and
expenses in respect of claims against the RPI Indemnities by parties
other than the RPI Indemnities, including fees and disbursements of
counsel and expenses of reasonable investigation (collectively, "RPI
Losses"), arising out of, based upon or caused by: (i) the inaccuracy of
any representation or the breach of any warranty, covenant or agreement
of Schering contained in this Agreement or in any other agreement or
instrument delivered by Schering pursuant to this Agreement; (ii) any
negligence or intentional wrongdoing in the research conducted by
Schering, its Affiliates or designees; or (iii) the development, pre-
clinical and clinical testing, manufacture, (except for Exogenous
Ribozymes manufactured by RPI and its contractors, distribution,) sale
and/or use (including but not limited to product liability claims) of
any Ribozyme Product or Non-Ribozyme Product made, used or distributed
by Schering or its licensees (except in each case to the extent that any
RPI Loss is due to the negligence or willful misconduct of RPI
Indemnities).
17.4 Notices, Etc. Each indemnified party agrees to give the indemnifying
party prompt written notice of any action, claim, demand, discovery of
fact, proceeding or suit (collectively, "Claims") for which such
indemnified party intends to assert a right to indemnification under
this Agreement; provided however, that failure to give such notification
shall not affect the indemnified party's entitlement to indemnification
hereunder except to the extent that the indemnifying party shall have
been prejudiced as a result of such failure. The indemnifying party
shall have the initial right (but not the obligation) to defend, settle
or otherwise dispose of any Claim for which the indemnified party
intends to assert a right to indemnification under this Agreement as
contemplated in the preceding sentence if and so long as the
indemnifying party has recognized in a written notice to the indemnified
party provided within thirty (30) days of such written notice its
obligation to indemnify the indemnified party for any RPI Losses or
Schering Losses (as the case may be) relating to such Claim, provided
however, that the indemnifying party shall obtain the written consent
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 52
of the indemnified party prior to ceasing to defend, settling or
otherwise disposing of any Claim. If the indemnifying party fails to
state in a written notice during such thirty (30) day period its
willingness to assure the defense of such a Claim, the RPI or Schering
Indemnity, as the case may be, shall have the right to defend, settle or
otherwise dispose of such claim, subject to the applicable provisions of
17.2 and 17.3 above.
17.5 Environmental Indemnification; Permits. Notwithstanding any other
indemnification obligation in this Agreement, and in addition to any
rights the Parties may have under relevant federal, state, or local
statutory and common laws, RPI shall indemnify and hold harmless
Schering and its Affiliates from and against any and all claims, acts,
investigation costs, response costs, losses, damages, and any other
costs and expenses (including attorney and consulting fees)
(collectively "Environmental Costs") incurred solely as a result of
Environmental Matters; provided however, this indemnification does not
apply to the extent such Environmental Costs are attributable to the
negligence or willful misconduct of Schering or its Affiliates or
Sublicensees.
17.6 "Environmental Matters" are:
(a) The operation by RPI or its Affiliates in the performance
of the Research Plan, or any entity which provides services
relating to the Research Plan under a subcontracting arrangement
with RPI or its Affiliates, in a manner that is not in material
compliance with and in violation of any applicable Environmental
Law as defined herein.
(b) Any action by RPI in violation of applicable Environmental
Laws where (i) there has been a release of Hazardous Materials
into the environment; or (ii) Hazardous Materials have been
Disposed of at a site in violation of applicable Environmental
Laws as the term "Disposed" is defined in applicable
Environmental Laws.
(c) Any failure by RPI during the Term of this Agreement to
obtain and/or maintain in full force and effect all permits
required under the applicable Environmental Laws, in the form
required by permitting authorities in light of this Agreement,
for any operation of any RPI facility or site.
(d) Any negligent or intentional failure by RPI to provide all
notices, required by Environmental Laws for the lawful operation
of any RPI facility or site.
(e) Any other actual or alleged negligent or intentional acts
or omissions by RPI relating to the improper handling or improper
disposal of Hazardous Materials at any RPI facility or site.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 53
XVIII
TERM, TERMINATION, AND EXPIRATION
18.1 Term. Unless earlier terminated the Term of this Agreement is five (5)
years from the Effective Date (the "Term"), renewable by mutual
agreement between the Parties. The licenses granted herein shall be
effective as of the Effective Date, and unless terminated earlier as
provided in this Section 18 shall continue in full force and effect on a
country-by-country basis and a product-by-product basis until Schering
or RPI has no remaining Royalty or royalty obligations in a country, at
which time this Agreement shall terminate in such country, and Schering
or RPI shall have fully paid up licenses.
18.2 Termination.
(a) Breach. If either Party breaches, or defaults in the
performance of, or fails to be in compliance with, any material
warranty, representation, agreement or covenant of this
Agreement, including any payment obligations, and such default or
noncompliance shall not have been substantially remedied, or
steps initiated to substantially remedy the same to the other
Party's reasonable satisfaction, within sixty (60) days after
receipt by the defaulting Party of a written notice thereof and
demand to cure such default from the other Party, then the Party
not in default may terminate this Agreement.
(b) Bankruptcy. Either Party may terminate this Agreement or
the licenses granted by such Party, if, at any time, the other
Party shall file in any court pursuant to any statute, a petition
in bankruptcy or insolvency or for reorganization in bankruptcy
or for an arrangement or for the appointment of a receiver or
trustee of such Party or of its assets, or if such Party proposes
a written agreement of composition or extension of its debts, or
if such Party shall be served with an involuntary petition
against it, filed in any insolvency proceeding, and such petition
shall not be dismissed within sixty (60) days after the filing
thereof, or if such Party shall propose or be a party to any
dissolution, or if such Party shall make an assignment for the
benefit of creditors.
(c) Unresolved Chairmen Dispute. In the event any dispute
submitted to the Chairman of Berlex and the Chairman of RPI
pursuant to Section 4.5 cannot be resolved, either Party may
terminate this Agreement on ninety (90) days written notice to
the other Party.
(d) Change in Control. Schering may terminate this Agreement
in the event there is a Change in Control during the Term.
(e) Rights in Law or Equity. Except as otherwise expressly
provided herein, termination by either Party pursuant to this
Section 18 shall not prejudice any other remedy that a Party
might have in law or equity, except that neither Party may claim
compensation for lost opportunity or like consequential damages
arising out of the fact of such termination.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 54
(f) Schering Unilateral Right to Terminate. At any time after
one (1) year from the Effective Date Schering may terminate this
Agreement for any reason or no reason.
18.3 Effect of Breach or Termination.
(a) Accrued Obligations. Termination of this Agreement for any
reason shall not release any Party hereto from any liability which, at
the time of such termination, has already accrued to the other Party or
which is attributable to a period prior to such termination nor preclude
either Party from pursuing all rights and remedies it may have hereunder
or at law or in equity with respect to any breach of this Agreement.
(b) Return of Materials. Upon any termination of this Agreement,
Schering and RPI shall promptly return to the other Party all
Information received from the other Party (except for one copy which may
be retained for archival purposes).
(c) Licenses.
(i) Termination by RPI.
(a) Termination Pursuant to Sections
18.2(a). In the event of termination by RPI under
Section 18.2(a) following a determination pursuant
to Section 18.2(a) of a material breach of this
Agreement by Schering, except for Section 6.6 the
licenses granted by Schering to RPI shall remain in
effect. The licenses granted hereunder to Schering
shall remain in effect, subject to the terms and
conditions of this Agreement until a full and final
judgment concerning such breach by a court of
competent jurisdiction; provided that if in such
judgment Schering is found to have been in material
breach, the licenses granted to Schering with
respect to such material breach shall terminate.
(b) Termination Pursuant to Section
18.2(b). In the event of termination by RPI
pursuant to Section 18.2(b) above, any licenses
granted by RPI to Schering and its Sublicensees
shall terminate concurrently, and any licenses
granted by Schering hereunder shall remain in
effect, subject to the terms and conditions of this
Agreement.
(c) Termination Pursuant to Section
18.2(c). In the event of termination by RPI
pursuant to Section 18.2(c) above, any licenses
granted by RPI to Schering and its Sublicensees and
by Schering to RPI and its Sublicensees shall
terminate concurrently.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 55
(ii) Termination by Schering.
(a) Termination Pursuant to Section
18.2(a) or (b). In the event of any termination by
Schering pursuant to Section 18.2(a) or (b) above,
the licenses granted by RPI shall remain in effect.
Any licenses granted by Schering hereunder shall
terminate concurrently, and any licenses granted by
RPI shall remain in effect, subject to the terms
and conditions of this Agreement;
(b) Termination Pursuant to Section
18.2(d). In the event of any termination by
Schering pursuant to Section 18.2(d) above, any
licenses granted by Schering to RPI shall terminate
and any licenses granted by RPI to Schering shall
remain in effect, subject to the terms and
conditions of this Agreement;
(c) Termination Pursuant to Section
18.2(f). In the event of a termination by Schering
pursuant to Section 18.2(f), except for any
Ribozyme Products or Non-Ribozyme Products already
being sold commercially by Schering, all licenses
granted by RPI to Schering pursuant to this
Agreement shall terminate. Furthermore, RPI shall
have no further obligation to conduct research
pursuant to this Agreement, and, provided that RPI
has provided Schering with a final written report
concerning the research done pursuant to the
Research Plan, within ninety (90) days of the
written notice sent by Schering pursuant to Section
18.2(f) Schering shall pay RPI a winddown payment
of Two Million Dollars (US$2,000,000.00).
(d) Termination Pursuant to Section
18.2(c). In the event of termination by Schering
pursuant to Section 18.2(c) above, any licenses
granted by RPI to Schering and its Sublicensees and
by Schering to RPI and its Sublicensees shall
terminate concurrently.
ARTICLE XIX
MISCELLANEOUS
19.1 Assignment. (a) Either Party may assign any of its rights or
obligations under this Agreement in any country to any Affiliates and
may delegate its obligations under this Agreement in any country to any
of its Affiliates; provided however, that such assignment or delegation
shall not relieve the assigning Party of its responsibilities for
performance of its obligations under this Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 56
(b) Neither Party may assign its rights or obligations under
this Agreement to a non-Affiliate without the prior written
consent of the other Party, except in connection with a merger or
similar reorganization or the sale of all or substantially all of
its assets. Except as provided in Section 18.2(d), this
Agreement shall survive any such merger or reorganization of
either Party with or into, or such sale of assets to, another
party and no consent for such merger, reorganization or sale
shall be needed, and no intellectual property rights of the
acquiring corporation shall be included in the technology
licensed hereunder; provided, that in the event of such merger,
reorganization or sale, no intellectual property rights of the
acquiring corporation shall be included in the technology
licensed hereunder.
(c) This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties.
Any assignment not in accordance with this Agreement shall be
void.
19.2 Retained Rights. Nothing in this Agreement shall limit in any respect
the right of either Party to conduct research and development and to
market products using such Party's technology other than as herein
expressly provided.
19.3 Consents Not Unreasonably Withheld or Delayed. Whenever provision is
made in this Agreement for either Party to secure the consent or
approval of the other, that consent or approval shall not unreasonably
be withheld or delayed, even when not so expressly stated, and whenever
in this Agreement provision is made for one Party to object to or
disapprove a matter, such objection or disapproval shall not
unreasonably be exercised, even when not so expressly stated.
19.4 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by
government action, war, fire, explosion, flood, strike, lockout,
embargo, act of God, or any other cause beyond the control of the
defaulting Party, provided that the Party claiming force majeure has
extended all reasonable efforts to avoid or remedy such force majeure
and has given the other Party prompt notice describing such event, the
effect thereof and the actions being taken to avoid or remedy such force
majeure; provided however, that in no event shall a Party be required to
settle any labor dispute or disturbance.
19.5 Further Actions. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent
of this Agreement.
19.6 No Trademark Rights. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the
name "Ribozyme Pharmaceuticals, Inc.," "RPI," "Schering," or any other
trade name or trademark of the other Party or its Affiliates in
connection with the performance of the Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 57
19.7 Notices. All notices hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return
receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for
a Party as shall be specified by like notice; provided that notices of a
change of address shall be effective only upon receipt thereof).
If to RPI: If to Schering AG:
Ribozyme Pharmaceuticals, Inc. Schering AG
2950 Wilderness Place Mullerstrasse, 170-178
Boulder, Colorado 80301 13353 Berlin, Germany
Attention: Larry Bullock Attention: Legal Department
Telecopy (303) 449-6995 Telecopy 49,30,4681-4086
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 58
With a copy to:
Berlex Biosciences
15049 San Pablo Ave.
Richmond, California 94804-0099
Attention: Legal Department
Telecopy: 510-262-7095
19.8 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a
continuing, waiver of same or any other of such Party's rights or
remedies provided in this Agreement.
19.9 Severability. If any term, covenant or condition of this Agreement or
the application thereof to any Party or circumstances shall, to any
extent or in any country or in the European Union, be held to be invalid
or unenforceable, then (i) the remainder of this Agreement, or the
application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of this Agreement shall be valid and be enforced to the
fullest extent permitted by law; and (ii) the Parties hereto covenant
and agree to re-negotiate any such term, covenant or application thereof
in good faith in order to provide a reasonably acceptable alternative to
the term, covenant or condition of this Agreement or the application
thereof that is invalid or unenforceable, it being the intent of the
Parties that the basic purposes of this Agreement are to be effectuated.
19.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed
to have authored the ambiguous provision.
19.11 Governing Law. This Agreement shall be governed by and interpreted
under the laws of New York.
19.12 Headings. The sections and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit
the contents of said sections or paragraphs.
19.13 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
19.14 Entire Agreement; Amendments. This Agreement, the Purchase Agreement
including, all Exhibits and Schedules attached hereto and thereto, and
all documents delivered con
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 59
currently herewith and therewith, set forth all the covenants, promises,
agreements, warranties, representations, conditions and understandings
between the Parties. There are no covenants, promises, agreements,
warranties, representations, conditions or understandings, either oral
or written, between the Parties other than as set forth herein and
therein. No subsequent alteration, amendment, change or addition to
this Agreement or the Purchase Agreement shall be binding upon the
Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.
19.15 Independent Contractors. The status of the Parties under this Agreement
shall be that of independent contractors. Neither Party shall have the
right to enter into any agreements on behalf of the other Party, nor
shall it represent to any person that it has any such right or
authority. Nothing in this Agreement shall be construed as establishing
a partnership or joint venture relationship between the Parties.
19.16 Negation of Agency. Nothing herein contained shall be deemed to create
an agency, joint venture, amalgamation, partnership, or similar
relationship between Schering and RPI. The relationship between the
Parties established by this Agreement is that of independent
contractors.
19.17 Publicity. No public announcement concerning the existence or the terms
of this Agreement shall be made, either directly or indirectly, by RPI
or Schering, except as may be legally required by applicable laws,
regulations, or judicial order, without first obtaining the approval of
the other Party and agreement upon the nature, text, and timing of such
announcement, which approval and agreement shall not be unreasonably
withheld. The Party desiring to make any such public announcement shall
provide the other Party with a written copy of the proposed announcement
in sufficient time prior to public release to allow such other Party to
comment upon such announcement, prior to public release. Neither Party
shall issue any press release or make any public announcement which
includes or otherwise uses the name of the other Party in any public
statement or document except with the prior written consent of such
Party.
19.18 Registration and Filing of the Agreement. To the extent, if any, that a
Party concludes in good faith that it is required to file or register
this Agreement or a notification thereof with any governmental
authority, including without limitation the U.S. Securities and
Exchange Commission and the Competition Directorate of the Commission of
the European Communities, in accordance with applicable laws and
regulations, such Party may do so, and the other Party shall cooperate
in such filing or notification and shall execute all documents
reasonably required in connection therewith at the expense of the
requesting party. The Parties shall promptly inform each other as to
the activities or inquiries of any such governmental authority relating
to this Agreement, and shall cooperate to respond to a request for
further information therefrom at the expense of the requesting party.
19.19 Beneficiaries. No person, other than Schering or RPI and their
permitted assignees hereunder, shall be deemed an intended beneficiary
hereunder or have any right to enforce any obligation of this Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 60
19.20 Affiliates of Parties. Each Party may perform its obligations hereunder
personally or through one or more Affiliates and shall be responsible
for the performance of such obligations, and any liabilities resulting
therefrom. Neither Party shall permit any of its Affiliates to commit
any act (including any act of omission) which such Party is prohibited
hereunder from committing directly.
19.21 Compliance with Laws. In exercising their rights under this Agreement,
the Parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body
having jurisdiction over the exercise of rights under this Agreement.
19.22 Patent Marking. Schering agrees to mark and have its Affiliates and
Sublicensees mark all Products and Other Products sold pursuant to this
Agreement in accordance with the applicable statute or regulations
relating to patent marking in the country or countries of manufacture
and sale thereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
duly authorized representatives as of the Effective Date.
SCHERING AKTIENGESELLSCHAFT RIBOZYME PHARMACEUTICALS
INCORPORATED
By: By:
--------------------------------- --------------------------------
Name: Name:
------------------------------- ------------------------------
Title: Title:
------------------------------ -----------------------------
Date: Date:
------------------------------- ------------------------------
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Date:
-------------------------------
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 61
EXHIBIT A
THIS CONVERTIBLE LOAN NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED (OTHER THAN PURSUANT
TO RULE 144 OR ANY SIMILAR OR ANALOGOUS RULE OR RULES) EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, QUALIFIES AS AN EXEMPT
TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
FORM OF CONVERTIBLE LOAN NOTE
[ ] New York, New York
April 9, 1997
FOR VALUE RECEIVED, the undersigned, RIBOZYME PHARMACEUTICALS, INC., a
Delaware corporation (the "Company"), hereby promises to pay to SCHERING
AKTIENGESELLSCHAFT, a German corporation (the "Note Purchaser"), or its
registered assigns, on the Maturity Date (as defined in the Purchase Agreement
dated as of April 9, 1997 among the Company, Schering Berlin Venture
Corporation and the Note Purchaser, as the same may be amended, modified,
extended or restated from time to time, the "Purchase Agreement"), the lesser
of the principal sum of [ ]and the aggregate unpaid principal amount of all
Loans made by the Note Purchaser to the Company pursuant to the Purchase
Agreement, in lawful money of the United Sates of America in same day funds,
and to pay interest from the date hereof on such principal amount from time to
time outstanding, in like funds, at a rate of [ ]per annum (computed on the
basis of a 360-day year of twelve 30-day months) payable on the Maturity Date.
All capitalized terms used herein and not otherwise defined shall have the
meaning assigned to such terms in the Purchase Agreement.
The Company promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at a rate of per annum.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 62
All Loans evidenced by this Convertible Loan Note and all payments and
prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that any failure of the holder hereof
to make such a notation or any error in such notation shall not in any manner
affect the obligation of the Company to make payments of principal and interest
in accordance with the terms of this Convertible Loan Note and the Purchase
Agreement.
This Convertible Loan Note is the Convertible Loan Note referred to in
the Purchase Agreement which, among other things, contains provisions for the
acceleration of the maturity hereof upon the happening of certain events, for
the offset at the discretion of the Note Purchaser of certain Milestone
Payments due and payable to the Company from the Note Purchaser pursuant to
Article VIII of the Research Agreement against amounts owed hereunder, and for
the amendment or waiver of certain provisions of the Purchase Agreement, all
upon the terms and conditions therein specified.
The Note Purchaser may, at its option, convert all or part of the unpaid
principal amount hereunder and accrued interest thereon into Common Stock in
accordance with the terms of the Purchase Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 63
THIS CONVERTIBLE LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
RIBOZYME PHARMACEUTICALS, INC.,
by:
--------------------------------
Name:
Title:
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 64
Loans and Payments
<TABLE>
<CAPTION>
Unpaid
Principal
Payments of Balance Name of Person
Date Amount of Loan Principal/Interest of Note Making Notation
---- -------------- ------------------ ------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 65
Exhibit 1
Purchase Agreement
April 9, 1997
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 66
Exhibit 2
Expenses for COGS
Expenses included in, but not limited to, the Party's manufacturing cost:
1. Direct materials
2. Salaries, wages and benefits of personnel directly engaged in
manufacturing the product.
3. Overhead associated with direct production, including, but not limited
to:
a. Depreciation, leasehold improvements and equipment leases
b. Repair and maintenance
c. Manufacturing supplies
4. Reasonable allocable general manufacturing overhead,
a. Manufacturing Administration
b. Materials Management
c. Validation and Calibration
d. Documentation and Compliance
e. Quality Assurance/Quality Control
f. Technical Services
g. Regulatory Compliance
5. Reasonable allocable General facilities overhead, including, but not
limited to:
a. Rent, utilities, property tax, insurance and other assigned
general facilities' costs
b. Purchasing
c. Environmental Health and Safety
d. Management Information Systems
e. Engineering
f. Accounting
g. Human Resources
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 67
Exhibit 4.1
Schering/Ribozyme Pharmaceuticals Inc. Research Plan
Schering through its Affiliate Berlex Biosciences plans to use Ribozymes
generally and specifically in high throughput target validation. There are two
principal objectives in this Research Plan:
1. HIGH THROUGHPUT TARGET VALIDATION USING RIBOZYMES
The Parties we envisage proceeding with this in two phases:
Phase 1 - It is anticipated that Phase 1 will take approximately [ ] to
complete and will have two objectives:
(a) Validation of the Use of Ribozymes for target evaluation when only
partial sequence information is available for a target mRNA. This will
be examined using synthetic Ribozymes administered to cells with lipid
based delivery vehicles. This work will be performed at RPI. Ribozymes
with demonstrated catalytic activity will be sent to Schering and their
effects evaluated in cell based functional assays.
(b) Validation of the use of retroviral vectors for high throughput
endogenous delivery of Ribozymes to cells and target evaluation using
cell based functional assays. This work will be performed initially at
Schering [ ].
Phase 2 will proceed with the use of retroviral vector delivery (Option 1) in a
high throughput manner for gene function analysis using target sequences
identified from existing data bases, by differential subtraction, or by
expression profiling. Alternatively, Option 2 will be pursued using exogenous
delivery of synthetic Ribozymes in a high throughput manner. [ ].
2. CONTRACT SYNTHESIS OF RIBOZYMES SELECTED BY SCHERING
RPI will design and synthesize plasmid or synthetic based Ribozymes for targets
selected by Schering. Target sequences identified from full length sequence
data will be chosen by Schering. RPI will allocate to this project for the
duration of the contract.
<TABLE>
<<C> <C> <C>
Basic Plan
[ ]
/--------------------------/-----------------------------/-------.............>
Phase 1a [ ] /--------------------------/ Assessment of use of synthetic
Ribozymes for target evaluation using
only partial sequence information
Phase 1b Schering /--------------------------/ Validation of use of retroviral
vectors in high throughput delivery
of ribozymes
-------------------------------------.............>
Phase 2 [ ] Target validation for newly
discovered target sequences
using retroviral based
delivery of ribozymes
[ ]
Contract ribozyme synthesis for Schering
</TABLE>
Detailed Plan:
Objective 1: High Throughput Target Validation Using Ribozymes
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 68
At Schering's request, RPI will design Ribozymes.
Phase 1: (a) Use of synthetic Ribozymes for target validation using partial
target sequence information.
o [ ]
o [ ]
o [ ]
SCHERING Provides:
o A list of partial sequences of selected by searching existing
data bases or other sources.
o [ ]
RPI Provides:
o [ ]
o [ ]
o [ ]
o [ ]
o [ ]
Phase 1: (b) Validation of the use of retroviral vectors for high throughput
delivery of Ribozymes for target evaluation using cell based functional based
assays.
Ribozymes will be designated based upon partial sequence information derived
from data base sequence information or from mRNA subtraction or profiling
technologies. The synthetic Ribozymes with suitable restriction sites will be
cloned into retroviral vectors and used to transfect target cells in a high
throughput cell based functional assay. The target gene sequences defined by
Ribozymes responding positively in the cell based functional assays will be
pursued in secondary confirmatory assays. Schering will then decide whether to
implement this technology. [ ]
SCHERING Provides:
o Sequence information on Ribozymes that reduce the expression of
known target sequence genes (control target genes).
o High throughout cell based functional assays.
o A transient retroviral expression system.
o Controls to ensure that the targeted RNA is specifically cleaved.
RPI Provides:
Following the technology development at SCHERING the technology may be
transferred to RPI. In that event, RPI will provide the following:
o [ ]
o [ ]
o [ ]
o [ ]
Phase 2: High throughput assay for functional analysis of novel genes based on
partial or full length sequence information. [ ].
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 69
Option 1. Retroviral delivery of Ribozymes for high throughput functional
analyses of target genes. Contingent upon successful technology development
described in phase 1b of the research collaboration, and Schering's election to
pursue this approach with RPI the following will be provided:
SCHERING Provides:
o [ ]
RPI Provides:
o [ ]
o [ ]
o High throughput cell based functional assays.
The calculations of [ ] are based on the following:
1. [ ]
2. [ ]
3. [ ]
Option 2. If Schering elects not to pursue the use of [ ] with RPI, the [ ].
SCHERING Provides:
o [ ].
RPI Provides:
o [ ].
o [ ].
Objective 2: Contract Synthesis of Ribozymes Selected by Schering
[ ]
SCHERING Provides:
o [ ]
RPI Provides:
o [ ].
o [ ].
[ ].
[ ].
[ ].
[ ].
3. QUARTERLY REPORTS
Quarterly meetings and reports will be one of the vehicles by which
Berlex Biosciences will monitor the RPI collaboration on behalf of
Schering. Quarterly Reports prepared by RPI will be submitted to Berlex
no less than five (5) working days before the quarterly meeting. The
Quarterly Reports will include a description of:
o Results for previous quarter.
o The collaboration's progress with respect to Research Plan
Milestones and goals.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 70
Name, percent of time allocated to the Research Plan and expertise
of RPI scientists involved in the program.
o Resource expenditures for immediate and next quarter.
The anticipated allocation of resources and names of RPI
scientists, when available, planned to be involved in the program.
4. COMMUNICATION
o Quarterly Reviews
The Research Committee will meet once a quarter to review the
research activities from the quarterly report prepared by RPI.
The quarterly review provides an opportunity to review the
progress of the collaboration. A written set of goals will be
approved by the Research Committee within 15 days following the
Quarterly Review for the next quarter. The quarterly reviews
shall be held in January, April, July, and October. The review
shall be held at alternating sites, the first quarterly review to
be held at Berlex during July 1997.
Members of the Research Committee:
Schering: [ ], or their representatives.
RPI: Members to be named at the first organizational meeting.
o Monthly Meetings
In order to facilitate communication and collaboration between
project team scientists at Berlex and RPI, formal monthly
meetings between key scientists will take place via face-to-face
meetings at alternate sites or via video or teleconference to
review the progress of the research.
o Informal Contacts
Schering may informally contact any RPI scientist charging time
to the Research Plan during normal business hours.
5. STAFFING
In order to foster communication and monitor good faith effort, RPI
shall identify all scientists who are spending at least 75% of their
time on the research collaboration. Berlex shall be informed within ten
(10) working days any time a scientist spending more than 75% of his
time is added to or removed from the collaboration and a copy of the
added scientist's CV sent. It is anticipated that all scientists shall
work full time on the collaboration, unless the Research Committee
approves otherwise. Time shall only be charged for conducting bench
research according to the Research Plan; time shall not be charged for
administrative or oversight functions.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 71
Exhibit 5.1
List of Designated Schering Sequences
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 72
Exhibit 15.1(h)
Excluded Sequences and Pathway
[ ][ ]
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 73
Exhibit 15.1(j)
Licenses Granted by RPI to Third Parties
1. Collaboration Research, Development and Commercialization Agreement
between RPI and Chiron Corporation dated July 15, 1995.
2. Research and Development Collaboration Agreement between RPI and the
Parke-Davis Division of Warner-Lambert Company dated as of April 19,
1993 as amended April 17, 1995 and February 8, 1996.
3. Agreement dated February 29, 1996 between RPI and Chiron Corporation.
4. Collaboration Agreement dated May 13, 1996 between RPI and Chiron
Corporation.
5. Memorandum of Understanding and Agreement dated March 1, 1996 between
RPI and DowElanco.
6. Letter Agreement dated May 22, 1996 between RPI and ALZA Corporation.
7. Research and Development Collaboration Agreement dated December 2, 1996
between RPI and Protogene Laboratories.
8. License Agreement dated February 14, 1997 between RPI and IntelliGene,
Ltd.
9. Research Collaboration and Licensing Agreement dated November 1, 1995
between RPI and Pharmacia Biotech, AB.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 74
Exhibit 15.1(k)
Third Party Sublicense Royalties
None - all sublicense royalties to Competitive Technologies, Inc. are payable
by RPI from the royalties it receives.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 75
Exhibit 15.1(m)
[ ]
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 1
EXHIBIT 1.2
THIS CONFIDENTIAL PORTION OF THIS CONTRACT HAS BEEN OMITTED PURSUANT TO
REGULATION 240.25B-2(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AND HAS BEEN
FILED SEPARATELY WITH THE COMMISSION.
================================================================================
PURCHASE AGREEMENT
dated as of
April 9, 1997
among
RIBOZYME PHARMACEUTICALS, INC.,
SCHERING BERLIN VENTURE CORPORATION
and
SCHERING AKTIENGESELLSCHAFT
---------------------------
================================================================================
<PAGE> 2
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.03. Accounting Terms; GAAP . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
Purchase and Sale of Common Stock
---------------------------------
SECTION 2.01. Purchase and Sale of Stock . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.02. The Initial Stock Closing and Additional Stock Closing . . . . . .
13
SECTION 2.03. Stock Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III
The Loans
---------
SECTION 3.01. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.02. Requests for Loans . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.03. Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.04. Termination of Commitments . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.05. Convertible Loan Note . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3.06. Payment of Principal; Prepayment of Loans . . . . . . . . . . . . .
15
SECTION 3.07. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.08. Conversion of the Convertible Loan
Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.09. Payments Generally . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
3
<TABLE>
<S> <C> <C>
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Organization; Good Standing . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.02. Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.03. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.04. Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.05. No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.06. Authorization To Do Business . . . . . . . . . . . . . . . . . . . 21
SECTION 4.07. Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.08. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4.09. Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.11. Regulatory; No Violation . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.12. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.13. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.14. No Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 4.15. No Registration Rights . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.16. Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.17. Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.18. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.19. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.20. Investment and Holding Company
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.21. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.22. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.23. Research Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V
Representations and Warranties of the Stock Purchaser and the Note Purchaser
----------------------------------------------------------------------------
SECTION 5.01. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.02. Investment for Own Account . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.03. Offering Exemption . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.04. Knowledge and Experience; Ability To
Bear Economic Risks . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.05. Disclosure of Information . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 4
4
<TABLE>
<S> <C> <C>
ARTICLE VI
Covenants of the Stock Purchaser
--------------------------------
and the Note Purchaser . . . . . . . . . . . . . . . . . 29
----------------------
ARTICLE VII
Conditions
----------
SECTION 7.01. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7.02. Initial Stock Closing and the Additional Stock Closing . . . . . .
31
SECTION 7.03. Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.04. Initial Stock Purchase Date . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VIII
Affirmative Covenants
---------------------
SECTION 8.01. Financial Statements and Other Information . . . . . . . . . . . .
36
SECTION 8.02. Notices of Material Events . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.03. Existence; Conduct of Business . . . . . . . . . . . . . . . . . . 38
SECTION 8.04. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.05. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.06. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.07. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.08. Books and Records; Inspection
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.09. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.11. Information Regarding Collateral . . . . . . . . . . . . . . . . . 40
SECTION 8.12. Maintenance of Common Stock . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.13. SEC Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.14. Equipment Purchases . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
<PAGE> 5
5
<TABLE>
<S> <C> <C>
ARTICLE IX
Negative Covenants
------------------
SECTION 9.01. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.02. Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.03. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.04. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 42
ARTICLE X
Events of Default . . . . . . . . . . . . . . . . . . 42
-----------------
ARTICLE XI
Registration Rights
-------------------
SECTION 11.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 11.02. Requested Registration . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 11.03. Company Registration . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 11.04. Expenses of Registration . . . . . . . . . . . . . . . . . . . . . 49
SECTION 11.05. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 11.06. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 11.07. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 11.08. Assignability of Registration Rights . . . . . . . . . . . . . . . 56
SECTION 11.09. "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . 56
SECTION 11.10. Termination of Rights . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE XII
Miscellaneous
-------------
SECTION 12.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.02. Waivers; Amendments . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 12.03. Expenses; Indemnity; Damage Waiver . . . . . . . . . . . . . . . . 58
SECTION 12.04. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 12.05. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 12.06. Counterparts; Integration; Effectiveness . . . . . . . . . . . . .
61
SECTION 12.07. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
<PAGE> 6
6
<TABLE>
<S> <C>
SECTION 12.08. Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 12.09. Confidentiality and Nondisclosure . . . . . . . . . . . . . . . . . 62
SECTION 12.10. Governing Law; Jurisdiction; Consent to Service of Process . . . .
63
SECTION 12.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 12.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 12.13. Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 12.14. Standstill Provisions . . . . . . . . . . . . . . . . . . . . . . . 64
SCHEDULES:
- ----------
Schedule 4.08 -- Liens
Schedule 4.12 -- Material Contracts
Schedule 4.15 -- Registration Rights
Schedule 9.01 -- Liens on Collateral
EXHIBITS:
- ---------
Exhibit A -- Form of Convertible Loan Note
Exhibit B -- Form of Research Agreement
Exhibit C -- Form of Security Agreement
Exhibit D -- Company's Certificate of Incorporation
Exhibit E -- Company's By-Laws
Exhibit F -- Form of Opinion of Company's Counsel
</TABLE>
<PAGE> 7
PURCHASE AGREEMENT dated as of April 9, 1997 among
RIBOZYME PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), SCHERING BERLIN VENTURE CORPORATION,
a Delaware corporation (the "Stock Purchaser"), and
SCHERING AKTIENGESELLSCHAFT, a German corporation (the
"Note Purchaser" or "Schering AG").
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"Act" has the meaning assigned to such term in Section 4.12.
"Additional Stock" has the meaning assigned to such term in
Section 2.01.
"Additional Stock Closing" has the meaning assigned to such
term in Section 2.02.
"Additional Stock Purchase Date" has the meaning assigned to
such term in Section 2.02.
"Aero-Tech Lease" has the meaning assigned to such term in
Section 7.02(d).
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Availability Period" means the period from and including the
Initial Stock Purchase Date and extending to but excluding the Commitment
Termination Date.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which banks in New York City are authorized or required by law to
remain closed.
"By-Laws" has the meaning assigned to such term in Section
4.01.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 8
2
Person under GAAP, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP.
"Certificate" has the meaning assigned to such term in Section
4.01.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
SEC thereunder as in effect on the date hereof), of shares representing more
than 40% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Company; (b) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Company by
Persons who were neither (i) nominated by the board of directors of the Company
nor (ii) appointed by directors so nominated; or (c) the acquisition of direct
or indirect Control of the Company by any Person or group.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means any and all "Collateral", as defined in the
applicable Security Document.
"Commitment Termination Date" means the earlier of December
31, 2001 or an Event of Default, upon such date the Yearly Commitment and the
Total Commitment shall be terminated.
"Commitments" means the Yearly Commitment and the Total
Commitment.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
"Company" means Ribozyme Pharmaceuticals, Inc., a Delaware
corporation.
"Contracts" has the meaning assigned to such term in Section
4.12.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 9
3
"Convertible Loan Note" means the promissory note of the
Company, substantially in the form of Exhibit A, evidencing the Loans, or any
note issued in full or partial replacement, or upon transfer of the Convertible
Loan Note.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless
cured or waived, become an Event of Default.
"dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 7.01 are satisfied (or waived in accordance with Section
12.02).
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials
into the environment or (e) any contract, agreement or other consensual
arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.
"Equipment" has the meaning assigned to such term in the
Security Agreement.
"Equipment Purchase Account" has the meaning assigned to such
term in the Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 10
4
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Company or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Company or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Company or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected to
be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to such term in
Article X.
"Exchange Act" has the meaning assigned to such term in
Section 4.12.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company.
"Financial Statements" has the meaning assigned to such term
in Section 4.13.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity, whether foreign or domestic,
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 11
5
"Holders" has the meaning assigned to such term in Section
11.01.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances.
The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to
the extent such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Party" has the meaning assigned to such term in
Section 11.06(c).
"Indemnifying Party" has the meaning assigned to such term in
Section 11.06(c).
"Indemnitee" has the meaning assigned to such term in Section
12.03.
"Initial Stock" has the meaning assigned to such term in
Section 2.01.
"Initial Stock Closing" has the meaning assigned to such term
in Section 2.02.
"Initial Stock Purchase Date" has the meaning assigned to such
term in Section 2.02.
"Initial Stock Purchase Price" has the meaning assigned to
such term in Section 2.01.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 12
6
"Inspector" has the meaning assigned to such term in Section
11.05(a)(v).
"Legal Requirements" has the meaning assigned to such term in
Section 4.11.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, and (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset.
"Loan Request" means a request by the Company for a Loan in
accordance with Section 3.03.
"Loans" means the loans made by the Note Purchaser to the
Company pursuant to this Agreement.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole, (b) the
ability of the Company to perform any of its obligations under this Agreement
and the other Transaction Documents or (c) the rights of or benefits available
to the Stock Purchaser or the Note Purchaser under this Agreement and the other
Transaction Documents.
"Maturity Date" means April 9, 2004; provided, that if the
Company shall have reached Phase II Clinical Trials for the first Ribozyme
Product (as such terms are defined in the Research Agreement) prior to April 9,
2004, the Maturity Date shall be extended an additional five years to April 9,
2009.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Nasdaq National Market" shall mean the Nasdaq National
Market, and if the Common Stock no longer trades on such stock market, "Nasdaq
National Market" shall refer to such other stock market upon which the
Company's Common Stock shall then trade.
"Note Purchaser" means Schering Aktiengesellschaft, a German
corporation, and its permitted successors and assigns.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 13
7
"Obligations" has the meaning assigned to such term in the
Security Agreement.
"Other Shareholder" has the meaning assigned to such term in
Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Permits" has the meaning assigned to such term in Section
4.11.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Company
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Proceeds" has the meaning assigned to such term in the
Security Agreement.
"Proprietary Rights" has the meaning assigned to such term in
Section 4.09.
"Records" has the meaning assigned to such term in Section
11.05(a)(v).
"Registrable Securities" has the meaning assigned to such term
in Section 11.01.
"Registration Expenses" has the meaning assigned to such term
in Section 11.01.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Research Agreement" means the Research, License Supply and
Royalty Agreement dated as of the date hereof between Schering AG and the
Company which
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 14
8
agreement shall be substantially in the form attached hereto as Exhibit B or in
such other form as the parties thereto may agree, as such agreement from time
to time may be amended, supplemented or otherwise modified in accordance with
its terms.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of the Company or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital stock of
the Company or any option, warrant or other right to acquire any such shares of
capital stock of the Company.
"SEC" has the meaning assigned to such term in Section 4.12.
"SEC Documents" has the meaning assigned to such term in
Section 4.18.
"Security" or "Securities" has the meaning set forth in
Section 2(1) of the Act.
"Security Agreement" means the Security Agreement between the
Company and the Note Purchaser, substantially in the form of Exhibit C.
"Security Documents" means the Security Agreement and each
other security agreement or other instrument or document executed and delivered
pursuant to Section 8.07 to secure the Obligations.
"Selling Expenses" has the meaning assigned to such term in
Section 11.01.
"Standstill Period" has the meaning assigned to such term in
Section 12.14.
"Stock Purchaser" means Schering Berlin Venture Corporation, a
Delaware corporation, and its permitted successors and assigns.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 15
9
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent.
"Subsidiary" means any subsidiary of the Company.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"Total Commitment" means, subject to the terms and conditions
herein, the commitment of the Note Purchaser to make Loans in the amount of up
to $10,000,000.
"Transaction Documents" means this Agreement, the Research
Agreement, the Convertible Loan Note and the Security Documents.
"Trigger Event" means the occurrence of either of the
following: (i) the closing price of the Common Stock as quoted on the Nasdaq
National Market is below the Trigger Price for three consecutive trading days
or (ii) the closing price of the Common Stock as quoted on the Nasdaq National
Market is below the Trigger Price on the next two succeeding trading days
following the issuance by the Company of a press release.
"Trigger Price" means the amount equal to 0.85 multiplied by
the Initial Stock Purchase Price; provided, that if outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Trigger
Price in effect upon the date such combination becomes effective shall be
proportionately increased to reflect such combination of shares of Common
Stock.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Yearly Commitment" means, subject to the terms and conditions
herein, the commitment of the Note Purchaser to make Loans in the amount of up
to $2,000,000 in each calendar year up to and including the year 2001;
provided, that if the Note Purchaser does not make Loans in the full amount of
the Yearly Commitment in any calendar year, the Yearly Commitment for the next
calendar year shall be increased by the difference between the aggregate
principal amount of Loans made in the prior calendar year and the Yearly
Commitment in such prior calendar year. The aggregate principal amount of
Loans made hereunder shall not exceed the Total Commitment.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 16
10
SECTION 1.02. Terms Generally. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding mascu-line, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person shall
be construed to include such Person's successors and assigns, (c) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.03. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Company notifies the Stock Purchaser and the Note Purchaser that
the Company requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Stock
Purchaser and the Note Purchaser notify the Company that such parties request
an amendment to any provision hereof for such purpose), regardless of whether
any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 17
11
ARTICLE II
Purchase and Sale of Common Stock
SECTION 2.01. Purchase and Sale of Stock. Subject to the
terms and conditions set forth in this Agreement and in reliance upon the
Company's and the Stock Purchaser's representations set forth herein, (i) on
the Initial Stock Purchase Date the Company shall sell to the Stock Purchaser,
and the Stock Purchaser shall purchase from the Company for an amount of
$2,500,000, the number of shares of Common Stock, rounded up to the next whole
number, obtained by dividing $2,500,000 by the closing price of the Common
Stock as quoted on the Nasdaq National Market on the trading day that is the
one-month anniversary of the Effective Date (as such term is defined in the
Research Agreement) of the Research Agreement (the "Initial Stock Purchase
Price", and the quantity of stock purchased pursuant to this item (i), the
"Initial Stock") and (ii) on the Additional Stock Purchase Date the Company
shall sell to the Stock Purchaser, and the Stock Purchaser shall purchase from
the Company for an amount of $2,500,000, the number of shares of Common Stock,
rounded up to the next whole number, obtained by dividing $2,500,000 by the
lower of (x) the Initial Stock Purchase Price and (y) the closing price of the
Common Stock as quoted on the Nasdaq National Market on the trading day that is
the one-year anniversary of the Effective Date (as such term is defined in the
Research Agreement) of the Research Agreement (the quantity of stock purchased
pursuant to this item (ii), the "Additional Stock"). Each sale and purchase
shall be effected on the Initial Stock Purchase Date or the Additional Stock
Purchase Date, as applicable, by the Company delivering to the Stock Purchaser
a duly executed stock certificate in the name of the Stock Purchaser evidencing
the shares of Common Stock to be purchased, against delivery by such Stock
Purchaser to the Company of cash by wire transfer of immediately available
funds to the following account (or to such other account as may be specified by
the Company at a later date):
Norwest Bank of Denver, [ ], For Further Credit of Norwest
Bank of Boulder, Account of Ribozyme Pharmaceuticals, Inc.,[ ].
The Stock Purchaser shall be obligated hereunder only with
respect to the number of shares for which it has subscribed (as set forth
above).
SECTION 2.02. The Initial Stock Closing and Additional Stock
Closing. (a) The closing of the sale and purchase of Initial Stock hereunder
(the "Initial Stock Closing") shall take place at the offices of the Company or
such other location as the Stock Purchaser and the Company shall agree, on the
immediately succeeding Business Day following the one-month anniversary of the
Effective Date (as such term is defined in the Research Agreement) of the
Research Agreement, or if the conditions set forth in Section 7.02 hereof have
not been satisfied or waived as of such date, as promptly as
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 18
12
practicable following the satisfaction or waiver of such conditions (the
"Initial Stock Purchase Date").
(b) The closing of the sale and purchase of the Additional
Stock hereunder (the "Additional Stock Closing") shall take place at the
offices of the Company or such other locations as the Stock Purchaser and the
Company shall agree on the immediately succeeding Business Day following the
one-year anniversary date of the Effective Date (as such term is defined in the
Research Agreement) of the Research Agreement, or if the conditions set forth
in Section 7.02 hereof have not been satisfied or waived as of such date, as
promptly as practicable following the satisfaction or waiver of such conditions
(the "Additional Stock Purchase Date").
SECTION 2.03. Stock Purchaser. The Stock Purchaser may, by
notice in writing to the Company, designate an Affiliate of the Stock Purchaser
to be the purchaser of the Initial Stock or the Additional Stock.
ARTICLE III
The Loans
SECTION 3.01. Commitments. Subject to the terms and
conditions set forth herein (including, without limitation, Section 7.03), the
Note Purchaser agrees to make Loans to the Company from time to time during the
Availability Period in an aggregate principal amount that will not result in
(a) the sum of the principal amount of outstanding Loans made in the current
calendar year exceeding the Yearly Commitment for such calendar year or (b) the
sum of the aggregate principal amount of outstanding Loans exceeding the Total
Commitment.
SECTION 3.02. Requests for Loans. To request a Loan, the
Company shall notify the Note Purchaser of such request by telephone not later
than 11:00 a.m., New York City time, ten Business Days before the date of the
proposed Loan. Each such telephonic Loan Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Note Purchaser of a
written Loan Request in a form approved by the Note Purchaser and signed by the
Company. Each such telephonic and written Loan Request shall specify the
following information in compliance with Section 3.02:
(i) the aggregate amount of the requested Loan (which amount shall be
at least[ ]);
(ii) the date of such Loan, which shall be a Business Day;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 19
13
(iii) a detailed list of the items of Equipment to be purchased with
such Loan and their approximate cost; and
(iv) the location and number of the Company's accounts to which funds
are to be disbursed; provided, that at least [ ]of the funds shall be
disbursed by the Note Purchaser to the Equipment Purchase Account.
SECTION 3.03. Funding of Loans. (a) The Note Purchaser
shall make each Loan to be made by it hereunder on the proposed date thereof by
wire transfer of immediately available funds by 3:00 p.m., New York City time,
to the accounts of the Company designated in the related Loan Request. It is
understood and agreed that at least [ ]of the funds to be disbursed by the Note
Purchaser in connection with each Loan shall be wired to the Equipment Purchase
Account to be used by the Company to purchase Equipment in accordance with
Section 8.10 hereof.
SECTION 3.04. Termination of Commitments. Unless previously
terminated, the Commitments shall terminate on the Commitment Termination Date.
SECTION 3.05. Convertible Loan Note. (a) The Loans made by
the Note Purchaser shall be evidenced by a Convertible Loan Note duly executed
on behalf of the Company, dated the date hereof, in substantially the form
attached hereto as Exhibit A, with the blanks appropriately filled, payable to
the order of the Note Purchaser in a principal amount equal to the Note
Purchaser's Total Commitment. The outstanding principal balance of each Loan,
as evidenced by such Convertible Loan Note, shall be payable as provided in
Section 3.06. The outstanding principal balance on each Loan, as evidenced by
such Convertible Loan Note, shall bear interest as set forth in Section 3.08.
(b) The Note Purchaser shall, and is hereby authorized by the
Company to, endorse on the schedule attached to the Convertible Loan Note
delivered to the Note Purchaser (or on a continuation of such schedule attached
to such Convertible Loan Note and made a part thereof), or otherwise to record
in the Note Purchaser's internal records, an appropriate notation evidencing
the date and amount of each Loan for the Note Purchaser, each payment and
prepayment of principal of any such Loan, any payment of interest on any such
Loan and the other information provided for on such schedule; provided,
however, that the failure of the Note Purchaser to make such a notation or any
error therein shall not in any manner affect the obligation of the Company to
repay the Loans made by the Note Purchaser in accordance with the terms of this
Agreement and the Convertible Loan Note.
SECTION 3.06. Payment of Principal; Prepayment of Loans. (a)
The outstanding principal balance of each Loan shall be payable on the Maturity
Date. Prior to the occurrence of a Trigger Event, an Event of Default or the
extension of the Maturity
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 20
14
Date from April 9, 2004 to April 9, 2009, the Company may prepay all Loans in
whole but not in part, subject to five days' written notice to the Note
Purchaser. Other than in accordance with the preceding sentence, the
outstanding principal balance of any Loan may not be prepaid by the Company
without the Note Purchaser's written consent.
(b) If any notice of prepayment is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to the payment date on the Loans.
(c) Amounts prepaid may not be reborrowed.
(d) Upon the extension of the Maturity Date to April 9, 2009
in accordance with the terms hereof, if at any time after the seven-year
anniversary of the date hereof a Milestone Payment is due and payable to the
Company from Schering AG pursuant to Article VIII of the Research Agreement,
the Note Purchaser may, at its option and upon providing written notice thereof
to the Company, offset such Milestone Payment against any outstanding principal
amount of Loans made hereunder and under the Convertible Loan Note and/or any
accrued interest thereon, and at such time the outstanding principal amount of
Loans and accrued interest owed hereunder and under the Convertible Loan Note
shall be reduced as specified by the Note Purchaser and such Milestone Payment
shall be deemed satisfied under the Research Agreement. The Note Purchaser may
elect to reduce any or all accrued interest prior to reducing any outstanding
principal amount of the Loans. It is understood and agreed that the
outstanding principal amounts of the Loans which are unsecured, if any, shall
be offset prior to offsetting any secured portion of the Loans. The Note
Purchaser shall evidence any reduction in outstanding principal amount of Loans
or accrued interest as specified in Section 3.05 hereof.
SECTION 3.07. Interest. (a) The Loans shall bear interest at
the rate of [ ]per annum, computed on the basis of a 360-day year of twelve
30-day months.
(b) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Company
hereunder is not paid when due, whether at stated maturity, upon acceleration
or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to [ ].
(c) Accrued interest on each Loan shall be payable in arrears
on the Maturity Date; provided that (i) interest accrued pursuant to paragraph
(b) of this Section shall be payable on demand, (ii) the Note Purchaser may
elect to offset accrued interest on demand pursuant to Section 3.06(b) and
(iii) in the event of any prepayment of any Loan, accrued interest on the
principal amount prepaid shall be payable on the date of such prepayment.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 21
15
SECTION 3.08. Conversion of the Convertible Loan Note. (a)
On the terms and subject to the conditions of this Section, the Note Purchaser
shall have the right, at its option, (i) on the Maturity Date or, if the
Maturity Date is extended to April 9, 2009, at any time after the Company
reaches Phase II Clinical Trials (as defined in the Research Agreement), (ii)
at any time after the occurrence of a Trigger Event, or (iii) at any time after
the occurrence of an Event of Default, to convert any (including, without
limitation, only the unsecured portion) or all of the then aggregate unpaid
principal amount of the Loans and any or all accrued interest thereon into
fully paid and non-assessable Common Stock. Any principal of and accrued
interest on the Loans to be converted into Common Stock may be converted into
that number of shares of Common Stock obtained by dividing the aggregate dollar
amount to be converted by the closing price of the Common Stock as quoted on
the Nasdaq National Market on the trading day that is three trading days prior
to the date specified for conversion by the Note Purchaser in accordance with
paragraph (b) below, rounded up to the next whole share in the case of any
fractional interests.
(b) In order to exercise the conversion privilege, the Note
Purchaser shall provide the Company with at least two trading days' written
notice stating that the Note Purchaser elects to convert into Common Stock on
the date specified in such notice all or a specified portion of the Loans
evidenced by the Convertible Loan Note pursuant to this Agreement and
specifying the name or names in which the Note Purchaser wishes the certificate
or certificates for such shares of Common Stock to be issued (which may be an
Affiliate, including the Stock Purchaser, or such other party as permitted
under the terms of this Agreement). On the date specified in such notice for
conversion, the Note Purchaser shall surrender the Convertible Loan Note at the
principal office of the Company. After receipt of such Convertible Loan Note
and on the date specified in such notice for conversion, the Company shall
issue and deliver at such office to the Note Purchaser, or elsewhere on the
Note Purchaser's written order, (i) a certificate or certificates for the
applicable number of shares of Common Stock and (ii) if less than the full
principal amount of the Convertible Loan Note is being converted, a new
Convertible Loan Note, of like tenor, representing the principal amount of the
surrendered Convertible Loan Note not being converted. Upon conversion of the
surrendered Convertible Loan Note, the rights of the Note Purchaser shall
terminate as to the converted portion of the surrendered Convertible Loan Note.
In the case of the exercise of the conversion privilege, each
conversion shall be deemed to have been affected as of the close of business on
the date on which the surrendered Convertible Loan Note is surrendered as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for such shares of Common Stock are issuable shall be deemed to
have become the holder or holders of record of such shares of Common Stock at
such time on such date, unless the stock transfer books of the Company are
closed on that date, in which event such person or persons shall be deemed
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 22
16
to have become such holder or holders of record at the close of business on the
next day on which such stock transfer books are open. Upon delivery, all such
shares of Common Stock shall be duly authorized, validly issued, fully paid,
nonassessable, free of all Liens and not subject to any preemptive or
subscription rights.
(c) If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation, shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, the Company or such successor
or purchasing corporation, as the case may be, shall execute with the Note
Purchaser a supplemental agreement providing that the Note Purchaser shall have
the right thereafter and until the expiration of the period of convertibility
to convert the Convertible Loan Note into the kind and amount of stock,
securities or assets receivable upon such reorganization, reclassification,
consolidation, merger or sale by a holder of the number of shares of Common
Stock into which the Convertible Loan Note might have been converted
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, subject to adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 3.08.
SECTION 3.09. Payments Generally. The Company shall make
each payment required to be made by it hereunder (whether of principal or
interest or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without setoff or counterclaim. Any
amounts received after such time on any date may, in the discretion of the Note
Purchaser, be deemed to have been received on the next succeeding Business Day
for purposes of calculating interest thereon. All such payments shall be made
to the Note Purchaser at its office specified in Section 12.01 hereof or at
such other place and manner specified by the Note Purchaser. If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in dollars.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 23
17
ARTICLE IV
Representations and Warranties
The Company represents and warrants to each of the Stock
Purchaser and the Note Purchaser that:
SECTION 4.01. Organization; Good Standing. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as it is presently being conducted and as proposed to be conducted.
Annexed as Exhibits D and E, respectively, are true and complete copies of the
Restated Certificate of Incorporation of the Company, as amended through the
date hereof (the "Certificate"), and the Amended and Restated By-laws of the
Company, as amended through the date hereof (the "By-laws").
SECTION 4.02. Capital Stock. The authorized capital stock of
the Company consists of: (i) 20,000,000 shares of Common Stock, par value
$0.01 per share, of which 6,960,130 are duly and validly issued, fully paid,
nonassessable and outstanding, 1,817,154 are reserved for issuance upon the
exercise of stock options granted or to be granted under the Company's stock
option and 401(k) plans and 487,458 are reserved for issuance upon the exercise
of warrants or options issued by the Company, and (ii) 5,000,000 shares of
Preferred Stock, par value $0.01 per share, of which no shares are outstanding.
Except as set forth above, (i) there are no shares of capital stock or other
equity securities of the Company outstanding and (ii) there are no outstanding
warrants, options, agreements, convertible or exchangeable securities or other
commitments (other than this Agreement) pursuant to which the Company is or may
become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of the Company, and there are not any equity
securities of the Company reserved for issuance for any purpose.
SECTION 4.03. Authorization. Each of the Transaction
Documents and the transactions contemplated therein has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms. The
Board of Directors of the Company has authorized the execution, delivery, and
performance of each of the Transaction Documents, and each of the transactions
contemplated thereby including, without limitation, authorization of the
issuance and delivery of the Initial Stock, the Additional Stock and the Common
Stock which is issuable upon conversion of the Convertible Loan Note in
accordance with this Agreement. No other corporate action is necessary to
authorize the execution or delivery of any of the Transaction Documents or
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 24
18
the performance by the Company of its obligations thereunder or under the terms
of the Common Stock.
SECTION 4.04. Common Stock. (a) The Initial Stock, the
Additional Stock and the shares of Common Stock which are issuable upon
conversion of the Convertible Loan Note pursuant to this Agreement have been
duly authorized and, upon issuance in accordance with this Agreement, will be
validly issued, fully paid and nonassessable shares of the Company, and no
Person has or will have any preemptive rights to subscribe for such shares.
(b) Assuming that the representations and warranties of the
Stock Purchaser and the Note Purchaser set forth in Article V are true and
correct and that any certificates evidencing securities shall contain a legend
substantially similar to that set forth in Article VI, the issuance of shares
of the Initial Stock, the Additional Stock and the Common Stock issuable upon
conversion of the Convertible Loan Note are and will be exempt from the
registration and prospectus delivery requirements of the Act as currently in
effect, and have been or will be registered or qualified (or exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws as currently in effect.
SECTION 4.05. No Consent. Neither the nature of the business
which the Company currently conducts or proposes to conduct, nor any
relationship between the Company and any other Person, nor any circumstance in
connection with the creation, authorization, issuance, offer or sale of the
Initial Stock, the Additional Stock or the Common Stock issuable upon
conversion of the Convertible Loan Note, nor the execution and performance of
any of the Transaction Documents, is such as to require a consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of the Company (except for filings necessary
to perfect Liens created under the Security Documents) or the vote, consent or
approval in any manner of any lender to the Company or the holders of any
Security of the Company as a condition to the execution, delivery and
performance of any of the Transaction Documents. In addition to the foregoing,
there are no consents or waivers, other than those which have been obtained,
which the Company must obtain so as to be able to fulfill its obligations and
to provide each of the Stock Purchaser and the Note Purchaser with all its
rights under each of the Transaction Documents.
SECTION 4.06. Authorization To Do Business. The Company has
filed all documents necessary to qualify it to do business as a foreign
corporation, and the Company is in good standing, under the laws of each
jurisdiction in which the conduct of the Company's business or the nature of
the property owned by the Company requires such qualification, except where the
failure to so qualify, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 25
19
SECTION 4.07. Control. The Company does not own or control,
and is not owned or controlled by, directly or indirectly, any corporation,
partnership, business trust, association or other business entity.
SECTION 4.08. Property. The Company owns or leases all of
the property and assets necessary for its business as currently conducted and
as proposed to be conducted and no such leases may be terminated without the
Company's consent where termination of any of such leases, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect. Except as described in Schedule 4.08 annexed hereto, the Company owns
its property and assets free and clear of all Liens, except those that arise in
the ordinary course of business and do not materially impair the Company's
ownership or use of such property or assets. With respect to the property and
assets which the Company leases, the Company is in compliance with such leases
and, to the best of its knowledge, holds a valid leasehold interest free of any
Liens or claims which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.09. Proprietary Rights. The Company has sufficient
title and ownership of all Proprietary Rights (as defined below) necessary for
its business as now conducted and necessary to perform its obligations under
the Transaction Documents. The Company is not bound by or a party to any
options, licenses or agreements of any kind with respect to the Proprietary
Rights of any other person or entity which prevent the Company from carrying
out its business as it is now conducted or as proposed to be conducted in the
Transaction Documents. Except as set forth in the letter dated March 4, 1997
from the Company to Berlex Biosciences, the Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate the Proprietary Rights of others.
"Proprietary Rights" shall mean patents, trademarks, service marks, trade
names, copyrights, trade secrets, licenses, information, proprietary rights and
processes.
SECTION 4.10. Litigation. There are no actions, suits,
proceedings or investigations pending or, to the best of the Company's
knowledge and belief, any basis therefor or threat thereof, against or
affecting the Company which question the validity of any Transaction Document
or the right of the Company to enter into or execute any of such agreements or
documents, or to consummate the transactions contemplated thereby, or, which
could reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect. The foregoing includes, without
limitation, actions pending or threatened (or any substantive basis therefor
known to the Company) involving the prior employment of any of the Company's
employees, use in connection with the Company's business of any information or
techniques allegedly proprietary to any former employers of the Company's
employees, or obligations of the Company's employees
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 26
20
under any agreements with their prior employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or governmental agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
SECTION 4.11. Regulatory; No Violation. (a) The Company has
in all material respects duly complied with, and is presently in due compliance
with, and is not in default in any material respect under any applicable law,
ordinance, code, rule, statute, regulation, judgment, decree, writ, ruling,
injunction, order or any other requirement of any Governmental Authority
relating in any way or applicable in any manner to the Company, its properties
or business (collectively, "Legal Requirements"), including, without
limitation, all Legal Requirements relating to, in the United States, the
Federal Food, Drug and Cosmetic Act, the Federal Trade Commission Act, and all
regulations issued thereunder, and there is no pending claim by the Food and
Drug Administration, the Federal Trade Commission or any other Governmental
Authority, whether national, state or local, in the United States or elsewhere,
that the Company is not in such compliance or is in such breach. The Company
holds, and is in compliance with, all franchises, licenses, permits, waivers,
registrations, certificates, consents, approvals or authorizations required by
any applicable Legal Requirement (collectively, "Permits") and has not received
any notice asserting any noncompliance with, or breach or violation of, any
Legal Requirement or Permit. The Company possesses all Permits required for
the conduct of its business as now being operated, and has no reason to believe
that it will be unable to obtain any Permits which are required for the future
conduct of such business.
(b) The Company is not in violation or default of any
provisions of the Certificate or the By- laws.
(c) The execution, delivery and performance of each of the
Transaction Documents will not result in any violation of, be in conflict with,
or constitute a default under, with or without the passage of time or the
giving of notice: (i) any Legal Requirement or Permit; (ii) any material
contract, obligation or commitment to which the Company is a party or by which
it is bound or (iii) the terms and conditions of the Certificate or the
By-Laws.
(d) The execution, delivery and performance of each of the
Transaction Documents will not result in the creation or imposition of any Lien
on any asset of the Company, except Liens created under the Transaction
Documents.
SECTION 4.12. Material Contracts. Except as set forth in
Schedule 4.12 annexed hereto, the Company has filed all material agreements as
exhibits to filings with
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 27
21
the Securities and Exchange Commission ("SEC") under the Securities Act of
1933, as amended (the "Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that are required to be filed as exhibits under
the rules and regulations of the SEC. All such agreements filed as Exhibits
are referred to as "Contracts". Each of the Contracts is valid, binding and in
full force and effect and is enforceable by the Company in accordance with its
terms. The Company has performed all material obligations required to be
performed by it to date under each of the Contracts and is not (with or without
the lapse of time or the giving of notice or both) in breach or default in any
material respect thereunder and, to the knowledge of the Company, no other
party to any of the Contracts is (with or without the lapse of time or the
giving of notice or both) in breach or default in any material respect
thereunder.
SECTION 4.13. Financial Information. The most recent audited
and unaudited financial statements of the Company included within reports filed
by the Company with the SEC prior to the date hereof (the "Financial
Statements") are complete and correct in all material respects and have been
prepared in accordance with GAAP applied on a consistent basis with each other
and with the financial statements of all previous fiscal periods (subject only,
in the case of unaudited statements, to normal, recurring audit adjustments).
Since the date of those Financial Statements, the Company has not:
(a) incurred any debts, obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities incurred in the ordinary course of business, none of which
(individually or in the aggregate) could reasonably be expected to
result in a Material Adverse Effect;
(b) discharged or satisfied any Liens other than those securing, or
paid any obligation or liability other than, current liabilities shown
on the Financial Statements and current liabilities incurred since the
most recent date thereof, in each case in the usual and ordinary course
of business;
(c) mortgaged, pledged or subjected to Lien any of its assets, tangible
or intangible;
(d) sold, transferred or leased any of its assets except in the usual
and ordinary course of business none of which (individually or in the
aggregate) could reasonably be expected to result in a Material Adverse
Effect;
(e) canceled or compromised any debt or claim, or waived or released
any right of material value;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 28
22
(f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) which either alone or in the aggregate could
reasonably be expected to result in a Material Adverse Effect;
(g) entered into any transaction other than in the usual and ordinary
course of business except for the Transaction Documents;
(h) declared or paid any dividends or other distributions with respect
to its outstanding Securities;
(i) suffered or experienced any other change that, individually or in
the aggregate, could reasonably be expected to result in a Material
Adverse Effect.
SECTION 4.14. No Voting Agreement. To the Company's
knowledge, there are no outstanding stockholder agreements, voting trusts,
proxies or other arrangements or understandings among the stockholders of the
Company or with the Company relating to the voting of their respective shares.
SECTION 4.15. No Registration Rights. Except as provided in
this Agreement and as disclosed in Schedule 4.15, the Company is under no
contractual obligation to register (now or in the future, whether contingent or
not) under any applicable securities laws any of its presently outstanding
Securities or any of its Securities that may subsequently be issued.
SECTION 4.16. Finder. The Company has not retained any
investment banker, broker or finder in connection with the transactions
contemplated by the Transaction Documents.
SECTION 4.17. Tax. All required tax returns of the Company
have been accurately prepared and duly and timely filed, and all Taxes required
to be paid with respect to the periods covered by such returns have been paid.
The Company has not been delinquent in the payment of any Tax, assessment or
governmental charge. For these purposes, references to "tax returns" shall be
interpreted broadly to include any Federal, state or local tax return, and any
tax return, or equivalent of any taxing jurisdiction outside of the United
States.
SECTION 4.18. Disclosure. The Company has made available to
each of the Stock Purchaser and the Note Purchaser a true and complete copy of
each report, schedule, registration statement and definitive proxy statement,
including exhibits filed therewith (but excluding exhibits incorporated therein
by reference and not attached thereto), filed by the Company during the fiscal
year ended December 31, 1996, and any subsequent interim periods, with the SEC
(the "SEC Documents"), which are all the
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 29
23
documents that the Company was required to file. As of their respective dates
and, except to the extent information contained therein has been revised or
superseded by a later filed SEC Document, as of the date hereof, none of the
SEC Documents contained or contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations with
respect thereto, have been prepared in accordance with GAAP during the periods
presented and fairly present (subject only, in the case of the unaudited
statements, to normal, recurring audit adjustments) the financial position of
the Company as of the date thereof and the results of its operations and its
cash flows for the periods then ended.
SECTION 4.19. Environmental Matters. (a) Except for the
matters disclosed to each of the Stock Purchaser and the Note Purchaser in
writing and except with respect to any other matters that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect, the Company (i) has not failed to comply with any Environmental Law or
to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has not become subject to any
Environmental Liability, (iii) has not received notice of any claim with
respect to any Environmental Liability or (iv) does not know of any basis for
any Environmental Liability.
SECTION 4.20. Investment and Holding Company Status. The
Company is not (a) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a "holding company"
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
SECTION 4.21. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Effect.
SECTION 4.22. Subsidiaries. The Company does not have any
subsidiaries as of the date hereof.
SECTION 4.23. Research Agreement. The representations and
warranties made in Article XV of the Research Agreement are true and correct
and are incorporated herein by reference.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 30
24
ARTICLE V
Representations and Warranties of the Stock Purchaser
and Note Purchaser
Each of the Stock Purchaser and the Note Purchaser represents
to the Company as follows:
SECTION 5.01. Authorization. This Agreement constitutes the
valid and binding obligation of such party, enforceable against it in
accordance with the terms of this Agreement, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors'
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law. The execution,
delivery, and performance of this Agreement have been duly authorized by all
necessary action on the part of such party and all consents of any third
parties that may be required to be obtained by it for the consummation of the
transactions contemplated hereby have been obtained.
SECTION 5.02. Investment for Own Account. Such party is
acquiring the Securities it is acquiring hereunder (including, in the case of
the Note Purchaser, the Convertible Loan Note) for its own account for
investment only and not with a view to any public distribution of the
Securities (including, in the case of the Note Purchaser all or any portion of
the Convertible Loan Note or the Common Stock issuable upon conversion of the
Convertible Loan Note); and such party will not offer to sell or otherwise
dispose of the Securities (including, in the case of the Note Purchaser, all or
any portion of the Convertible Loan Note or the Common Stock issuable upon
conversion of the Convertible Loan Note) except pursuant to Article VI hereof.
No other Person has been granted by such party any right with respect to or
interest in the Securities (including, in the case of the Note Purchaser, the
Convertible Loan Note or the Common Stock issuable upon conversion of the
Convertible Loan Note), nor has it agreed to give any Person any such interest
or right in the future.
SECTION 5.03. Offering Exemption. Such party understands
that the Securities (including, in the case of the Note Purchaser, the
Convertible Loan Note and the Common Stock issuable upon conversion of the
Convertible Loan Note) have not been registered under the Act, nor qualified
under any state securities laws, and that they are being offered and sold
pursuant to an exemption from such registration and qualification based in part
upon the representations of such party contained herein. Such party is an
"accredited investor", as defined in Rule 501 of Regulation D under the Act.
SECTION 5.04. Knowledge and Experience; Ability To Bear
Economic Risks. Such party has such knowledge and experience in financial and
business matters
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 31
25
that it is capable of evaluating the merits and risks of the investment
contemplated by this Agreement and such party is able to bear the economic risk
of its investment in the Company (including a complete loss of its investment).
SECTION 5.05. Disclosure of Information. Such party believes
that it has received all the information it considers necessary or appropriate
for deciding whether to enter into this Agreement to purchase Securities, and
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Securities.
ARTICLE VI
Covenants of the Stock Purchaser and the Note Purchaser
Each of the Stock Purchaser and the Note Purchaser covenants
that it will not sell or otherwise transfer any of the Securities acquired
hereunder, including without limitation all or any portion of the Convertible
Loan Note or the Common Stock issuable upon conversion of the Convertible Loan
Note (other than pursuant to Rule 144 or any similar or analogous rule or
rules), except pursuant to an effective registration under the Act or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder.
The certificates evidencing any of the Securities acquired hereunder
(including the Convertible Loan Note) shall bear the following legend or
language substantially similar thereto reflecting the foregoing restrictions on
the transfer of such Securities:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
TRANSFERRED (OTHER THAN PURSUANT TO RULE 144 OR ANY SIMILAR OR
ANALOGOUS RULE OR RULES) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER THE ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, QUALIFIES AS AN EXEMPT
TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 32
26
ARTICLE VII
Conditions
SECTION 7.01. Effective Date. The obligations of the Stock
Purchaser and the Note Purchaser hereunder shall not become effective until the
date on which each of the following conditions is satisfied (or waived in
accordance with Section 12.02):
(a) The Stock Purchaser and the Note Purchaser (or their counsel)
shall have received from the Company a counterpart of this Agreement
signed on behalf of the Company;
(b) The Stock Purchaser and the Note Purchaser shall have received a
favorable written opinion (addressed to the Stock Purchaser and the
Note Purchaser and dated the Effective Date) of Rothgerber, Appel,
Powers & Johnson LLP, counsel for the Company, substantially in the
form of Exhibit F. The Company hereby requests such counsel to deliver
such opinion;
(c) The Stock Purchaser and the Note Purchaser shall have received
such documents and certificates as they or their counsel may reasonably
request relating to the organization, existence and good standing of
the Company, the authorization of the transactions contemplated in this
Agreement and the other Transaction Documents and any other legal
matters relating to the Company, this Agreement, the Convertible Loan
Note, the other Transaction Documents or the transactions contemplated
hereby or thereby, all in form and substance satisfactory to the Stock
Purchaser and the Note Purchaser and their counsel;
(d) The Note Purchaser shall have received (i) a counterpart of the
Security Agreement signed on behalf of the Company and (ii) all
documents and instruments, including Uniform Commercial Code financing
statements, required by law or reasonably requested by the Note
Purchaser to be filed, registered or recorded to create or perfect the
Liens intended to be created under the Security Agreement;
(e) The Company shall have executed and delivered to the Stock
Purchaser the Research Agreement and any further documents required in
connection therewith.
SECTION 7.02. Initial Stock Closing and the Additional Stock
Closing. With respect to the Initial Stock Closing and the Additional Stock
Closing, the obligation of the Company and of the Stock Purchaser shall, in the
case of the obligations of the Stock Purchaser, be subject to each of the
conditions set forth in paragraphs (a) through (e) having been satisfied or
waived on or prior to the Initial Stock Purchase Date with
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 33
27
respect to the Initial Stock Closing and the Additional Stock Closing Date with
respect to the Additional Stock Closing and, in the case of the obligations of
the Company, be subject to the condition set forth in paragraph (f) having been
satisfied or waived on or prior to the Initial Stock Purchase Date with respect
to the Initial Stock Closing and the Additional Stock Closing Date with respect
to the Additional Stock Closing.
(a) Legal Opinions. The Stock Purchaser shall have received an
opinion of counsel to the Company, dated as of the Initial Stock
Purchase Date with respect to the Initial Stock Closing and dated as of
the Additional Stock Purchase Date with respect to the Additional Stock
Closing, and in a form and substance reasonably acceptable in all
respects to the Stock Purchaser to the effect that:
(i) the Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified
to do business under the laws of the State of Colorado;
(ii) the Initial Stock or Additional Stock, as applicable, issued
pursuant to this Agreement, when so issued for the consideration herein
set forth, shall constitute duly authorized, validly issued, fully paid
and nonassessable shares of capital stock of the Company;
(iii) the certificate representing the Initial Stock or the Additional
Stock, as applicable, issued pursuant to this Agreement is in due and
proper form and has been duly and validly executed as required by law;
(iv) the execution and delivery by the Company of this Agreement and
the Research Agreement and the performance by the Company of its
obligations there-under (a) have been duly authorized by all requisite
corporate action on the part of the Company and (b) will not conflict
with, result in a breach of or constitute a default under (i) the
Certificate or By-laws, (ii) any law, rule or regulation of the United
States of America or the State of Colorado, or the General Corporation
Law of the State of Delaware, (iii) the provisions of any material
agreement of the Company, or (iv) any order or decree of any court or
government agency or instrumentality;
(v) no authorization, approval or other action by, and no notice to,
consent or order of, registration, designation, or qualification by or
filing with, any United States Federal, Colorado or, to the extent
required under the General Corporation Law of the State of Delaware,
Delaware governmental authority is required to be made prior to the
Initial Stock Closing or the Additional Stock Closing, other than those
that have been made or obtained and are in full force and effect;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 34
28
(vi) the offer and sale of the Securities pursuant to the terms of this
Agreement are exempt from the registration requirements of the Act;
(vii) such counsel is not aware of any action, proceedings or
investigation pending against the Company, or that the Company has
received any threat thereof, which questions the validity of this
Agreement or the Research Agreement, or the right of the Company to
enter into this Agreement and the Research Agreement or which might
result, either individually or in the aggregate, in any material
adverse change in the assets, conditions, affairs, or prospects of the
Company, nor is such counsel aware of any litigation pending against
the Company or that the Company has received any threat thereof, by
reason of the proposed activities of the Company, or negotiations by
the Company with possible investors in the Company or its business; and
(viii) the Certificate and the By-laws are not in violation of any
provision of the laws of the State of Delaware and, to the best of such
counsel's knowledge, the Company is not in violation of any provision
of such documents.
(b) Representation and Warranties of the Company. The representations
and warranties of the Company set forth in this Agreement shall be true
and correct on and as of the Initial Stock Purchase Date with respect
to the Initial Stock Closing and on and as of the Additional Stock
Purchase Date with respect to the Additional Stock Closing, with the
same effect as though such representations and warranties had been made
on and as of the Initial Stock Purchase Date or the Additional Stock
Purchase Date, as applicable.
(c) Effective Date; Performance; No Defaults. The Effective Date shall
have occurred; the Company shall have performed and complied with all
agreements, obligations and conditions contained in the Transaction
Documents that are required to be performed or complied with by it on
or before the Initial Stock Purchase Date or the Additional Stock
Purchase Date, as applicable, and the Company is not (with or without
the lapse of time or the giving of notice or both) in breach or default
of this Agreement, the Research Agreement or any other Transaction
Document; no Event of Default under this Agreement shall have occurred.
(d) Consents. The Company shall have delivered to the Stock Purchaser
and the Note Purchaser the consents of (i) Wilderness Place Holdings
LLC and Hambrecht & Quist Guaranty Finance, LLP in connection with the
Financing Agreement dated March 16, 1995 between the Company and such
parties, (ii) Silicon Valley Bank in connection with the Loan and
Security Agreement dated February 24, 1994 between the Company and
Silicon Valley Bank, (iii) Silicon
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 35
29
Valley Bank and MMC/GATX Partnership No. 1 in connection with the Loan
and Security Agreement dated December 29, 1995 between the Company and
such parties, and (iv) Aero-Tech Investments in connection with the
Lease dated May 20, 1992 and any amendments or extensions thereto,
between the Company and Aero-Tech Investments (the "Aero-Tech Lease"),
in each case satisfactory to the Stock Purchaser and the Note Purchaser
in their sole discretion. It is understood and agreed that such
consent from Aero-Tech Investments shall include confirmation that such
party waives any right under the Aero-Tech Lease to the Equipment and
its further agreement to provide any information to the Company and the
Note Purchaser as is necessary in the judgment of the Note Purchaser to
permit a fixture filing by the Note Purchaser in full compliance with
all applicable laws and regulations.
(e) Compliance Certificate. The Company shall have delivered to the
Stock Purchaser a certificate dated as of the Initial Stock Purchase
Date with respect to the Initial Stock Closing and dated as of the
Additional Stock Purchase Date with respect to the Additional Stock
Closing, executed by an executive officer of the Company and in a form
reasonably acceptable to the Stock Purchaser, certifying that the
conditions set forth in paragraphs (b), (c) and (d) have been satisfied
and that there has been no material adverse change in the assets,
properties, prospects, conditions, affairs, operations or business of
the Company, as now conducted or as proposed to be conducted, since the
date of this Agreement.
(f) Representations and Warranties of the Stock Purchaser. The
representations and warranties of the Stock Purchaser contained in
Article V of this Agreement shall be true on and as of the Initial
Stock Purchase Date with respect to the Initial Stock Closing and on
and as of the Additional Stock Purchase Date with respect to the
Additional Stock Closing, with the same effect as though such
representations and warranties had been made on and as of the Initial
Stock Purchase Date or Additional Stock Purchase Date, as applicable.
SECTION 7.03. Each Loan. The obligation of the Note
Purchaser to make a Loan when requested by the Company under the terms of this
Agreement is subject to the satisfaction of the following conditions:
(a) The Note Purchaser shall have received its duly executed
Convertible Loan Note complying with the provisions of Section 3.05
hereof;
(b) The representations and warranties of the Company set forth in
this Agreement shall be true and correct on and as of the date of such
Loan, with the same effect as though such representations and
warranties had been made on and as of such date; if the Company shall
have any Subsidiary, the representations and
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 36
30
warranties of the Company set forth in this Agreement shall be deemed
made by such Subsidiary in addition to being made by the Company and
shall be true and correct on and as of the date of such Loan;
(c) At the time of and immediately after giving effect to such Loan no
Default shall have occurred and be continuing;
(d) The Initial Stock Purchase Date shall have occurred; and
(e) A Letter of Direction substantially in the form of Exhibit A to
the Security Agreement shall have been executed and delivered by the
Company and Securities Intermediary (as such term is defined in the
Security Agreement) with respect to the Equipment Purchase Account.
Each Loan shall be deemed to constitute a representation and warranty by the
Company on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
SECTION 7.04. Initial Stock Purchase Date. Notwithstanding
anything herein to the contrary, if the Initial Stock Purchase Date has not
occurred on or prior to June 1, 1997, the Stock Purchaser's obligation to
purchase the Initial Stock and the Additional Stock shall be terminated and the
Note Purchaser's obligations to make Loans hereunder shall be terminated, in
each case, as of such date.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 37
31
ARTICLE VIII
Affirmative Covenants
The Company covenants and agrees with each of the Stock
Purchaser and the Note Purchaser as follows:
SECTION 8.01. Financial Statements and Other Information.
The Company will furnish to each of the Stock Purchaser and the Note Purchaser:
(a) within 90 days after the end of each fiscal year of the
Company, its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Ernst & Young LLC or other independent
public accountants of recognized national standing (without a "going concern"
or like qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Company and its consolidated Subsidiaries, if any,
on a consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance
sheet and related statements of operations, stockholders' equity and
cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of
(or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of the Company and its consolidated Subsidiaries,
if any, on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence
of footnotes;
(c) concurrently with any delivery of financial statements under clause
(a) or (b) above, a certificate of a Financial Officer of the Company
(i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, and (ii) stating whether any
change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 4.13
and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 38
32
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed
by the Company with the SEC, or any Governmental Authority succeeding
to any or all of the functions of said Commission, or with any national
securities exchange, or distributed by the Company to its shareholders
generally, as the case may be;
(e) within 10 days after the end of each fiscal quarter a report of a
Financial Officer of the Company stating (i) what the Company spent
proceeds of Loans on during the immediately prior fiscal quarter and
(ii) which supplies and items of equipment the Company will use the
proceeds to purchase during the current fiscal quarter; and
(f) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
the Company or any Subsidiary, or compliance with the terms of this
Agreement or the other Transaction Documents, as the Stock Purchaser or
the Note Purchaser may reasonably request.
SECTION 8.02. Notices of Material Events. The Company will
furnish to the Stock Purchaser and the Note Purchaser prompt written notice of
the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Company or any Affiliate thereof that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event; and
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Company setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 8.03. Existence; Conduct of Business. The Company
will do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights, licenses, permits,
privileges and franchises material to the conduct of its business.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 39
33
SECTION 8.04. Payment of Obligations. The Company will, and
will cause each of its Subsidiaries to, pay its Indebtedness and other
obligations, including Tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Company or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, (c) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation,
and (d) the failure to make payment pending such contest could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 8.05. Maintenance of Properties. The Company will,
and will cause each of its Subsidiaries to, keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 8.06. Insurance. The Company will, and will cause
each of its Subsidiaries to, maintain with financially sound and reputable
insurance companies, insurance in such amounts and against such risks
(including fire and other risks insured by extended coverage) as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations, including public liability
insurance against claims for personal injury, death or property damage
occurring upon, about or in connection with the use of any properties owned,
occupied or controlled by it as well as such other insurance as may be required
by law.
SECTION 8.07. Further Assurances. The Company will execute
any and all further documents, financing statements, agreements and
instruments, and take all such further actions (including the filing and
recording of financing statements), which may be required under any applicable
law, or which the Stock Purchaser or the Note Purchaser may reasonably request,
to effectuate the transactions contemplated by this Agreement or the Security
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Company. The Company also agrees to
provide to the Note Purchaser, upon request, evidence reasonably satisfactory
to the Note Purchaser as to the perfection and priority of the Liens created or
intended to be created by the Security Documents.
SECTION 8.08. Books and Records; Inspection Rights. The
Company will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Company will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Stock Purchaser or the Note Purchaser, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 40
34
extracts from its books and records, and to discuss its affairs, finances and
condition with its officers and independent accountants, all at such reasonable
times and as often as reasonably requested.
SECTION 8.09. Compliance with Laws. The Company will, and
will cause each of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 8.10. Use of Proceeds. The Company shall use (i) at
least [ ] of the proceeds of each Loan for the purchase of Equipment and (ii)
any remaining amounts for general corporate purposes
SECTION 8.11. Information Regarding Collateral. (a) The
Company will furnish to the Note Purchaser prompt written notice of any change
(i) in the Company's corporate name or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties, (ii) in the
location of the Company's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
it is located (including the establishment of any such new office or facility),
(iii) in the Company's identity or corporate structure or (iv) in the Company's
Federal Taxpayer Identification Number. The Company agrees not to effect or
permit any change referred to in the preceding sentence unless all filings have
been made under the Uniform Commercial Code or otherwise that are required in
order for the Note Purchaser to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral. The
Company also agrees promptly to notify the Note Purchaser if any material
portion of the Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 8.01, the Company shall deliver to the Note Purchaser a certificate of
a Financial Officer and the chief legal officer of the Company certifying that
all Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction where appropriate to
the extent necessary to protect and perfect the security interests under the
Security Agreement for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 41
35
SECTION 8.12. Maintenance of Common Stock. The Company shall
maintain a sufficient number of authorized but unissued Common Stock reserved
for issuance upon conversion of the Convertible Loan Note.
SECTION 8.13. SEC Disclosures. Each report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC from and after the date of this Agreement will comply in all material
respects with the requirements of the Exchange Act applicable to such documents
and none of such documents will, when filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company shall
comply with all SEC filing requirements to which it is subject.
SECTION 8.14. Equipment Purchases. With respect to the
proceeds of Loans to be applied to the purchase of Equipment in accordance with
Section 8.10, the Company shall as promptly as practicable apply such proceeds
to purchase Equipment but, in any event, the Company shall apply such proceeds
within 30 days of receipt from the Note Purchaser.
ARTICLE IX
Negative Covenants
The Company covenants agrees with each of the Stock Purchaser
and the Note Purchaser as follows:
SECTION 9.01. Liens. The Company will not create, incur,
assume or permit to exist any Lien on any Collateral now owned or hereafter
acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(a) Liens created under the Security Documents; and
(b) any Lien on Equipment or Proceeds of the Company existing on the
date hereof and set forth in Schedule 9.02; provided that such Lien
shall secure only those obligations which it secures on the date
hereof.
SECTION 9.02. Fundamental Changes. The Company will not, and
will not permit any of its Subsidiaries to, engage to any material extent in
any business other than businesses of the type conducted by the Company on the
date of execution of this Agreement and businesses reasonably related thereto.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 42
36
SECTION 9.03. Restricted Payments. The Company will not, and
will not permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a) the Company
may declare and pay dividends with respect to its capital stock payable solely
in additional shares of its common stock, (b) Subsidiaries may declare and pay
dividends ratably with respect to their capital stock, and (c) the Company may
make Restricted Payments pursuant to and in accordance with stock option plans
or other benefit plans for management or employees of the Company.
SECTION 9.04. Transactions with Affiliates. The Company will
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates, except in the ordinary course of business at prices and
on terms and conditions not less favorable to the Company or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties.
ARTICLE X
Events of Default
If any of the following events ("Events of Default") shall
occur:
(a) the Company shall fail to pay any principal of, or interest on, any
Loan or any other amount payable under this Agreement when and as the
same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise;
(b) any representation or warranty made or deemed made by or on behalf
of the Company or any Subsidiary in or in connection with this
Agreement, the Convertible Loan Note or the Security Documents or any
amendment or modification hereof or thereof or waiver hereunder or
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any such documents
or any amendment or modification thereof or waiver thereunder, shall
prove to have been incorrect when made or deemed made;
(c) the Company shall fail to observe or perform any covenant,
condition or agreement contained in Section 8.02, 8.03 (with respect to
the Company's
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 43
37
existence) or 8.10 or in Article IX hereof or Section 4.10 of the
Security Agreement;
(d) the Company shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement, the Convertible
Loan Note or the Security Documents (other than those specified in
clause (a) or (c) of this Article), and such failure shall continue
unremedied for a period of 30 days after notice thereof from the Stock
Purchaser or the Note Purchaser to the Company;
(e) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Company or any Subsidiary or its debts,
or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, seques- trator, conservator or similar official for the
Company or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;
(f) the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or
other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (f)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(g) the Company or any Subsidiary shall become unable, admit in writing
or fail generally to pay its debts as they become due;
(h) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Company,
any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to attach or levy upon any assets of the Company
or any Subsidiary to enforce any such judgment;
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 44
38
(i) an ERISA Event shall have occurred that, in the opinions of the
Stock Purchaser and the Note Purchaser, when taken together with all
other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect;
(j) any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by the Company not to be, a valid and
perfected Lien on any Collateral, with the priority required by the
applicable Security Document, except as a result of the sale or other
disposition of the applicable Collateral in a transaction permitted
under the Transaction Documents;
(k)(i) a termination of the Research Agreement pursuant to Section 18.2
thereof or (ii) notice from Schering AG to the Company of its intent to
terminate the Research Agreement pursuant to Section 18.2(f) thereof;
(l) a Change in Control shall occur; or
(m) the Company or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect
of any material Indebtedness, when and as the same shall become due and
payable whether at the scheduled maturity or otherwise;
then, and in every such event (other than an event with respect to the Company
described in clause (e) or (f) of this Article), and at any time thereafter
during the continuance of such event, (a) the Note Purchaser may, by notice to
the Company, take either or both of the following actions, at the same or
different times: (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all other obligations of
the Company accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company; and in case of any event with respect to the
Company described in clause (e) or (f) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all other obligations of the Company
accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company and (b) the Stock Purchaser shall have no further
obligation to purchase the Initial Stock or Additional Stock.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 45
39
ARTICLE XI
Registration Rights
SECTION 11.01. Definitions. As used in this Article XI:
(a) the terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness
of such registration statement;
(b) the term "Registrable Securities" means shares of the Initial
Stock, the Additional Stock and the Common Stock issuable upon
conversion of all or any part of the Convertible Loan Note pursuant to
this Agreement as well as any capital stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or
in replacement of, such Initial Stock, Additional Stock or Common Stock
issuable upon conversion of the Convertible Loan Note.
(c) the term "Holders" shall mean the Stock Purchaser and the Note
Purchaser or any permitted transferee pursuant to Section 11.08;
(d) "Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 11.02, 11.03, 11.04 and 11.05
hereof, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be
paid in any event by the Company);
(e) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities
and all fees and disbursements of counsel for each of the Holders.
SECTION 11.02. Requested Registration. (a) Request for
Registration. If the Company shall receive from one or more Holders, at any
time after the date of this Agreement a written request that the Company effect
a registration of Registrable Securities the Company shall as soon as
practicable, use its diligent best efforts to effect such registration under
the Act (including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Act) as may be so requested and as would permit or
facilitate the sale and distribution of such Registrable Securities as are
specified in such request
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 46
40
(which request must cover at least 25% of the Registrable Securities then held
by the requesting Holder); provided, however, that the Company shall not be
obligated to effect or take any action to effect, (A) more than three
registrations pursuant to this Section 11.02 (provided, however, that any
registration where the registration statement does not become effective shall
not constitute a registration pursuant to Section 11.02), or (B) any
registration pursuant to this Section 11.02 in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance, unless the
Company is already subject to such jurisdiction and except as may be required
by the Act or applicable rules or regulations thereunder. It is understood and
agreed that the Note Purchaser or any other Holder who holds the Convertible
Loan Note may request that the Company effect a registration under the Act in
accordance with the provisions herein and in the amount so requested prior to
converting all or any part of the Convertible Loan Note into Common Stock if
the Note Purchaser or other such Holder represents in good faith that it
intends to convert all or any portion of such Convertible Loan Note into Common
Stock upon the effectiveness of such registration under the Act; provided, that
the Note Purchaser or any other Holder who holds the Convertible Loan Note
shall not be required to make such representation if such party requests that
the Company effect a shelf registration in accordance with Rule 415 under the
Act as specified immediately below.
The Company shall promptly provide notice in writing to the
Note Purchaser and any other Holder who holds the Convertible Loan Note if the
Company becomes eligible to effect a shelf registration pursuant to Rule
415(a)(4) and, if the Note Purchaser or any Holder holding the Convertible Loan
Note so requests, shall use its diligent best efforts to promptly effect such a
shelf registration under the Act with respect to the Common Stock issuable upon
conversion of the Convertible Loan Note and shall use diligent efforts to keep
such registration effective for so long as the Note Purchaser or such Holder
requests.
(b) Underwriting. If the Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to
Section 11.02(a) and the Company shall enter into an underwriting agreement in
customary form (including, without limitation, such representations and
warranties and indemnity and contribution provisions as the underwriter or
underwriters customarily require) with the representative of the underwriter or
underwriters selected for such underwriting by the Company, such underwriter or
underwriters to be acceptable to the Holders.
(c) Form S-3. The Company shall use reasonable efforts to
qualify and remain qualified for effecting registration of its securities on
Form S-3 and pursuant to Rule 415 under the Act for secondary sales. Any
request by a Holder for a registration of Registrable Securities pursuant to
Section 11.02(a) shall be made on Form S-3 so long as
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 47
41
the Company is qualified to register the Registrable Securities on such form
and shall be a shelf registration pursuant to Rule 415 under the Act if
requested by the Holder and the Company is qualified under such Rule. If the
Company is not qualified to register the Registrable Securities on Form S-3, or
if the Company registers the Registrable Securities on Form S-3 and
subsequently becomes ineligible to use such form, then the Company will
register the Registrable Securities on a registration statement on Form S-1 or
other available form and will file any amendments or supplements to such
registration statement as may be necessary to allow such Holder to meet the
prospectus delivery requirements of the Act in connection with its sales of
Registrable Securities under such registration statement.
SECTION 11.03. Company Registration. (a) If at any time
after the date of this Agreement the Company shall determine to register any of
its Securities for its own account or for the account of any other holder of
Securities, other than a registration relating solely to director stock option
or employee benefit plans, or a registration relating solely to a transaction
for the type described in Rule 145 under the Act, or any successor to Rule 145,
or a registration on any registration form which does not permit secondary
sales or does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registrable Securities, the Company will provide prior written notice at least
thirty (30) days before the filing with the SEC of such registration statement.
Such notice shall offer to include in such filing that number of Registrable
Securities as the Holders may request, subject to the conditions hereinafter
set forth. If the Holder desires to have Registrable Securities registered
under this Section 11.03, it shall be required to so advise the Company in
writing within twenty (20) days after the date of receipt of such offer from
the Company, setting forth the number of Registrable Securities for which
registration is requested. The Company shall thereupon include in such filing
the number of Registrable Securities for which registration is so requested,
subject to its right to reduce the number of Registrable Securities as set
forth in Section 11.03(b) below, and shall use its best efforts to effect
registration under the Act of such Registrable Securities.
(b) Underwriting. Where the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the written
notice given pursuant to Section 11.03(a). In such event, the right of each of
the Holders to registration pursuant to this Section 11.03 shall be conditioned
upon such Holders' participation in such underwriting and the inclusion of such
Holders' Registrable Securities in the underwriting to the extent provided
herein. The Holders shall (and it shall be a condition of their participation
in any such registration and underwriting that any other shareholders
distributing Securities through such underwriting also shall) enter into an
underwriting agreement in customary form (including, without limitation, such
indemnity and contribution provisions as the underwriter or underwriters
customarily require) with the underwriter or underwriters
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 48
42
selected for underwriting by the Company. Notwithstanding any other provision
of this Section 11.03, if the underwriter determines that marketing factors
require a limitation on the number of shares to be underwritten, the
underwriter may (subject to the allocation priority set forth below) exclude
from such registration and underwriting some or all of the Registrable
Securities which would otherwise be underwritten pursuant hereto. In such a
case, the Company shall so advise all Holders requesting registration, and
participation in the underwriting by Holders and other holders of the
securities shall be reduced, on a pro rata basis, by such minimum number of
shares as is necessary to comply with such limitation. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded (in accordance with this
Section 11.03(b)) or withdrawn from such underwriting shall be withdrawn from
such registration.
SECTION 11.04. Expenses of Registration. All Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Article XI shall be borne by the Company, and
Selling Expenses shall be borne by the Holders.
SECTION 11.05. Registration Procedures. (a) Whenever the
Company effects or is required to effect the registration of any Registrable
Securities, the Company will as expeditiously as possible:
(i) prepare and file with the SEC, a registration statement with
respect to such Registrable Securities and use reasonable efforts to
cause such registration statement to promptly become and remain
effective for the period set forth in subsection (ii) below and
promptly notify the Holders (x) when such registration statement
becomes effective, (y) when any amendment to such registration
statement becomes effective and (z) of any request by the SEC for any
amendment or supplement to such registration statement or any
prospectus relating thereto or for additional information;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to
the offer of the Registrable Securities covered by such registration
statement during the period required for distribution of the
Registrable Securities, which period shall not be in excess of (i) nine
(9) months from the effective date of such registration statement with
respect to any registration statement that is not a shelf registration
filed pursuant to Rule 415 and (ii) the period permitted under the Act
with respect to a shelf registration under Rule 415.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 49
43
(iii) furnish to the Holders, prior to filing a registration statement,
copies of such registration statement as proposed to be filed and
thereafter, such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such
registration statement (including each preliminary prospectus, reports
on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company
shall have filed with the SEC and financial statements, reports and
proxy statements mailed to shareholders of the Company) as the Holders
may reasonably request in order to facilitate the disposition of the
Registrable Securities being offered by the Holders;
(iv) use reasonable efforts to register or qualify, not later than the
effective date of any filed registration statement, the Registrable
Securities covered by such registration statement under the securities
or "blue sky" laws of such jurisdictions as the Holders reasonably
request, subject, however, to the proviso to Section 11.02(a);
(v) make available, upon reasonable notice and during business hours,
for inspection by the underwriter or underwriters (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents, agreements and properties of the Company (collectively the
"Records") as shall be necessary to enable the Inspectors to exercise
their due diligence responsibilities, and cause the Company's officers,
directors and employees to supply all information reasonably requested
by any such Inspector in connection with the registration statement;
(vi) if the Securities covered by the Registration Statement are to be
sold through one or more underwriters, obtain a comfort letter from the
Company's independent public accountants dated within five business
days prior to the effective date of the registration statement (and as
of such other dates as the underwriter or underwriters for the
Registrable Securities may reasonably request) in customary form and
covering such matters of the type customarily covered by such comfort
letters as such underwriter or underwriters reasonably request;
(vii) if the Securities covered by the Registration Statement are to be
sold through one or more underwriters, obtain an opinion of counsel
dated the closing of the sale of the Registrable Securities (and as of
such other dates as the underwriter or underwriters for the Registrable
Securities may reasonably request) in customary form and covering such
matters of the type customarily covered by such opinions as counsel
designated by such underwriter or underwriters reasonably requests;
(viii) if the Securities covered by the Registration Statement are to
be sold through one or more underwriters, provide to the underwriter or
underwriters
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 50
44
representations and warranties of the Company, dated the closing of the
sale of the Registrable Securities (and as of such other dates as the
underwriter or underwriters for the Registrable Securities may
reasonably request) in customary form and covering such matters of the
type customarily covered by such representations and warranties as
counsel designated by such underwriter or underwriters reasonably
request;
(ix) during the period when the registration statement is required to
be effective, notify the Holders of the happening of any event as a
result of which the prospectus included in the registration statement
contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and the Company will forthwith prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made not misleading;
(x) cause such Registrable Securities to be listed for trading on each
securities exchange on which similar Securities of the same class
issued by the Company are then traded, provided that the Company is
eligible to do so under applicable listing requirements;
(xi) otherwise use reasonable efforts to comply with all applicable
rules and regulations of the SEC, and make available to the holders of
the Company's Securities, as soon as reasonably practicable, an
earnings statement governing a period of twelve months, beginning
within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act.
(b) The Holder shall timely furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request.
(c) The Holder agrees that upon the receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (a)(ix) above, the Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until receipt by the Holder of the copies of the
supplemented or amended prospectus contemplated by paragraph(a)(ix) above.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 51
45
SECTION 11.06. Indemnification. (a) The Company will
indemnify each of the Holders, as applicable, each of its officers, directors
and partners, and each person controlling each of the Holders, with respect to
each registration which has been effected pursuant to this Article XI, and each
underwriter, if any, and each Person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other document
(including any related registration statement, notification or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of the Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each of the Holders, each of its officers, directors and
partners, and each Person controlling each of the Holders, each such
underwriter and each Person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to any Holder or underwriter or
person controlling such Holder or underwriter to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished in
writing to the Company by such Holder or underwriter or Person controlling such
Holder or underwriter and stated to be specifically for use therein.
(b) Each of the Holders will, if Registrable Securities held
by it are included in the Securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
Securities covered by such a registration statement, each Person who controls
the Company or such underwriter within the meaning of the Act and the rules and
regulations thereunder, each other holder of Securities in respect of which
such registration, qualification or compliance is being effected ("Other
Shareholder") and each of their officers, directors, and partners, and each
Person controlling such Other Shareholder against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document made by such Holder or any violation by the Stock Purchaser or the
Note Purchaser of the Act or any rule or regulation thereunder applicable to
the Stock Purchaser or the Note Purchaser and relating to action or inaction
required of the Stock Purchaser or the Note Purchaser in connection with any
such registration, qualification or compliance, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading by such Holder, and
will reimburse the Company and such Other
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 52
46
Shareholders, directors, officers, partners, Persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of each of the Holders hereunder shall
be limited to an amount equal to the proceeds to such Holder for Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
11.06 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld) and the Indemnified Party
may participate in such defense at such party's expense (unless (i) the
employment of counsel by such Indemnified Party has been authorized by the
Indemnifying Party, or (ii) the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Indemnifying
Party and the Indemnified Party in the defense of such action, in each of which
cases the fees and expenses of one law firm serving as counsel for each
Indemnified Party shall be at the expense of the Indemnifying Party), and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Article XI unless such failure or any delay in providing such notice
results in the loss of material defenses or rights. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party (which consent shall not be unreasonably withheld),
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 11.06
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability,
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 53
47
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which
resulted in such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the Indemnifying
Party and of the Indemnified Party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in a negotiated
underwriting agreement entered into in connection with an underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall be controlling.
SECTION 11.07. Information. In connection with any request
for registration, the Holders shall be required to furnish the Company with all
relevant information concerning the proposed method of sale or other
disposition of the Registrable Securities, the identity of and compensation to
be paid to any underwriters proposed to be employed in connection therewith,
and such other information as may be reasonably required by the Company to
properly prepare and file such registration statement in accordance with
applicable provisions of the Act and the rules and regulations thereunder.
Upon request of the Company, such information shall be furnished by the Holders
in writing.
SECTION 11.08. Assignability of Registration Rights. The
registration rights granted pursuant to this Article XI shall be assignable at
the option of each of the Holders, in whole or in part.
SECTION 11.09. "Market Stand-Off" Agreement. Holder hereby
agrees that following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and its underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees
who agree to be similarly bound) any securities of the Company held by it at
any time during such period except Registrable Securities included in such
registration.
SECTION 11.10. Termination of Rights. Notwithstanding any
provisions to the contrary herein, the registration rights set forth in Section
11.02 hereof and in Section 11.03 hereof shall terminate ten years from the
date of this Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 54
48
ARTICLE XII
Miscellaneous
SECTION 12.01. Notices. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Company, to it at 2950 Wilderness Place, Boulder, CO
80301, Attention of L. Bullock (Telecopy No.(303) 449-6995);
(b) if to the Stock Purchaser, to it at 110 East Hanover Avenue, Cedar
Knolls, NJ 07927-2095, Attention of J. Nicholson, Treasurer (Telecopy
No. (201)292-8770); and
(c) if to the Note Purchaser, to it at Mullerstrasse 178, 13353 Berlin,
Germany, Attention of Finance Department (Telecopy No.4930-468-11411);
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 12.02. Waivers; Amendments. (a) No failure or delay
by the Stock Purchaser or the Note Purchaser in exercising any right or power
hereunder or under the Convertible Loan Note or any Security Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Stock
Purchaser and the Note Purchaser hereunder and under the Convertible Loan Note
and the Security Documents are cumulative and are not exclusive of any rights
or remedies that it would otherwise have. No waiver of any provision of this
Agreement, the Convertible Loan Note or any Security Document or consent to any
departure by the Company therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) of this Section, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making
of a Loan shall not be construed as a waiver of any Default, regardless of
whether the Stock Purchaser or the Note Purchaser may have had notice or
knowledge of such Default at the time.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 55
49
(b) Neither this Agreement, the Convertible Loan Note nor any
Security Document nor any provision hereof or thereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Company, the Stock Purchaser and the Note Purchaser. The parties hereto
shall be bound by any waiver, amendment or modification authorized by this
Section regardless of whether the Convertible Loan Note shall have been marked
to make reference thereto, and any consent by the parties hereto (or their
assignees) pursuant to this Section shall bind any person subsequently
acquiring the Convertible Loan Note from it, whether or note such Convertible
Loan Note shall have been so marked.
SECTION 12.03. Expenses; Indemnity; Damage Waiver. (a) The
Company shall pay all out-of-pocket expenses incurred by the Stock Purchaser
and the Note Purchaser, including the fees, charges and disbursements of any
counsel for the Stock Purchaser or the Note Purchaser, in connection with the
enforcement or protection of their rights in connection with the Transaction
Documents, including their rights under this Section, or the rights of the Note
Purchaser in connection with the Loans made, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans. The Company will pay, and save the Stock Purchaser and the Note
Purchaser harmless from any and all liabilities (including interest and
penalties) with respect to any stamp, transfer and other Taxes (other than
income taxes), if any, which may be payable or determined to be payable on the
execution and delivery of this Agreement, the Convertible Loan Note or the
Research Agreement or the acquisition of the Company's capital stock pursuant
to this Agreement.
(b) The Company shall indemnify the Stock Purchaser and the
Note Purchaser, and each Related Party of the Stock Purchaser and the Note
Purchaser (each such Person being called an "Indemnitee") against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of any actual or prospective
claim, litigation, investigation or proceeding relating to or arising out of
any of the Transaction Documents or any agreement or instrument or transaction
contemplated thereby, any Loan or the use of the proceeds thereof, whether
based on contract, tort or any other theory and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are deter-mined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Company
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability,
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 56
50
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the transactions
contemplated hereby and in the other Transaction Documents, any Loan or the use
of the proceeds thereof.
(d) All amounts due under this Section shall be payable
promptly after written demand therefor.
SECTION 12.04. Successors and Assigns. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby, except
that the Company may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Stock Purchaser
and the Note Purchaser (and any attempted assignment or transfer by the Company
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of the
Stock Purchaser and the Note Purchaser) any legal or equitable right, remedy or
claim under or by reason of this Agreement.
(b) The Stock Purchaser or the Note Purchaser may assign to
one or more assignees all or a portion of its rights and obligations under this
Agreement (including in the case of the Note Purchaser, all or a portion of the
Commitments and the Loans at the time owing to it and the Convertible Loan Note
held by it); provided that (i) except in the case of an assignment to an
Affiliate of the Stock Purchaser or the Note Purchaser or an assignment
pursuant to Section 11.08, the Company must give its prior written consent to
such assignment (which consent shall not be unreasonably withheld), (ii) the
parties to such assignment shall execute and deliver to each other and the
Company a written document evidencing such assignment and, in the case of the
Note Purchaser, if such assignment shall include rights and obligations with
respect to the Convertible Loan Note, the Note Purchaser shall deliver to the
Company, on the effective date of such assignment, the Convertible Loan Note
but only if the Note Purchaser shall also cease to be a party hereto as
provided below in this paragraph, and (iii) such assignment shall comply with
Article VI hereof; provided further that any consent of the Company otherwise
required under this paragraph shall not be required if an Event of Default
under clause (e) or (f) of Article X has occurred and is continuing. From and
after the effective date specified in such document evidencing a valid
assignment of the assigning Stock Purchaser or Note Purchaser hereunder, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such written assignment, have the rights and obligations of such
Stock Purchaser or Note Purchaser under this Agreement, and the assigning Stock
Purchaser or Note Purchaser thereunder shall, to the extent of the interest
assigned by such written assignment, be released from its obligations under
this
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 57
51
Agreement (and, in the case of a written assignment covering all of the
assigning Stock Purchaser's or Note Purchaser's rights and obligations under
this Agreement, such Stock Purchaser or Note Purchaser, as applicable, shall
cease to be a party hereto but shall continue to be entitled to the benefits of
Section 12.03).
(c) Subject to and in accordance with the conditions set
forth in this Section, the Company, at its own expense, shall immediately
execute and deliver to the assignee party on the effective date of any written
assignment relating to the Convertible Loan Note a new Convertible Loan Note
payable to the order of the assignee representing Loans made pursuant to the
Commitments assumed by it pursuant to such written assignment and Commitments
to make Loans assumed by it and the assigning Note Purchaser, if it shall cease
to be a party hereto as provided above in paragraph (b), shall deliver the
Convertible Loan Note held by it to the Company for cancellation. The new
Convertible Loan Note delivered to such assignee shall be dated the date of the
original Convertible Loan Note issued hereunder and shall otherwise be in
substantially in the form of Exhibit A.
SECTION 12.05. Survival. All covenants, agreements,
representations and warranties made by the Company in the Transaction Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Transaction Document shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Transaction Documents and the making
of any Loans, regardless of any investigation made by any such other party or
on its behalf and notwithstanding that the Stock Purchaser or the Note
Purchaser may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any other amount payable under this Agreement
is outstanding and unpaid and so long as the Commitments have not expired or
terminated. The provisions of Section 12.03 shall survive and remain in full
force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the Commitments or the registration rights set forth in Article XI or the
termination of this Agreement or any provision hereof.
SECTION 12.06. Counterparts; Integration; Effectiveness.
This Agreement may be executed in counterparts (and by the parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement
and the other Transaction Documents constitute the entire agreement among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 7.01, this Agreement
shall become effective when the parties hereto exchange signed counterparts
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 58
52
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 12.07. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 12.08. Right of Setoff. If an Event of Default shall
have occurred and be continuing, the Note Purchaser and each of its Affiliates
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
obligations at any time owing by such Note Purchaser or Affiliate to or for the
credit or the account of the Company against any of and all the obligations of
the Company now or hereafter existing under this Agreement held by such Note
Purchaser, irrespective of whether or not such Purchaser shall have made any
demand under this Agreement and although such obligations may be unmatured.
The rights of the Note Purchaser under this Section are in addition to other
rights and remedies (including other rights of setoff) which such Note
Purchaser may have.
SECTION 12.09. Confidentiality and Nondisclosure. (a)
Each of the Company, the Stock Purchaser and the Note Purchaser agrees to be
bound by the provisions of Section 14.1 of the Research Agreement as if the
Company, the Stock Purchaser and the Note Purchaser were Parties (as defined
therein) to the Research Agreement.
(b) Notwithstanding the foregoing (but without limitation of
the provisions of Section 14.1 of the Research Agreement allowing disclosure of
information by any party), the Stock Purchaser and the Note Purchaser shall be
permitted to disclose the following information in connection with regular
disclosures to its shareholders or in connection with raising additional
financing or general marketing purposes: (i) the nature of its investment in
the Company; (ii) the nature of the Company's business; and (iii) any other
general nonproprietary information of the Company and its operations.
SECTION 12.10. Governing Law; Jurisdiction; Consent to
Service of Process. (a) This Agreement shall be construed in accordance with
and governed by the law of the State of New York.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 59
53
(b) The Company hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Transaction Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Transaction Document shall affect any
right that the Stock Purchaser or the Note Purchaser may otherwise have to
bring any action or proceeding relating to this Agreement or any other
Transaction Document against the Company or its properties in the courts of any
jurisdiction.
(c) The Company hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
other Transaction Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 12.01.
Nothing in this Agreement or any other Transaction Document will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.
SECTION 12.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 60
54
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 12.12. Headings. Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.
SECTION 12.13. Directly or Indirectly. Where any provision
in this Agreement refers to action to be taken by, or prohibited to be taken
by, any Person, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
SECTION 12.14. Standstill Provisions. During the period from
the date hereof through the third- year anniversary of the Initial Stock
Purchase Date (the "Standstill Period"), the Note Purchaser, the Stock
Purchaser and their respective Affiliates will not, without the prior written
consent of the Company: (i) acquire, directly or indirectly, by purchase or
otherwise, of record or beneficially, ownership of any Common Stock or other
voting securities of the Company if, as a result of such acquisition, the Note
Purchaser, the Stock Purchaser and their respective Affiliates would own more
than 19.5% of the Common Stock or other voting securities of the Company then
outstanding; (ii) make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act) to vote, or become a "participant" in any "election contest" (as
such terms are used in Rule 14a-11 under the Exchange Act); (iii) initiate or
propose any shareholder proposal for submission to a vote of shareholders with
respect to the Company or any of its Affiliates; or (iv) take any action,
individually or jointly with any partnership, limited partnership, syndicate or
other group or assist any person, corporation, entity or group in taking any
action it could not take individually under the terms of this Agreement;
provided, that nothing in this Section 12.14 will prohibit the Note Purchaser,
the Stock Purchaser or its Affiliates from: (i) participating in any of the
activities contemplated by the Transaction Documents; (ii) engaging in any
unsolicited discussion initiated by persons other than the Note Purchaser, the
Stock Purchaser or their Affiliates and communicating the substance of any such
discussion to the Company if deemed appropriate; (iii) communicating with
members of the Board of Directors of the Company from time to time in a manner
similar to other shareholders concerning the views of the Note Purchaser or the
Stock Purchaser regarding the Company's business policies; (iv) disposing of
its Common Shares in whole or in part or entering into agreements to do so, it
being understood that the provisions of this Agreement apply to the parties
hereto and their affiliates and their successors and legal representatives and
assigns, but do not run with the Securities; or (v) filing such documents as
are required by applicable law and not otherwise inconsistent with the terms of
this Agreement.
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
<PAGE> 61
55
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
RIBOZYME PHARMACEUTICALS, INC.,
by: /s/ Ralph E. Christoffersen
Title: President/CEO
SCHERING BERLINVENTURE CORPORATION,
by: /s/ John Nicholson
Title: Treasurer
SCHERING AKTIENGESELLSCHAFT,
by: /s/ Guenter Stock
Title: Vorstand
by: /s/ Wolfgang Kunze
Title: Head of Finance
Confidential portions ( [ ] ) have been omitted pursuant to regulation
240.25b-2(b) of the Securities Exchange Act of 1934 and have been filed
separately with the Commission.
