FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20459
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________.
Commission file number 0-20713
ENTREMED, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1959440
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 200
9610 Medical Center Drive
ROCKVILLE, MARYLAND
(Address of principal executive offices)
20850
(Zip code)
(301) 217-9858
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date.
CLASS OUTSTANDING AT AUGUST 9, 1996
--------------------------- -----------------------------
Common Stock $.01 Par Value 11,993,912
<PAGE>
ENTREMED, INC.
Table of Contents
PART I. FINANCIAL INFORMATION PAGE
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
June 30, 1996 and 1995, and the Six Months
Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30, 1996
and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2 -- Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II. OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults upon Senior Securities 11
Item 4 -- Submission of Matters to Vote of
Security Holders 11
Item 5 -- Other Information 11
Item 6 -- Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
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ENTREMED, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, December 31,
1996 1995
----------- -----------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $55,497,455 $6,885,099
Accounts receivable 100,000 2,500,000
Interest receivable 30,725 4,016
Prepaid expenses 212,438 -
-------------------- -------------------
Total current assets 55,840,618 9,389,115
-------------------- ------------------
Furniture and equipment, net 770,453 754,399
-------------------- ------------------
Other assets:
Deposits 1,294 894
Other 100,910 1,975
-------------------- ------------------
Total other assets 102,204 2,869
-------------------- ------------------
Total assets $56,713,275 $10,146,383
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 807,266 $ 367,250
Accrued liabilities 486,276 341,776
Capital lease obligations 306,232 396,113
Deferred revenues 2,594,166 2,594,166
-------------------- ------------------
Total current liabilities 4,193,940 3,699,305
-------------------- ------------------
Capital lease obligations, less current portion - 104,152
-------------------- ------------------
Deferred revenues, less current portion 2,391,666 2,741,666
-------------------- ------------------
Stockholders' equity:
Preferred stock, $1.00 par value
5,000,000 shares authorized, no shares issued and
outstanding as of June 30, 1996 (unaudited);
5,000,000 shares authorized, 3,000,000 shares of
Series A issued and outstanding as of December 31, 1995; - 3,000,000
Common stock, $.01 par value: 27,000,000 shares
authorized, 11,993,912 and 6,376,588 shares issued
and outstanding as of June 30, 1996
and December 31, 1995, respectively 119,939 63,766
Additional paid-in capital 72,635,047 21,024,465
Accumulated deficit (22,627,317) (20,486,971)
-------------------- ------------------
Total stockholders' equity 50,127,669 3,601,260
-------------------- ------------------
Total liabilities and stockholders' equity $56,713,275 $10,146,383
==================== ==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ENTREMED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
Three Months Ended Six months ended
June 30, June 30,
1996 1995 1996 1995
------------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenues:
Grant revenues $ - $ 88,098 $ - $ 88,098
Collaborative research & development 1,042,500 - 2,085,000 -
License fee 50,000 - 100,000 -
------------- -------------- ------------- --------------
Total revenues 1,092,500 88,098 2,185,000 88,098
------------- -------------- ------------- -------------
Expenses:
Research & development 1,246,045 1,115,838 3,309,315 2,712,515
General & administrative 472,224 466,724 1,243,635 922,066
------------- -------------- ------------- -------------
1,718,269 1,582,562 4,552,950 3,634,581
Interest expense (8,643) (15,234) (18,190) (15,234)
Interest income 169,474 5,777 245,795 11,336
------------- -------------- ------------- -------------
Net loss $ (464,938) $ (1,503,921) $ (2,140,345) $ (3,550,381)
============== =============== ============== ===============
Pro forma net loss per share $ (0.05) $ (0.17) $ (0.23) $ (0.39)
============= ============== ============= ===============
Pro forma weighted average number
of shares outstanding 9,237,136 8,850,484 9,274,585 9,000,500
============= ============== ============= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ENTREMED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Six Months Ended
June 30,
1996 1995
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,140,345)
(3,550,381)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 98,136 93,361
Deferred revenue (350,000) -
Changes in assets and liabilities:
Accounts receivable 2,500,000 -
Prepaid Expenses (212,438)
Other Assets (22) 14,877
Accounts payable 440,016 210,297
Accrued liabilities 144,500 152,433
Deposits (400) -
Interest receivable (26,709) -
--------------- --------------
Net cash provided (used) by operating activities 452,738 (3,079,413)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments 200,000 -
Purchases of furniture & equipment 113,104 48,475
--------------- --------------
Net cash used by investing activities 313,104 48,475
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale lease-back - 654,020
Payment of capital lease obligations (194,033) (90,354)
Proceeds from sales of common stock 48,666,755 2,168,765
Repayment of note payable - 510,000
Sales of preferred stock - -
--------------- --------------
Net cash provided by financing activities 48,472,722 3,242,431
--------------- --------------
Net increase in cash and cash equivalents 48,612,356 114,543
Cash and cash equivalents at beginning of period 6,885,099 218,619
--------------- --------------
Cash and cash equivalents at end of period $ 55,497,455 $ 333,162
=============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
AND NONCASH INVESTMENT AND FINANCING ACTIVITIES
Interest paid $ 18,190 $ 15,234
=============== ==============
Equipment purchased under capital lease $ - $ 122,909
=============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ENTREMED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited and condensed financial information of EntreMed,
Inc. ( the "Company") includes the accounts of its wholly owned subsidiary,
Cytokine Sciences, Inc. The Company formed Cytokine Sciences, Inc. in June
1996 for the purpose of acquiring the assets of Innovative Therapeutics,
Inc. See Note 5 - Subsequent Events.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, such financial statements do not include all of the
information and disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three- and six-month periods ended June 30,
1996 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. For further information, refer
to the Company's audited financial statements and footnotes thereto
included in the Company's Prospectus dated June 11, 1996.
2. NET LOSS PER SHARE
Pro Forma Net Loss Per Share
Net loss per common share and weighted average shares outstanding for
the periods presented give effect to the automatic conversion of
3,000,000 shares of preferred stock into 2,000,000 shares of common
stock as of the date of the Company's initial public offering on June
11, 1996. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin Number 83, common and convertible preferred stock
issued for consideration below the initial public offering price of
$15.00 and stock options and warrants issued with exercise prices below
the initial public offering price during the twelve-month period
preceding the initial filing of the registration statement, have been
included in the calculation of common shares, using the treasury stock
method, as if they were outstanding for all periods prior to the
effective date of the initial public offering. Net loss per common
share is computed based on the weighted average number of common shares
and, when dilutive, common equivalent shares (stock options and
warrants) outstanding during each of the periods.
6
<PAGE>
2. NET LOSS PER SHARE (Continued)
Historical Net Loss Per Share
The historical net loss per share amounts as required
by generally accepted accounting principles, which do not give effect
to the pro forma conversion of the preferred stock described above, are
as follows:
Three Month Period Ended Six Month Period Ended
JUNE 30, JUNE 30,
------------------------------- ------------------------
1996 1995 1996 1995
------------------------------- ------------------------
(unaudited) (unaudited)
Net loss per
share $ (0.06) $(0.22) $ (0.29) $ (0.51)
====== ====== ====== ======
Weighted average
common and common
equivalent shares
outstanding
during the period 7,696,696 6,850,484 7,494,366 7,000,500
========= ========= ======== =========
3. INITIAL PUBLIC OFFERING
On June 17, 1996, the Company completed an initial public offering of
3,200,000 shares of the Company's common stock at a price of $15.00 per
share. Bristol-Myers Squibb Company, a party to a collaboration with
the Company, also purchased from the Company in a private placement on
the closing of the offering 333,333 shares of the Company's common
stock at $15.00 per share. The initial public offering resulted in net
proceeds to the Company of approximately $43,500,000 and the private
placement with Bristol-Myers Squibb Company ("BMS") resulted in net
proceeds to the Company of an additional $5,000,000.
4. CONTINGENCIES
The Company is a party to certain litigation filed in August 1995 in
the United States District Court for the Eastern District of Tennessee
by Bolling McCool & Twist, a consulting firm. The suit relates to a
claim for services rendered in the approximate amount of $50,000 and
seeks a finder's fee in an unspecified amount in connection with the
Bristol-Myers collaboration. Due to the early stage of the proceedings,
the Company is unable to predict with certainty the eventual outcome of
the lawsuit. The Company is contesting the action vigorously and
believe that this proceeding will not have a material adverse effect on
the Company or its financial statements, although there can no
assurance that this will be the case.
5. SUBSEQUENT EVENT
In July 1996, the Company's previously wholly-owned subsidiary acquired
substantially all of the assets of Innovative Therapeutics, Inc. in
exchange for 15% of the common stock of Cytokine Sciences and research
funding commitments. Innovative Therapeutics, Inc. previously performed
early-stage research on methods for treating infectious diseases by
stimulating cellular immunity. Most of the research activities of
Innovative Therapeutics prior to the acquisition had been funded under
a collaboration agreement between Innovative Therapeutics and the
Company.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
GENERAL
Since its inception in September 1991, the Company has devoted
substantially all of its efforts and resources to sponsoring and conducting
research and development on its own behalf and through collaborations with
corporate partners and academic research and clinical institutions, and
establishing its facilities and hiring personnel. In December 1995, the Company
entered into a collaboration agreement with Bristol-Myers Squibb ("BMS") in
which BMS made an equity investment in the Company and agreed to pay certain
research and development fees and expenses, license fees, milestone payments,
and royalties on net sales, if any. Through June 30, 1996, with the exception of
license fees and research and development funding from BMS and certain research
grants, the Company had not generated any revenue from operations. The Company
anticipates its revenue sources for the next several years will be limited to
research grants and future collaboration payments from BMS and from other
collaborators under arrangements that may be entered into in the future. The
timing and amounts of such revenues, if any, will likely fluctuate and depend
upon the achievement of specified milestones.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and 1995
Revenues increased to $1,092,500 during the three months ended June
30, 1996 ("1996 Three Months") from approximately $88,000 during the three
months ended June 30, 1995 ("1995 Three Months"). This increase primarily
reflects revenue received under the BMS collaboration agreement, which was
executed in December 1995. The collaborative research and development fees
relate to the amortization over five years of a one-time payment of $2,500,000
received in December 1995 and the amortization of semi-annual payments of
$1,835,000 under the BMS collaboration agreement. The license fee represents the
amortization over five years of a one-time $1,000,000 license fee received in
December 1995 under the BMS collaboration agreement.
Research and development expenses increased by 12% from approximately
$1,116,000 in the 1995 Three Months to $1,246,000 in the 1996 Three Months.
Research and development expenditures include sponsored research payments to
academic collaborators and costs related to the Company's internal research
programs. The increase in research and development costs reflects increased
efforts in the Company's sponsored research and product development programs
related to its angiogenesis and cell permeation technologies, offset in part by
a reduction in expenditures relating to the development of vaccines.
General and administrative expenses remained relatively constant at
approximately $472,000 during the 1996 Three Months, as compared to
approximately $467,000 in the 1995 Three Months. The Company anticipates that
general and administrative expenses will increase in the future to support
increased management and administrative expenses related to research and
development activities and as a result of additional costs associated with being
a publicly-held company.
Interest income increased to $169,000 for the 1996 Three Months from
$6,000 for the 1995 Three Months. This increase is a result of the investment of
the proceeds received from the BMS collaboration agreement in December 1995 and
June 1996 and the capital raised in the Company's initial public offering.
8
<PAGE>
Six Months Ended June 30, 1996 and 1995
Revenues increased to $2,185,000 during the six months ended June 30,
1996 ("1996 Six Months") from approximately $88,000 during the six months ended
June 30, 1995 ("1995 Six Months"). This increase primarily reflects revenue
received under the BMS collaboration agreement, which was executed in December
1995. The collaborative research and development fees relate to the amortization
over five years of a one-time payment of $2,500,000 and the amortization of
semi-annual payments of $1,835,000 under the BMS collaboration agreement. The
license fee represents the amortization over five years of a one-time $1,000,000
license fee under the BMS collaboration agreement.
Research and development expenses increased by 22% from approximately
$2,713,000 in the 1995 Six Months to $3,309,000 in the 1996 Six Months. This
increase reflects increased efforts in the Company's sponsored research and
product development programs related to its angiogenesis and cell permeation
technologies, offset in part by a substantial reduction in expenditures relating
to the development of vaccines.
General administrative expenses increased by 35% in the 1996 Six
Months to approximately $1,244,000 from $922,000 in the 1995 Six Months. This
increase in general and administrative expenses primarily reflects a one time
charge of $233,000 related to future payments to a founder and former director
of the Company as compared to $45,000 of consulting fees to this individual
during the 1995 Six Months. The Company anticipates that general and
administrative expenses will increase in the future to support increased
research and development activities and as a result of additional costs
associated with being a publicly-held company.
Interest income increased to $246,000 in the 1996 Six Months from
$11,000 in the 1995 Six Months. This increase is a result of the investment of
additional working capital generated from the BMS collaboration agreement and
the capital raised in the Company's initial public offering.
9
<PAGE>
Liquidity and Capital Resources
At June 30, 1996, the Company had cash and cash equivalents of
approximately $55,500,000 and working capital of approximately $51,600,000,
primarily representing the net proceeds of the Company's initial public offering
and private placement with BMS in June 1996 together with funds received under
the BMS agreement entered into in December 1995. Prior to December 1995, the
Company funded its operations from proceeds of private placements of equity
securities which raised approximately $17,000,000, various grants totaling
approximately $437,000, and certain borrowings.
The Company's cash resources have been used to finance research and
development, including sponsored research, capital expenditures, including
leasehold improvements to the Company's laboratory facility, and general and
administrative expenses. Over the next several years, the Company expects to
incur substantial additional research and development costs, including costs
related to early-stage research in areas not reimbursed by BMS, preclinical and
clinical trials, increased administrative expenses to support its research and
development operations and increased capital expenditures for pilot
manufacturing capacity, various equipment needs and facility improvements.
As of August 1, 1996, the Company was a party to sponsored research
agreements and clinical trials requiring the Company to fund an aggregate of
approximately $10,669,000 through 1999 ( including $6,000,000 to Children's
Hospital and $2,837,500 to Cytokine Sciences, its 85% owned subsidiary) and
license agreements requiring milestone payments of up to $2,360,000 and
additional payments upon attainment of regulatory milestones.
Bristol-Myers Squibb is obligated to make additional semi-annual
payments to the Company of $1,835,000 in each of June and December through June
2000 and $365,000 in December 1996 as well as additional payments in the event
certain mostly late-stage regulatory milestones are achieved. BMS may terminate
the collaboration agreement and return the licensed technology to the Company at
any time upon six months' notice, in which event it would have no further
funding obligation to the Company.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
This information as set forth in Note 4 of "Notes to Condensed
Consolidated Financial Statements" appearing in Item 1 of Part I of this report
is incorporated herein by reference.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
.
On June 17, 1996, the Company completed an initial public offering of
3,200,000 shares of the Company's common stock at a price of $15.00
per share. Bristol- Myers Squibb Company ("BMS"), a party to a
collaboration with the Company, also purchased from the Company in a
private placement on the closing of the offering 333,333 shares of
the Company common stock at $15.00 per share. The initial public
offering resultied in net proceeds to the Company of approximately
$43,500,000 and the private placement with Bristol-Myers Squibb
Company ("BMS") resulted in net proceeds to the Company of an
additional $5,000,000.
In July 1996, the Company's previously wholly-owned subsidiary
acquired substantially all of the assets of Innovative Therapeutics,
Inc. in exchange for 15% of the common stock of Cytokine Sciences and
research funding commitments.
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) The following exhibits are filed with this report:
10.23 Agreement between Cytokine Sciences, Inc. and Innovative
Therapeutics, Inc.
10.24. Research Agreement between the Registrant and Cytokine
Sciences, Inc.
11 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed by Registrant during the
quarter ended June 30, 1996.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENTREMED, INC.
(Registrant)
Date: August 13, 1996 /S/ JOHN W. HOLADAY
---------------------
John W. Holaday, Ph.D.
President and Chief Executive
Officer
Date: August 13, 1996 /S/ JOHN C. THOMAS, JR.
-----------------------
John C. Thomas, Jr.
Chief Financial Officer
12
BACHNER, TALLY, POLEVOY & MISHER LLP
ATTORNEYS AT LAW
380 MADISON AVENUE
NEW YORK, NEW YORK 10017-2590
- - - - - - - - - - - - - - - - -
Marc S. Goldfarb (212) 687-7000
Fax: (212) 682-5729
August 14, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: ENTREMED, INC. (THE "COMPANY")
SEC FILE NO. 0-20713
- - - - - - - - - - - - - - -
Ladies and Gentlemen:
On behalf of our client EntreMed, Inc., pursuant to Regulation S-T,
enclosed please find one conformed copy of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996. Please note that the Company
inadvertently failed to file Exhibit 27 in connection with its recent initial
public offering (File No. 333-6711) and, as a result, a separate Exhibit 27 for
the period ended March 31, 1996 is being filed herewith. Manually executed
signature pages have been executed prior to the time of this electronic filing.
Very truly yours,
BACHNER, TALLY, POLEVOY & MISHER LLP
By: /s/ Marc S. Goldfarb
- - - - - - - - - - - - -
Marc S. Goldfarb
MSG/npm
Enclosures
cc: John W. Holaday, Ph.D.
John C. Thomas, Jr.
The Nasdaq Stock Market, Inc.
EXHIBIT 10.23
AGREEMENT
AGREEMENT, made and entered into as of this 2nd day of July, 1996, by
and between Cytokine Sciences, Inc., a Delaware corporation (the "Subsidiary")
and Innovative Therapeutics, Inc., a Delaware corporation (the "Corporation").
W I T N E S S E T H :
WHEREAS, the Corporation is engaged in the business of early stage
research on a method to treat disease by stimulating cellular immunity, a
specific area of the immune system, located at 4860 North Broadway, Denver,
Colorado 80216 (the "Facility," with the assets located at the Facility and the
above business conducted there being referred to in this Agreement as the
"Business"); and
WHEREAS, the Subsidiary is authorized to issue 10,000,000 shares of
common stock, $.01 par value per share (the "Subsidiary Shares") and all of the
presently issued and outstanding Subsidiary Shares are owned by EntreMed, Inc.,
a Delaware corporation ("EntreMed"); and
WHEREAS, the Corporation wishes to sell the Business to the Subsidiary
solely in exchange for voting shares of the Subsidiary in a transaction intended
to qualify within the meaning of Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code"), it being contemplated by the Subsidiary
and the Corporation that the Corporation will thereafter, as an integral part of
the transaction, distribute the shares of the Subsidiary to the Corporation's
shareholders in complete liquidation of the Corporation and dissolve; and
WHEREAS, the voting shares of the Subsidiary which the Corporation
shall receive hereunder shall constitute 15% of the issued and outstanding
voting shares of the Corporation as of the closing; and
-1-
<PAGE>
WHEREAS, EntreMed and the Subsidiary are entering into the
Stockholders' Agreement of even date (the "Stockholders' Agreement") and the
Corporation, the Subsidiary and others are entering into the Stock Restriction
Agreement of even date (the "Stock Restriction Agreement").
NOW, THEREFORE, the Subsidiary and the Corporation in consideration of
the mutual representations, warranties, covenants and agreements and upon the
terms and subject to the conditions hereinafter set forth, do hereby agree as
follows:
ARTICLE I
TRANSFER OF ASSETS AND ISSUANCE OF SHARES
1.01 ASSETS TO BE TRANSFERRED BY THE CORPORATION. Subject to the terms
and conditions hereof and except for the Retained Assets set forth in Section
1.02 hereto, at the Closing (as such term in defined herein), the Corporation
agrees to sell, assign, transfer and deliver to the Subsidiary and the
Subsidiary agrees to purchase, pay for and accept the sale, assignment, transfer
and delivery, from the Corporation of, the following assets of the Corporation
owned or employed in connection with or related to the operation of the Business
as of the Closing Date (as such term is defined herein), and wherever they exist
on the Closing Date:
(a) All equipment, furniture, furnishings, office equipment, fixtures,
displays, tools, models, prototypes, plates and engravings, blueprints,
periodicals, reference books, advertising material, and computer equipment and
software owned by or leased (as lessee) by the Corporation related to the
Business ("Fixed Assets"), including, without limitation the assets set forth in
Exhibit 1.01(a) hereto;
(b) All patents, trademarks, trademark registrations, copyrights,
copyright registrations, trade names, service marks and all registrations
thereof and all applications for any of the foregoing, if any, and all
-2-
<PAGE>
licenses granting the Corporation a right to use any patents, trademarks, trade
names, service marks or copyrighted materials which relate to the Business, and
all goodwill in the trade associated with any of the foregoing, including,
without limitation, all of the items listed in Exhibit 1.01(b) hereto, and all
inventions, improvements, formulas, trade secrets, designs, plans, patterns,
blueprints, engineering or other software, product drawings, licenses,
know-how, technical knowledge of any kind whatsoever, including, without
limitation, data on or from existing experiments and sequencing of amino acids
and nucleic acids, and all other related right and interests associated with
the Business to which the Corporation has any right of ownership or use (the
"Intangible Assets");
(c) All inventories and supplies of every kind and description relating
to the Business, wherever located (the "Inventory" or "Inventories");
(d) All of the Corporation's right, title and interest in, to the
following contracts (the "Contracts");
(i) Agreement dated August 20, 1991 between the Corporation
and National Jewish Center for Immunology and Respiratory Medicine;
(ii) Business Lease dated February 18, 1993, amended
February 6, 1995, between A&B Building Co. and the Corporation; and
(iii) Research and License Agreement dated August 1993
between the Corporation and EntreMed;
(e) All business records relating to any of the assets acquired or
liabilities assumed pursuant to this Agreement, including, without limitation,
all business correspondence and employment records (but only with respect to
employees employed by the Subsidiary as of the Closing Date) and all records
-3-
<PAGE>
relating to the Business, including, without limitation, all files,
invoices, forms, designs, diagrams, drawings, technical data, production
records, formulations, and any confidential or other business information which
has been reduced to writing;
(f) All licenses, permits, authorizations, franchises and other
approvals from any governmental or other authority used or held for use in
connection with the Business, and any correspondence in connection therewith or
in connection with an application therefor, whether or not such application was
approved;
(g) All unliquidated claims of every kind and description which the
Corporation may have against any person which claims arise out of, or relate to,
the Business, whether or not reflected on the balance sheet of the Corporation;
(h) All rights and benefits of the Corporation under any (i) employee
confidentiality agreements entered into by the Corporation, and (ii)
confidentiality and secrecy agreements entered into by the Corporation with
third parties, in each such case to the extent the obligations of the parties
thereto relate to the use or disclosure of information relating to the Business
or any Assets (the "Confidentiality Agreement Rights"); and
(i) All other properties and assets of every kind and nature, real or
personal, tangible or intangible owned by the Corporation, including, without
limitation, cash, cash equivalents, bank account deposits, certificates of
deposit and securities.
As used herein, the assets described in this Section 1.01 are referred
to as the "Assets." The transfer of the Assets to the Subsidiary pursuant to
this Agreement shall be free and clear of all mortgages, security interests,
liens, encumbrances, equities, claims and obligations of any nature
(collectively "Liens").
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1.02 ASSETS TO BE RETAINED BY CORPORATION. Anything contained herein to
the contrary notwithstanding, the Corporation shall not sell, and the Subsidiary
shall not acquire, the following assets of the Corporation (the "Retained
Assets"):
(a) The assets set forth on Exhibit 1.02(b) hereto.
1.03 ASSUMPTION OF LIABILITIES BY SUBSIDIARY. Subject to the terms and
conditions hereof, at the Closing the Subsidiary shall assume and agree to pay
and discharge the following, and only the following, liabilities and obligations
of the Corporation relating to the Business (the "Assumed Liabilities"): all
liabilities and obligations under or arising out of the Contracts accruing on
and after the Closing Date with respect to the operations of the Business on or
after the Closing Date.
1.04 LIABILITIES TO BE RETAINED. Notwithstanding anything contained
herein to the contrary, the Corporation shall retain, pay and perform, and the
Subsidiary shall not assume, any liabilities or obligations of the Corporation
(other than the liabilities and obligations set forth in Section 1.03 hereof)
(the "Retained Liabilities"), including, without limitation, the following:
(a) All liabilities and obligations incurred by the Corporation in
connection with the Business prior to the Closing Date;
(b) All liabilities and obligations for claims with respect to death,
personal injury and property damages relating to services or activities of the
Business by the Corporation prior to the Closing Date;
(c) All liabilities and obligations of the Corporation to employees of
the Corporation (including former and retired employees), including, without
limitation, accrued bonuses, vacations and sick time, any claims for workers'
compensation and other employee discrimination, health, accident and safety
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matters occurring prior to the Closing Date, whether such claims are made or
filed before or after the Closing Date;
(d) All liabilities and obligations of the Corporation with respect to
pending and threatened litigation of, and other legal proceedings relating to,
the Business and all future litigation relating to the Business to the extent
that such litigation is based upon events occurring prior to the Closing Date;
(e) All liabilities and obligations of the Corporation with respect to
the conduct of the Business prior to the Closing Date, including, without
limitation: (i) all liabilities and obligations relating to compliance with all
statutes, laws, rules and regulations applicable to or relating to the conduct
or operation of the Business prior to the Closing Date, including, without
limitation, any statutes, laws, rules and regulations relating to environmental
protection or quality; (ii) all liabilities and obligations arising out of the
disposal or release of hazardous substances by the Corporation prior to the
Closing Date; and (iii) all liabilities and obligations under or arising out of
the Contracts other than Assumed Liabilities;
(f) All liabilities and obligations specifically undertaken or retained
by the Corporation pursuant to Article VIII or any other provision of this
Agreement;
(g) All liabilities and obligations for legal, accounting or other fees
and expenses of the Corporation relating to the transactions contemplated by
this Agreement;
(h) All liabilities and obligations to dissenting shareholders, if any,
of the Corporation relating to the transactions contemplated by this Agreement;
(i) Any liabilities or obligations relating to, based in whole or in
part on events or conditions occurring or existing in connection with, or
arising out of, the shutdown by the Corporation of any operations or
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facilities utilized by the Corporation in connection with the Business,
including, without limitation, any action which could be construed as a "plant
closing" or "mass layoff," as those terms are defined in the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. Sections 2101-2109, or similar
federal or state legislation ("WARN") or any "employment loss," as defined in
WARN; and
(j) All tax liabilities of the Corporation arising by virtue of the
transactions contemplated hereby, including, without limitation, arising from
the failure of such transactions to qualify under Section 368(a)(1)(C) of the
Code.
1.05 ISSUANCE OF SHARES. In consideration of the sale and transfer of
the Assets and subject to the terms and conditions contained herein, the
Subsidiary will, at the Closing:
(a) assume the Assumed Liabilities; and
(b) deliver to the Corporation a certificate or certificates
representing 225,000 shares of Subsidiary Shares (such 225,000 shares referred
to herein as the "New Shares").
1.06 ALLOCATION OF PURCHASE PRICE. The Subsidiary and the Corporation
agree that the purchase price shall be allocated to the Assets in accordance
with Exhibit 1.06 hereto.
1.07 SALES AND TRANSFER TAXES. The Corporation shall pay all sales
taxes and other taxes, if any, applicable to the transactions contemplated by
this Agreement.
ARTICLE II
CLOSING
2.01 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Carella,
Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein, 6 Becker Farm Road, Roseland,
New Jersey 07068 on July 2, 1996 at 10:00 a.m. or at such other place or on
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such other date which the parties may mutually agree upon (the "Closing Date").
All transfers and other proceedings required to be made or taken at the
Closing shall be deemed to have taken place simultaneously, and no delivery
shall be considered to have been made until all such proceedings have been
completed. Upon completion of the Closing and for the purposes of this
Agreement, legal title, equitable title and risk of loss with respect to the
Assets shall be deemed to have passed to the Subsidiary as of 12:01 a.m. Eastern
Standard Time on the Closing Date.
2.02 CORPORATION'S DELIVERIES AT CLOSING. At the Closing, the
Corporation shall deliver to the Subsidiary the following:
(a) Bills of sale, assignments, certificates of title, and other
instruments of conveyance, transfer and assignment, in form and substance
reasonably satisfactory to the Subsidiary and the Subsidiary's counsel, as may
be necessary to effectively vest in the Subsidiary title to the Assets,
including the Intangible Assets, free and clear of all Liens;
(b) All consents from third parties required to permit the Corporation
to sell, transfer and assign to the Subsidiary the Assets, including any
consents under the Material Contracts (as hereinafter defined);
(c) A certificate executed by the Secretary of the Corporation, in a
form reasonably satisfactory to the Subsidiary and the Subsidiary's counsel,
attaching a true copy of the Certificate of Incorporation and By-Laws of the
Corporation and setting forth the resolutions duly adopted by the Shareholders
and the Board of Directors of the Corporation authorizing the execution of this
Agreement and the taking of any and all actions deemed necessary or advisable to
consummate the transactions contemplated hereby and certifying that such
resolutions have not been modified, amended or rescinded since the date of
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adoption thereof, and a certified incumbency certificate, dated as of the
Closing Date and executed by the Secretary or an Assistant Secretary of the
Corporation, certifying the incumbency and signature of the person or persons
executing, on behalf of the Corporation, this Agreement and each other
document, certificate or instrument delivered by the Corporation pursuant
hereto, and a current good standing certificate from each jurisdiction in which
the Corporation is authorized to do business stating the Corporation in good
standing therein;
(d) A certificate executed by a duly authorized officer of the
Corporation stating that:
(i) the warranties and representations made by the Corporation
in this Agreement were true correct when made and are true and correct
as of the Closing Date; and
(ii) all obligations of the Corporation required to have been
performed at or prior to the Closing have been satisfied as required
by this Agreement.
The statements contained in such certificate shall be deemed to be
representations and warranties of the Corporation which shall survive the
Closing;
(e) Actual or constructive receipt of the books and records of the
Business which the Subsidiary is purchasing pursuant hereto;
(f) An opinion from the Corporation's counsel, dated as of the Closing
Date, in the form of Exhibit 2.02(f) hereto;
(g) Copies of Consulting Agreements with EntreMed duly executed by
Dr. Charles H. Kirkpatrick, Martin J. McDermott and Stephen P. Eisenberg in
the form of Exhibit 2.02(g) hereto (collectively, the "Consulting
Agreements");
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(h) Copies of the Employment Agreements duly executed by Dr. Charles H.
Kirkpatrick, Martin J. McDermott and Stephen P. Eisenberg, in the form of
Exhibit 2.02(h) hereto (collectively the "Employment Agreements");
(i) Copies of the Stockholders' Agreement and Stock Restriction
Agreement executed by the Corporation and the other parties thereto; and
(j) Consent of the landlord under the Facility Lease to the assignment
thereof to the Subsidiary.
2.03 SUBSIDIARY'S DELIVERIES AT CLOSING. At the Closing, the Subsidiary
shall deliver to the Corporation the following:
(a) A certificate or certificates for the New Shares;
(b) Instruments of assumption in form and substance reasonably
satisfactory to the Corporation and to the Corporation's counsel, wherein the
Subsidiary assumes and agrees to pay and discharge the Assumed Liabilities;
(c) A certificate from the Secretary of the Subsidiary, in a form
reasonably satisfactory to the Corporation and the Corporation's counsel,
attaching a true copy of the Certificate of Incorporation and By-Laws of the
Subsidiary and setting forth the resolutions duly adopted by the Board of
Directors of the Subsidiary authorizing the execution of this Agreement and the
taking of any and all actions deemed necessary or advisable to consummate the
transactions contemplated hereby and certifying that such resolutions have not
been modified, amended or rescinded since the date of adoption thereof and a
certified incumbency certificate, dated as of the Closing Date and executed by
the Secretary or an Assistant Secretary of the Subsidiary, certifying the
incumbency and signature of the person or persons executing this Agreement on
behalf of the Subsidiary and each other document, instrument and certificate
delivered by the Subsidiary pursuant hereto;
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(d) A certificate executed by a duly authorized officer of the
Subsidiary stating that:
(i) the warranties and representations made by the Subsidiary
in this Agreement were true and correct when made and are true
and correct as of the Closing Date; and
(ii) all obligations of the Subsidiary under this Agreement
required to have been performed at or prior to the Closing have been
satisfied as required by this Agreement.
The statements contained in such certificate shall be deemed to
be representations and warranties of the Subsidiary which shall survive the
Closing;
(e) Copies of the Consulting Agreements duly executed by EntreMed; and
(f) Copies of the Employment Agreements duly executed by the
Subsidiary.
ARTICLE III
CONDITIONS PRECEDENT TO CLOSING
The consummation of the transactions contemplated by this Agreement is
expressly contingent upon the following:
3.01 CONDITIONS FOR THE CORPORATION. The obligation of the Corporation
to perform all of its obligations pursuant hereto at the Closing is subject to
the satisfaction of the following conditions, except to the extent that any such
conditions have been waived in writing by the Corporation at or prior to the
Closing:
(a) There shall be no breach of the covenants, conditions or
obligations of the Subsidiary as set forth in this Agreement and all
representations and warranties of the Subsidiary set forth in this Agreement or
in any document, instrument or certificate delivered pursuant hereto
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shall be true and correct in all material respects as of the Closing Date. In
the event of a breach by the Subsidiary, the Subsidiary shall disclose the
nature of such breach in writing to the Corporation at or before the Closing. In
the event of a breach, the Corporation may elect to: (i) terminate this
Agreement without liability to the Corporation; or (ii) waive such breach by
written waiver delivered to the Subsidiary at or prior to the Closing and
consummate the transactions contemplated by this Agreement. Notwithstanding
anything herein to the contrary, the Corporation may rely on the certificate of
the Subsidiary delivered at the Closing pursuant to Section 2.03(d) herein.
(b) Prior to or at the Closing, the Subsidiary shall have
delivered to the Corporation all items to be delivered by the Subsidiary
pursuant to this Agreement. In the event that the Subsidiary fails to deliver
all items required to be delivered to the Corporation pursuant hereto at or
prior to the Closing, the Corporation may elect to: (i) terminate this Agreement
without liability to the Corporation; or (ii) waive such failure by written
notice delivered to the Subsidiary at or prior to the Closing.
3.02 CONDITIONS FOR THE SUBSIDIARY. The obligation of the Subsidiary to
perform all of its obligations pursuant hereto at the Closing is subject to the
satisfaction of the following conditions, except to the extent that any such
conditions have been waived in writing by the Subsidiary at or prior to the
Closing:
(a) There shall be no breach of the covenants, conditions or
obligations of the Corporation as set forth in this Agreement and all
representations and warranties of the Corporation set forth in this Agreement or
set forth in any document, instrument or certificate delivered pursuant hereto
shall be true and correct in all material respects as of the Closing Date. In
the event of a breach by the Corporation, the Corporation shall disclose the
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nature of such breach in writing to the Subsidiary at or before the Closing.
In the event of a breach, the Subsidiary may elect to: (i) terminate this
Agreement without liability to the Subsidiary; or (ii) waive such breach by
written waiver delivered to the Corporation at or prior to the Closing and
consummate the transactions contemplated by this Agreement. Notwithstanding
anything herein to the contrary, the Subsidiary may rely on the certificate of
the Corporation delivered at the Closing pursuant to Section 2.02(d) herein.
(b) Prior to or at the Closing, the Corporation shall have delivered to
the Subsidiary all items to be delivered by the Corporation pursuant to this
Agreement. In the event that the Corporation fails to deliver all items required
to be delivered to the Subsidiary pursuant hereto at or prior to the Closing,
the Subsidiary may elect to: (i) terminate this Agreement without liability to
the Subsidiary; or (ii) waive such failure by written notice delivered to the
Corporation at or prior to the Closing.
3.03 NO PROHIBITION. No statute, law, rule, regulation or order of any
court or governmental agency shall be in effect, and no suit, action or
proceeding shall be pending, which enjoins, restrains or prohibits or seeks to
enjoin, restrain or prohibit or seeks damages in connection with, the
consummation of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORPORATION
The Corporation represents and warrants to the Subsidiary as follows:
4.01 ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease its
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properties and the Assets and to carry on the Business. The Corporation is duly
qualified to do business as a foreign corporation in the state of Colorado. The
Corporation does not own or lease property or engage in any activity in any
other jurisdiction which would require its qualification in such jurisdiction.
4.02 CAPITALIZATION. As more fully described in the capitalization
table set forth in Schedule 4.02 hereto, the authorized capital stock of the
Corporation immediately prior to the Closing is 225,000 shares of Common Stock,
of which 225,000 shares are issued and outstanding and held of record as set
forth in Schedule 4.02 hereto.
There are (1) no outstanding warrants, options, agreements, convertible
securities or other commitments or instruments pursuant to which the Corporation
is or may become obligated to issue, sell, repurchase or redeem any shares of
capital stock or other securities of the Corporation; (2) no preemptive,
contractual or similar rights to purchase or otherwise acquire shares of capital
stock of the Corporation pursuant to any provision of law, the Certificate of
Incorporation or By-laws of the Corporation (the "By-laws") or any agreement to
which the Corporation is a party, or otherwise; (3) no restrictions on the
transfer of capital stock of the Corporation imposed by the Certificate of
Incorporation or Bylaws of the Corporation, any agreement to which the
Corporation is a party, any order of any court or any governmental agency to
which the Corporation is subject, or any statute other than those imposed by
relevant state and federal securities laws; (4) no cumulative voting rights for
any of the Corporation's capital stock; (5) no registration rights under the
Securities Act of 1933, as amended, with respect to shares of the Corporation's
capital stock; (6) to the best of the Corporation's knowledge and belief, no
options or other rights to purchase shares of capital stock from stockholders of
the Corporation granted by such stockholders; and (7) no agreements, written
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or oral, between the Corporation and any holder of its securities, or, to the
best of the Corporation's knowledge and belief, among holders of its
securities, relating to the acquisition, disposition or voting of the
securities of the Corporation.
4.03 AUTHORIZATION OF THIS AGREEMENT, THE STOCK RESTRICTION AGREEMENT
AND THE STOCKHOLDERS' AGREEMENT. The execution, delivery and performance by the
Corporation of this Agreement, the Stock Restriction Agreement and the
Stockholders' Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action on the part
of the Corporation. Each of this Agreement, the Stock Restriction Agreement and
the Stockholders' Agreement has been duly and validly executed and delivered by
the Corporation and constitutes the legal, valid and binding obligation of the
Corporation, enforceable in accordance with its respective terms except to the
extent that such enforceability:
(a) may be limited by bankruptcy, insolvency, or other similar laws
relating to creditors' rights generally; and
(b) is subject to general principles of equity. The execution, delivery
and performance of this Agreement, the Stockholders' Agreement, the Stock
Restriction Agreement, the consummation of the transactions contemplated hereby
and thereby, and the compliance with the provisions hereof and thereof by the
Corporation, will not:
(c) violate any provision of law, statute, ordinance, rule or
regulation or any ruling, writ, injunction, order, judgment or decree of any
court, administrative agency or other governmental body applicable to the
Corporation or its properties or the Assets;
(d) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
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acceleration) under (i) any agreement, document, instrument, contract,
understanding, arrangement, note, indenture, mortgage or lease to which the
Corporation is a party or under which the Corporation or any of its assets is
bound or affected, (ii) the Corporation's Certificate of Incorporation, or
(iii) the By-laws; or
(e) result in the creation of any Lien upon any of the properties or
Assets of the Corporation.
4.04 LITIGATION INVOLVING THE CORPORATION. There is no action,
proceeding or investigation pending in any court or before any governmental
authority or arbitration panel ("Litigation") and to Corporation's knowledge, no
such Litigation is threatened, which seeks to enjoin, restrain, prohibit or
obtain damages in respect of the consummation of the transactions contemplated
hereby.
4.05 CONSENTS AND APPROVALS. No authorization, consent, approval or
other order of, or declaration to or filing with, any governmental agency or
body is required for the valid authorization, execution, delivery and
performance by the Corporation of this Agreement, the Stock Restriction
Agreement and the Stockholders' Agreement.
4.06 BUSINESS OF CORPORATION. The Business is the only business
conducted by the Corporation since its formation. The Corporation has never
conducted business in any name other than Innovative Therapeutics, Inc. The
Corporation has no, and has never had any, ownership interest in or affiliation
or business relationship with Innovative Therapeutic Services, Inc.
4.07 FINANCIAL INFORMATION. Attached hereto as Schedule 4.05 are the
balance sheets of the Corporation as of December 31, 1993, 1994 and 1995, and
January 31, 1996, February 29, 1996, March 31, 1996 and April 30, 1996, and the
income statements of the Corporation for the twelve months ending on
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December 31, 1993, 1994 and 1995, and for one month
ending January 31, 1996, for two months ending February 29, 1996, for three
months ending March 31, 1996 and for four months ending April 30, 1996. Such
financial statements are accurate and complete and are in accordance with the
books and records of the Corporation and fairly present the financial position
and the results of operations of the Corporation as of the dates and for the
periods set forth therein and have been prepared in accordance with generally
accepted accounting principles consistently applied by the Corporation. There
were no liabilities or obligations of the Corporation with respect to the
Business or otherwise as of the dates of such balance sheets of the type which
should be reflected on a balance sheet prepared in accordance with generally
accepted accounting principles which are not set forth in such balance sheets.
4.08 COMPLIANCE WITH APPLICABLE LAWS. The business and operations of
the Corporation as they relate to the Business or otherwise have been and are
currently conducted in compliance with all federal, state, local and foreign
laws, statutes, rules and regulations in effect from time to time applicable to
the Business or applicable to the business and operations conducted by the
Business. All permits and licenses required by any federal, state, local or
foreign law, rule or regulation and necessary for the operation of the Business
by the Corporation as currently being conducted have been obtained and are
currently in effect and are set forth in Schedule 4.08 hereto and shall pass to
the Subsidiary at Closing without any authorization, consent, approval or order
of, or declaration to or filing with any governmental agency or body. The
Corporation either is in compliance with the Clinical Laboratories Improvement
Act of 1967, as amended (the "CLA"), or the CLA does not apply to the
Corporation.
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4.09 TITLE TO ASSETS; LEASES. (a) The Corporation has good and
marketable title to all the Assets free and clear of all Liens. The Assets
constitute all of the assets which are being used in the Business and all that
are required to operate the Business as presently operated. The Fixed Assets are
in good and serviceable condition and are suitable for the uses intended, and
their use conforms to applicable law and regulations. All of the Assets will on
the Closing Date be physically located at the Facility. Prior to the Closing
Date, the Assets will be used exclusively for the benefit of the Corporation in
the Business.
(b) The Corporation does not own any real property and is not
a party to or bound by any contract or agreement for the purchase or sale of any
real property. All real property and buildings and Assets held under leases by
the Corporation and used in the conduct of the Business are held under valid,
subsisting and enforceable leases (copies of which are set forth in Schedule
4.09 hereto). With respect to each of such leases: (i) the Corporation has not
received any notice or communications from the landlord (or lessor) advising or
claiming that the Corporation is in default under said leases or that the
Corporation has failed to perform or observe any term, agreement or obligation
on the part of the Corporation to be performed thereunder; (ii) there exists no
event which, with the giving of notice or lapse of time or both, would become a
default under any of said leases on the part of the Corporation; (iii) all sums
required to be paid by the Corporation to the landlord (or lessor) or any other
party pursuant to said leases have been paid when due; and (iv) to the best
knowledge of the Corporation, the landlord (or lessor) has performed and
observed all of the obligations, covenants and responsibilities, terms and
provisions on its part to be performed and observed under said leases. The
premises and Assets leased pursuant to any of said leases are operated in
conformity with all applicable laws, ordinances and
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regulations, including zoning, building, environmental and occupational safety
and health requirements, private covenants and restrictions, and requirements
imposed by insurance carriers or underwriters, without variance or exception and
the Corporation has not received any notice of violation of the foregoing.
4.10 INTELLECTUAL PROPERTY AND TRADE SECRETS. Set forth in Exhibit
1.01(b) hereto is a list of all United States and foreign patents, trademarks,
trade names, copyrights, and applications therefor, used by the Corporation in
the conduct of the Business (the "Intellectual Property") and a description in
reasonable detail of all trade secrets or know how used by the Corporation in
the conduct of the Business (the "Trade Secrets"). The Corporation owns or
possesses adequate and valid licenses or other rights to use all Intellectual
Property; and the conduct of the Business as now being conducted by the
Corporation and as contemplated to be conducted in the future does not conflict
with any valid patents, trademarks, trade names or copyrights of others except
as may be permitted under valid license agreements to which the Corporation is a
party and which are set forth in Exhibit 1.01 (b) hereto. There are no claims,
demands or proceedings pending or, to the knowledge of the Corporation,
threatened by any third party pertaining to or challenging the validity of or
the Corporation's right to use any of the Intellectual Property or Trade
Secrets. The Corporation knows of no infringement by any party of its rights
with respect to any of the Intellectual Property and the Corporation knows of no
facts which would render any of the Intellectual Property invalid or
unenforceable.
4.11 CONTRACTS; COMMITMENTS. Except as set forth in Schedule 4.11
hereto, the Corporation is not a party to any lease, agreement, indenture,
mortgage, loan agreement, note, guaranty, agreement granting a Lien or negative
pledge on any Assets or properties of the
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Corporation, commitment, employment agreement, pension plan, profit sharing
plan, collective bargaining agreement, employee benefit plan, other agreement
with respect to employment or compensation, joint venture agreement, agreement
with sales representatives or distributors, agreement for the purchase or sale
of supplies, materials, services or finished product, or other contract (each
such matter set forth on Schedule 4.11 being referred to as a "Material
Contract"). The Corporation is not in default under any Material Contract, and
to the knowledge of the Corporation, no other party or parties are in default
under any Material Contract. Between the date hereof and the Closing Date, the
Corporation will not enter into any contract or commitment except in the usual
and ordinary course of business and consistent with its business practices
heretofore followed. The Corporation is not renegotiating or making any payments
in lieu of performing any such contracts or commitments. The Corporation is not
subject to any purchase commitment in excess of its normal business requirements
or requiring the payment of prices in excess of market prices in effect at the
time such commitment was made.
4.12 NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, there has not
occurred any material adverse change in the condition (financial or otherwise),
assets, properties or business of the Corporation. Since such date the
Corporation has: (a) not incurred any liabilities, fixed or contingent, matured
or unmatured or otherwise, not sold any material assets and not entered into any
contracts or agreements except as set forth in Schedule 4.12 hereto; (b)
conducted the Business only in the ordinary course; and (c) not been affected by
any fire, explosion, accident, casualty, labor disturbance, condemnation, flood,
embargo, act of God or cessation or interruption of business, whether or not
covered by insurance.
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4.13 LITIGATION INVOLVING THE BUSINESS. Except as set forth in Schedule
4.13 hereto, the Corporation is not a party to, and, to the knowledge of the
Corporation, the Corporation is not threatened with, any Litigation or other
proceeding. Except as set forth in Schedule 4.13 hereto, there are no actions,
suits, proceedings, investigations or claims pending, or, to the knowledge of
the Corporation, threatened against the Corporation with respect to the
Business, the properties, operations, assets or affairs of the Corporation, at
law or in equity, before or by any federal, state, municipal or any other
governmental court, department, commission, agency or instrumentality, domestic
or foreign; nor, to the knowledge of the Corporation, is there any basis for any
such claim, suit, proceeding or investigation. The Corporation has not admitted
in writing its inability to pay its debts generally as they become due, filed or
consented to the filing against it of a petition in bankruptcy or a petition to
take advantage of any insolvency act, made an assignment for the benefit of
creditors, consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, or had a petition in bankruptcy
filed against it, been adjudicated a bankrupt, or filed a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other laws or of the United States or any other jurisdiction.
4.14 TAXES. The Corporation has filed in proper form all federal,
state, local and foreign Tax (as such term is defined herein) returns required
to be filed prior to the date hereof, which relate to the Assets or to the
operations of the Business, and all such returns are true and correct. All
taxes, fees, assessments and charges due and payable by the Corporation on or
before the date hereof pursuant to said returns have been paid. There is no
unpaid interest, penalty or addition to tax due or claimed to be due from, or
any unpaid tax deficiency, determination or assessment
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outstanding against the Corporation and there is no basis therefor. The Federal
income tax returns of the Corporation have never been audited by the Internal
Revenue Service. Neither the Internal Revenue Service nor any other taxing
authority is now asserting nor, to the best of the Corporation's knowledge and
belief, is threatening to assert, against the Corporation any deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith, and the Corporation does not know of any such deficiency or basis for
such a deficiency or claim.
4.15 SECURITIES LAWS. Neither the Corporation nor anyone acting on its
behalf has offered securities of the Corporation for sale to, or solicited any
offers to buy the same from, or sold securities of the Corporation to, any
person or organization, in any case so as to subject the Corporation, its
promoters, directors and/or officers to any liability under the Securities Act
of 1933, as amended (the "Securities Act"), the Securities and Exchange Act of
1934, as amended, or any state securities or "blue sky" law (collectively, the
"Securities Laws").
4.16 INVESTMENTS IN OTHER PERSONS. Except as indicated in Schedule
4.16, (a) the Corporation has not made any loan or advance to any person or
entity which is outstanding on the date hereof, nor is it committed or obligated
to make any such loan or advance, and (b) the Corporation has never owned or
controlled and does not currently own or control, directly or indirectly, any
subsidiaries and has never owned or controlled and does not currently own or
control any capital stock or other ownership interest, directly or indirectly,
in any corporation, association, partnership, trust, joint venture or other
entity.
4.17 ERISA. The Corporation has not made and is not required to make
any contributions to any pension, defined benefit or defined contribution plans
for its employees which are subject to the Federal Employee Retirement Income
Security Act of 1974, as amended
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("ERISA"). Except for the health insurance plan disclosed in Schedule 4.18
hereto (the "Benefit Plan"), the employees of the Corporation and independent
contractors who contract with the Corporation to perform services with respect
to the operation of the Business do not benefit under and are not covered by (as
a current employee or a future retiree) any employee benefit plan, as defined in
Section 3(3) of ERISA, or any other severance, bonus, salary continuation,
medical, disability, life, retirement, insurance, pension, profit-sharing,
deferred compensation plan, agreements or arrangements whether written or oral,
qualified or nonqualified, funded or unfunded, foreign or domestic, any trust,
escrow, or similar agreement related thereto, whether or not funded, nor has the
Corporation's shareholders, officers, or directors, taken any action directly or
indirectly to obligate the Corporation to institute any such employee plan. Any
Benefit Plan intended to be a qualified plan within the meaning of Sections
401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the "Code")
(the "Qualified Plans") has been determined by the Internal Revenue Service to
be so qualified. There is no fact or circumstance which would adversely affect a
Qualified Plan's qualified status or compliance as described above. The
Corporation has complied with all terms and conditions of, and (except as
disclosed on the balance sheets which are part of Schedule 4.07 hereto) have no
liabilities or obligations with respect to, a Benefit Plan, and (except as
disclosed on said balance sheets), all benefits relating to periods of service
under a Qualified Plan are fully funded. All (i) insurance premiums required
with respect to, (ii) benefits, expenses, and other amounts due and payable
under, and (iii) contributions, transfers, or payments required to be made to,
any Benefit Plan through the Closing Date will have been paid on or before the
Closing Date, and, with respect to any insurance policy (including any stop-loss
coverage) providing funding for benefits under any Benefit Plan, there is no
liability
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of the Corporation, in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other actual or contingent liability, nor would there be any
such liability if such insurance policy was terminated on the date hereof. All
Benefit Plans have been maintained in full compliance with all laws, regulations
and orders, including, without limitation, ERISA and the Code, of all
governmental authorities, and all notices, reports and other filings required to
be delivered or filed under applicable law with respect to the Benefit Plans
have been duly and timely delivered or filed. The Corporation and the members of
any controlled group as defined in Section 414(b), (c), (m) and (o) of the Code
of which the Corporation is a member, have not incurred or taken any action, and
no action or event has occurred, that could be expected to cause the Corporation
or the Subsidiary to incur any liability (i) under Section 412 of the Code or
Title IV of ERISA with respect to any accumulated funding deficiency under any
employee benefit plan that is a single-employer plan, within the meaning of
Section 4001(a)(15) of ERISA, (ii) on account of a partial or complete
withdrawal as provided in Section 4201 or 4212 of ERISA from any multiemployer
plan, within the meaning of Section 3(37) of ERISA, or on account of any unpaid
contributions to any such multiemployer plan, (iii) for any tax or penalty under
Section 4975 of the Code or Section 502(i) of ERISA for any prohibited
transaction, within the meaning of Section 4975 of the Code or Section 406 of
ERISA, (iv) on account of a distress or involuntary plan termination under
Section 4062(b)(1) of ERISA, or (v) under Section 4980B of the Code or under
Sections 502 and 601 through 607 of ERISA on account of a failure to comply with
the continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"). The Corporation has complied in all
respects with the continuation coverage requirements of group health plans under
the Code, ERISA and state law applicable to a Benefit
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Plan with respect to the transactions contemplated by this Agreement. No Benefit
Plan is a multiemployer plan within the meaning of Section 3(37) of ERISA or a
plan that is subject to Title IV of ERISA; the Corporation has not sponsored,
maintained, contributed to or been obligated to contribute to any such
multiemployer plan or plan subject to Title I of ERISA during the last six
years. The Subsidiary has been provided with true, correct and complete copies
of each of the Benefit Plans and any trust agreements relating to the Benefit
Plans and any other information relating to the Benefit Plans reasonably
requested by the Subsidiary.
4.18 INSURANCE. Schedule 4.18 lists all insurance policies carried by
the Corporation covering its properties and business. The Corporation is not in
default with respect to its obligations under any insurance policy maintained by
it.
4.19 BOARD OF DIRECTORS. Except as provided in Schedule 4.19 attached
hereto, the Corporation has not extended any offer or promise or entered into
any agreement, arrangement, understanding or otherwise, whether written or oral,
with any person or entity by which the Corporation has agreed to allow such
person or entity to participate, in any way, in the affairs of the Board of
Directors of the Corporation, including without limitation, appointment or
nomination as a member, or right to appear at, or receive the minutes of, a
meeting of the Board of Directors of the Corporation.
4.20 ENVIRONMENTAL MATTERS.
(a) The Corporation has not used, generated, manufactured,
refined, treated, transported, stored, handled, disposed, transferred, produced,
processed or released (together defined as "Release") any Hazardous Materials
(as hereinafter defined) in any manner or by any means in violation of any
Environmental Laws (as hereinafter defined). To the best of the
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Corporation's knowledge and belief, the Corporation and any prior owner or
tenant of the Property (as hereinafter defined) have not Released any Hazardous
Material or other pollutant or effluent into, on or from the Property in a way
which can pose a risk to human health or the environment nor is there a threat
of such Release. As used herein, the term "Property" shall mean the property
subject to the Facility Lease and any land, buildings and laboratory facilities
owned or leased by the Corporation or as to which the Corporation now has any
duties, responsibilities (for clean-up, remedy or otherwise) or liabilities
under any Environmental Laws, or as to which the Corporation or any subsidiary
of the Corporation may have such duties, responsibilities or liabilities because
of past acts or omissions of the Corporation or any such subsidiary or their
predecessors, or because the Corporation or any such subsidiary or their
predecessors in the past was such an owner or operator of, or bore some other
relationship with, such land, buildings and/or laboratory facilities, all as
more fully described in Schedule 4.20(a) hereto. The term "Hazardous Materials"
shall mean any flammable explosives, petroleum products, petroleum byproducts,
radioactive materials, hazardous wastes, hazardous substances, toxic substances
or related materials as defined by the Environmental Laws.
(b) No notice of lien under any Environmental Laws has been
filed against any Property of the Corporation.
(c) The use of the Property in or for the Business complies
with and is a lawful, permitted and conforming use in all respects under all
applicable building, fire, safety, subdivision, zoning, sewer, environmental,
health, insurance and other laws, ordinances, rules, regulations and plan
approval conditions of any governmental or public body or authority.
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(d) Except as described in Schedule 4.20(d) hereto, to the
best of the Corporation's knowledge and belief, the Property does not contain:
(i) asbestos in any form; (ii) urea formaldehyde foam insulation; (iii)
transformers or other equipment which contain dialectic fluid containing levels
of polychlorinated biphenyls; (iv) radon; or (v) any other chemical, material or
substance, the exposure to which is prohibited, limited or regulated by a
Federal, state or local government agency, authority or body, or which, even if
not so regulated, to the best of the Corporation's knowledge and belief, may or
could pose a hazard to the health and safety of the occupants of the Property or
the owners or occupants of property adjacent to or in the vicinity of the
Property.
(e) The Corporation has not received written notice that the
Corporation is a party potentially responsible for costs incurred at a cleanup
site or corrective action under any Environmental Laws. The Corporation has not
received any written requests for information in connection with any inquiry by
any Governmental Authority concerning disposal sites or other environmental
matters. As used herein, "Governmental Authority" shall mean any nation or
government, any federal, state, municipal, local, provincial, regional or other
political subdivision thereof, and any entity or person exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government. Schedule 4.20(e) attached hereto identifies all locations where
Hazardous Materials used in whole or in part by the businesses of the
Corporation or resulting from the businesses, facilities or properties of the
Corporation have been stored or disposed of by or on behalf of the Corporation.
As used herein, "Environmental Laws" shall mean all applicable federal, state
and local laws, ordinances, rules and regulations that regulate, fix liability
for, or otherwise relate to, the handling, use (including use in industrial
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processes, in construction, as building materials, or otherwise),
storage and disposal of hazardous and toxic wastes and substances, and to the
discharge, leakage, presence, migration, threatened Release or Release (whether
by disposal, a discharge into any water source or system or into the air, or
otherwise) of any pollutant or effluent. Without limiting the preceding
sentence, the term "Environmental Laws" shall specifically include the following
federal and state laws, as amended: Comprehensive Environmental
Response,Compensation and Liability Act of 1980, 42 U.S.C. 9601 ET. SEQ.;
Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901 ET. SEQ.; Federal
Water Pollution Control Act, 33 U.S.C. 1251 ET. SEQ.; and Clean Air Act, 42
U.S.C. 7401 ET, SEQ. (f) The Corporation has maintained all environmental and
operating documents and records substantially in the manner and for the time
periods required by the Environmental Laws and any other laws, regulations or
orders and has never conducted an environmental audit except as disclosed in
Schedule 4.20(f) hereto. For purposes of this Section 4.20(f), an environmental
audit shall mean any evaluation, assessment, study or test performed at the
request of or on behalf of a Governmental Authority, including, but not limited
to, a public liaison committee, but does not include normal or routine
inspections, evaluations or assessments which do not relate to a threatened or
pending charge, restraining order or revocation of any permit, license,
certificate, approval, authorization, registration or the like issued pursuant
to the Environmental Laws and any other law, regulation or order. (g) No part of
the Property of the Corporation is (i) located within any wetlands area, (ii)
subject to any wetlands regulations, or (iii) included in or is proposed for
inclusion in,
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or abuts any property included in or proposed for inclusion in, the National
Priority List or any similar state lists.
(h) The stockholders, as stockholders, of the Corporation have
had no control over, or authority with respect to, the waste disposal operations
of the Corporation.
4.21 INVENTORY. The Corporation has no inventory.
4.22 CURRENT EMPLOYEES. Included as Schedule 4.22 hereto is a list of
all current employees of the Corporation as of the date of this Agreement.
Schedule 4.22 includes their annual or hourly rate of compensation, date of
hire, and position. There are, to the knowledge of the Corporation, no threats
of strikes or work stoppages by any of such employees of the Corporation. The
Corporation is not a party to any contract or agreement with a labor union or
any local or subdivision thereof, and has not been charged with any unresolved
unfair labor practices. The Corporation has paid all compensation due to and
payroll taxes (including withheld "trust fund taxes") with respect to current
and past employees of the Corporation. The Corporation is not in arrears in the
payment of remuneration to any employee including any bonuses, accrued vacations
or sick leave (it being understood that the Corporation pays its hourly and
salaried employees on a regular, i.e., weekly, monthly, etc., basis at the end
the respective pay periods). The Corporation knows of no pending Workmen's
Compensation claim by any employee of the Corporation. The Corporation agrees to
discharge, and represents and warrants as of the Closing Date that it has
discharged, all of its employees as of the date of Closing. The Corporation does
not have any information or facts indicating that any employee of the
Corporation will refuse employment if offered to said employee by the
Subsidiary. The Corporation has no collective bargaining agreements, employment
agreements, bonus, profit
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sharing, pension or deferred compensation agreements or plans or any other
employee benefit plans except as set forth in Schedule 4.18 (the health
insurance plan) and Schedule 4.11 (employment agreements).
Each current employee of or consultant to the Corporation who has or is
proposed to have access to confidential and/or proprietary information of the
Corporation is a signatory to, and is bound by, an agreement with the
Corporation relating to noncompetition, nondisclosure, proprietary information
and assignment of patent, copyright and other intellectual property rights in
substantially the form attached hereto as Exhibit 4.22.
To the best of the Corporation's knowledge and belief, no employee of
or consultant to the Corporation is in violation of any term of any employment
contract, patent disclosure agreement or any other contract or agreement
including, but not limited to, those matters relating (i) to the relationship of
any such employee with the Corporation or to any other party as a result of the
nature of the Corporation's business as currently conducted, or (ii) to unfair
competition, trade secrets or proprietary information.
4.23 BANK ACCOUNTS. Set forth in Schedule 4.23 hereto is a list of the
names, locations and account numbers of all banks or other institutions in which
the Corporation has checking, deposit or lock box accounts together with the
names of all persons authorized to draw thereon and the amounts therein as of
the date hereof. The Corporation has no cash except as set forth in Schedule
4.23, and the Corporation owns no cash equivalents, certificates of deposit or
securities, except as set forth in Schedule 4.23.
4.24 FULL DISCLOSURE. None of the information supplied by the
Corporation herein or in the exhibits and schedules hereto contains any untrue
statement of a material fact or omits to
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state a material fact required to be stated herein or necessary in order to make
the statements herein, in light of the circumstances under which they are made,
not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY
The Subsidiary hereby represents and warrants to the Corporation
as follows:
5.01 ORGANIZATION; POWER AND AUTHORITY. The Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
carry on its business as now being conducted. The Subsidiary is duly qualified
to do business and is in good standing as a foreign corporation in all states or
countries where such qualification is necessary because of the assets owned by
it therein or because of the nature of the business conducted by it therein.
5.02 DUE AUTHORIZATION AND EXECUTION; EFFECT OF AGREEMENT. The execution,
delivery and performance by the Subsidiary of this Agreement and the documents
executed and delivered by it in connection herewith and the consummation by the
Subsidiary of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action required to be taken on the part of
the Subsidiary. This Agreement and the documents executed and delivered by the
Subsidiary in connection herewith have been duly and validly executed and
delivered by the Subsidiary and constitute the legal, valid and binding
obligation of the Subsidiary, enforceable in accordance with their terms, except
to the extent that such enforceability:
(a) may be limited by bankruptcy, insolvency or other similar
laws relating to creditors' rights generally; and
(b) is subject to general principles of equity.
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The execution, delivery and performance by the Subsidiary of this Agreement and
the documents executed and delivered by it in connection herewith and the
consummation by the Subsidiary of the transactions contemplated hereby and
thereby will not, with or without the giving of notice or the lapse of time, or
both, but subject to obtaining any required consents, approvals, authorizations
or exemptions:
(i) violate any provision of any law, rule or regulation to which
the Subsidiary is subject;
(ii) violate any order, judgment or decree applicable to the
Subsidiary; or
(iii) conflict with or result in a breach of or default under,
any term or condition of the Subsidiary's Certificate of Incorporation or
By-Laws or any agreement or other instrument to which the Subsidiary is a party
or by which the Subsidiary or its assets may be bound.
5.03 CONSENTS. No consent, approval or authorization of,
exemption by, or filing with, any governmental or regulatory authority or any
other third party is required in connection with the execution, delivery and
performance by the Subsidiary of this Agreement and the documents executed and
delivered by the Subsidiary in connection herewith, except for consents,
approvals, authorizations, exemptions and filings, if any, (a) which have been,
or by the Closing Date will be, obtained; or (b) which the Corporation is
required to obtain or make. 5.04 LITIGATION. There is no Litigation pending, or
to the Subsidiary's knowledge, threatened: (a) against the Subsidiary in
connection with the conduct of its business, which if adversely determined would
materially adversely affect the condition (financial or otherwise) or business
of the Subsidiary; or
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(b) which seeks to enjoin, restrain, prohibit or obtain damages in
respect of the consummation of the transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS OF THE CORPORATION
The Corporation hereby covenants and agrees with the Subsidiary
as follows:
6.01 ACCESS TO INFORMATION. From the date hereof through the Closing
Date, the Corporation shall, subject to applicable fiduciary, privacy and other
legal obligations, afford to the Subsidiary and the Subsidiary's accountants,
counsel and other representatives, reasonable access, upon reasonable notice, to
all of the assets, properties, books, contracts, commitments and records of the
Corporation relating to the Business and the Subsidiary and the Subsidiary's
accountants, counsel and other representatives may make abstracts thereof.
6.02 COOPERATION BY THE CORPORATION. The Corporation will use its
best efforts to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable the Corporation to effect the transactions contemplated hereby, and the
Corporation will otherwise use its best efforts to cause the consummation of the
transactions contemplated hereby in accordance with the terms and conditions
hereof.
6.03 FURTHER ASSURANCES. At any time and from time to time after the
Closing Date, the Corporation shall, at the request of the Subsidiary, execute
and deliver any further instruments or documents and take all such further
action as the Subsidiary may reasonably request in order to consummate more
effectively the transactions contemplated hereby and to vest in the Subsidiary
any and all of the Assets contemplated to be sold pursuant to this Agreement.
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6.04 CONDUCT OF BUSINESS PENDING CLOSING. The Corporation covenants and
agrees that, from and after the date hereof and prior to the Closing, unless the
Subsidiary shall otherwise agree in writing or expressly permitted or
contemplated by this Agreement:
(a) the Business shall be conducted in the ordinary course and
consistent with past practice, and the Corporation shall not purchase or sell
any Assets or make any material changes in its operations and will maintain all
of the Assets in good repair, order and condition and take all steps necessary
to maintain all of the Intellectual Property;
(b) the Corporation shall use its reasonable efforts to keep
available the services of its key officers and employees and to preserve the
good will of those having business relationships with it;
(c) the Corporation shall not (i) increase in any manner the
compensation of any of its employees, except in the ordinary course of business
and after consultation with the Subsidiary, (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit to any officer or
employee, whether past or present, or (iii) enter into any additional pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay retirement or
other employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement with or for the benefit of any officer or employee, whether
past or present;
(d) the Corporation shall not agree, in writing or otherwise, to
take any of the actions prohibited by the foregoing clauses (a) through (c);
(e) maintain all books, accounts and records relating to the
Business in the usual, regular and ordinary manner on a basis consistent with
prior years;
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(f) the Corporation shall not lease or create a Lien against any
Assets, except for Liens for current taxes not yet due; and
(g) the Corporation shall maintain in effect its existing
insurance coverages of all types, including but not limited to, public liability
and property damage, or procure substantially similar substitute insurance
policies with financially sound and reputable insurance companies in at least
such amounts and against such risks as are currently covered by such policies
and are reasonably satisfactory to the Subsidiary.
6.05 CONFIDENTIALITY. (a) Unless and until the Closing is consummated,
the Corporation shall keep confidential any information which has been furnished
to it by or on behalf of the Subsidiary in connection with the transactions
contemplated by this Agreement (the "Subsidiary Confidential Information"), and
shall use the Subsidiary Confidential Information solely in connection with the
transactions contemplated by this Agreement. In the event this Agreement is
terminated, the Corporation shall return all documents received from the
Subsidiary which contain Subsidiary Confidential Information to the Subsidiary
and shall destroy any writings made by or on behalf of the Corporation which
writings were based upon or contain any Subsidiary Confidential Information.
Subsidiary Confidential Information does not include information which: (i) is
or becomes (but only when it becomes) generally available to the public other
than as a result of disclosure in violation of this Section 6.05; or (ii) is or
becomes (but only when it becomes) available to the Corporation on a
non-confidential basis from a source other than the Subsidiary or its agents or
advisors, provided that such source is not bound by a confidentiality agreement
with the Subsidiary in respect thereof.
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(b) The Corporation may disclose the Subsidiary Confidential
Information to any of its directors, officers, employees, agents and advisors
who need to know such Subsidiary Confidential Information in connection with the
transactions contemplated by this Agreement; provided, however, prior to making
such disclosure, the Corporation shall inform all such persons and entities of
the confidential nature of such Subsidiary Confidential Information.
Notwithstanding the foregoing, the Corporation may disclose Subsidiary
Confidential Information if required by legal process or by operation of
applicable law (but only to the extent so required), provided that the
Corporation shall first promptly notify the Subsidiary thereof so that the
Subsidiary may seek an appropriate protective order.
(c) In the event that the transactions contemplated hereby are
consummated, from and after the Closing Date, the Corporation agrees to use its
best efforts to keep confidential any and all information and data with respect
to the Assets which is not otherwise available to the public; provided, however,
notwithstanding the foregoing the Corporation shall be free to disclose any such
information and data during the course of or in connection with any litigation,
arbitration or other proceeding based upon or in connection with the subject
matter of this Agreement; provided that the Corporation shall first promptly
notify the Subsidiary thereof so that the Subsidiary may seek an appropriate
protective order.
(d) Without intending to limit the remedies available to the
Subsidiary due to any breach of this Section 6.05, the Corporation agrees that
damages at law would be an insufficient remedy to the Subsidiary in the event of
any breach by the Corporation of this Section 6.05 and that the Subsidiary shall
be entitled to injunctive relief or other equitable remedies in the event of any
such breach.
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6.06 NOTICE OF ACTIONS AND PROCEEDINGS. The Corporation shall promptly
notify the Subsidiary of any actions, suits, claims, investigations or
proceedings commenced or, to the Corporation's knowledge, threatened against,
relating to or involving or otherwise affecting the Corporation which, if
pending on the date hereof, would have been required to have been disclosed in
writing pursuant to Sections 4.04 or 4.13 hereof or which relate to the
consummation by the Corporation of the Closing.
6.07 CHANGE OF NAME. The Corporation hereby agrees that immediately
after the Closing it shall take all actions and make all filings required under
the laws of the State of Colorado and the laws of any other jurisdiction in
which it is qualified to transact business, in order to change its name to
another name that is different from and not similar to its present name and any
trademark or servicemark used by the Corporation and shall coordinate the taking
of such actions and the making of such filings with the Subsidiary and its
counsel.
6.08 COVENANT NOT-TO-COMPETE. The Corporation agrees that during a five
(5) year period commencing on the Closing Date ("the Term"), it will not,
directly or indirectly:
(a) on its own account or as agent, stockholder, partner, owner,
employer, employee (or otherwise) of another solicit any business which is the
same or similar or competitive with that of the Subsidiary (including, without
limitation, with respect to the Business) from the customers of the Subsidiary
on the date hereof or thereafter during the Term; or
(b) engage in a business which is the same or similar to or
competitive with that of the Subsidiary (or any subsidiaries or affiliates)
(including, without limitation, the Business) in the Territory (defined
hereinafter). "Territory" means the United States; or
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(c) contact or approach, directly or indirectly, for its own individual
purposes or those of another, any employee of the Subsidiary, without regard to
his or her location, for the purpose of attempting to or actually soliciting or
hiring that employee on its own account, or for the account of another; or
(d) acquire any ownership interest in or lend money to (or act as a
guarantor or surety in connection with a loan by a third party to) any person,
partnership, corporation or other entity engaged in any business (or subsidiary
or division) referred to in clause (b) above; provided however, that the
limitation contained in this clause (d) shall not apply to the ownership of less
than five percent (5%) of the voting stock of a publicly held company.
The parties agree that no adequate remedy at law exists for the
violation of the covenants contained in this Section and that such covenants
shall be enforceable by specific performance and injunctive relief or at law in
an action for damages at the election of the Subsidiary. If any court, in an
unappealed final decision, holds that the restrictions on competition provided
for in this Section are too broad in scope as to area, activity or time period
covered thereby, such area, activity or time period may be reduced to the extent
such court deems reasonable. The parties agree that they shall be bound by the
terms of such lesser covenant held by that court to be reasonable and
enforceable.
The parties hereto hereby acknowledge and agree that (i) the Subsidiary
would be irreparably injured in the event of a breach by the Corporation of any
of its obligations under this Section, (ii) monetary damages would not be an
adequate remedy for any such breach, and (iii) the Subsidiary shall be entitled
to injunctive relief, in addition to any other remedy which it may have, in the
event of any such breach. It is hereby also agreed that the existence of any
claims
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which the Corporation may have against the Subsidiary, whether under this
Agreement or otherwise, shall not be a defense to the enforcement by the
Subsidiary of any of its rights under this Section.
The undertakings of the Corporation contained in this Section shall be
in addition to, and not in lieu of, any obligations which it may have with
respect to the subject matter hereof, whether by contract, as a matter of law or
otherwise.
ARTICLE VII
COVENANTS OF THE SUBSIDIARY
The Subsidiary hereby covenants and agrees with the Corporation
as follows:
7.01 COOPERATION BY THE SUBSIDIARY. The Subsidiary will use its
best efforts to secure all consents, approvals, authorizations, exemptions and
waivers from third parties as shall be required in order to enable the
Subsidiary to effect the transactions contemplated by this Agreement, and will
otherwise use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof. 7.02
CONFIDENTIALITY. (a) Unless and until the Closing is consummated, the Subsidiary
shall keep confidential any information which has been furnished to it by or on
behalf of the Corporation in connection with the transactions contemplated by
this Agreement (the "Corporation Confidential Information"), and shall use the
Corporation Confidential Information solely in connection with the transactions
contemplated by this Agreement. In the event this Agreement is terminated, the
Subsidiary shall return all documents received from the Corporation which
contain Corporation Confidential Information to the Corporation and shall
destroy any writings made by or on behalf of the Subsidiary which writings were
based upon or contain any
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Corporation Confidential Information. Corporation Confidential Information does
not include information which: (i) is or becomes (but only when it becomes)
generally available to the public other than as a result of disclosure in
violation of this Section 7.02; or (ii) is or becomes (but only when it becomes)
available to the Subsidiary on a non-confidential basis from a source other than
the Corporation or its agents or advisors, provided that such source is not
bound by a confidentiality agreement with the Corporation in respect thereof.
(b) The Subsidiary may disclose Corporation Confidential
Information to any of its directors, officers, employees, agents, advisors and
prospective lenders who need to know such Corporation Confidential Information
in connection with the transactions contemplated by this Agreement; provided,
however, prior to making such disclosure, the Subsidiary shall inform all such
persons and entities in writing of the confidential nature of such Corporation
Confidential Information. Notwithstanding the foregoing, the Subsidiary may
disclose Corporation Confidential Information if required by legal process or by
operation of applicable law (but only to the extent so required), provided that
the Subsidiary shall first promptly notify the Corporation thereof so that the
Corporation may seek an appropriate protective order.
(c) Without intending to limit the remedies available to the
Corporation due to any breach of this Section 7.02, the Subsidiary agrees that
damages at law would be an insufficient remedy to the Corporation in the event
of any breach by the Subsidiary of this Section 7.02 and that the Corporation
shall be entitled to injunctive relief or other equitable remedies in the event
of any such breach.
7.03 FURTHER ASSURANCES. At any time and from time to time after
the Closing Date, the Subsidiary shall, at the request of the Corporation,
execute and deliver any further instruments
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or documents and take all such further action as the Corporation may reasonably
request in order to consummate more effectively the transactions contemplated
hereby and the assumption of the Assumed Liabilities by the Subsidiary.
ARTICLE VIII
ADDITIONAL COVENANTS CONCERNING TAXES
8.01 TAXES.
(a) DEFINITION.
For purposes of this Agreement, the terms "Tax" and "Taxes" shall
include: (i) all taxes, assessments, levies, imports, duties, license fees,
registration fees, withholdings, or other similar governmental charges,
including, without limitation, income taxes, franchise taxes, gross income or
gross receipts taxes, stamp taxes, transfer taxes or fees, sales and use taxes,
real and personal property taxes, excise taxes, ad valorem taxes, withholding
taxes, unemployment insurance, severance taxes, minimum taxes and social
security taxes by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and (ii) any interest, penalties or
additions to tax imposed on any Tax described in clause (i) hereof.
(b) PAYMENT.
(1) The Corporation shall retain the liability for the payment
of all Taxes with respect to the Business on account of all periods up to and
including the Closing Date.
(2) The Corporation shall be responsible for, and shall
indemnify the Subsidiary from and hold the Subsidiary harmless against, any
liability for Taxes for the period ending on or prior to the Closing Date
arising from or attributable to the operation of the Business.
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(3) The Subsidiary shall be responsible for, and shall
indemnify the Corporation from and hold the Corporation harmless against, any
liability for Taxes for the period beginning after the Closing Date arising from
or attributable to the operations of the Business after the Closing Date.
(c) COOPERATION. After the Closing Date, the Subsidiary and
the Corporation shall make available to the other, as reasonably requested, and
to any taxing authority, all information, records or documents relating to any
Tax liabilities of the Business and shall preserve all such information, records
and documents until the expiration of any applicable statute of limitations or
extensions thereof.
ARTICLE IX
TERMINATION PRIOR TO CLOSING
9.01 TERMINATION. This Agreement may be terminated at any time
prior to the Closing only as follows:
(a) By the mutual written consent of the Subsidiary and the
Corporation;
(b) By the Subsidiary, in writing, without liability to the
Corporation (provided that the Subsidiary is not otherwise in default or in
breach of this Agreement), if the Closing shall not have occurred on or before
July 15, 1996 or such later date upon which the Corporation and the Subsidiary
may agree in writing; or (c) By either the Corporation or the Subsidiary, in
writing, without liability to the terminating party (provided that the
terminating party is not otherwise in default or in breach of this Agreement),
if the other party shall: (i) fail to perform in any material respect any of its
agreements contained herein and required to be performed prior to the Closing;
or (ii) materially
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breach any of its representations, warranties or covenants contained herein,
provided however, that no such termination shall become effective unless the
terminating party has notified the other party in writing of its intent to
terminate, such notice to be sent at least 15 days prior to the intended date of
termination and specifying the nature of the failure or breach giving rise to
such termination, and provided further that such notice to terminate shall be
void if the recipient thereof has cured such failure or breach within such 15
day period.
9.02 EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article shall terminate all obligations of the parties hereunder, except
for the obligations under Sections 6.05, 7.02, 10.08 and 10.09 hereof, provided
however, that termination pursuant to clause (b) or (c) of Section 9.01 shall
not relieve the defaulting or breaching party from any liability to the other
party hereto.
ARTICLE X
MISCELLANEOUS
10.01 SURVIVAL. The representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant hereto or
in connection herewith and the covenants and agreements contained herein to be
performed or complied with at the Closing, prior to the Closing Date or in
connection with the Closing shall survive the Closing Date for an unlimited
period of time.
10.02 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the sole
understanding of the parties with respect to the subject matter hereof. No
amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
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10.03 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; provided however, that this
Agreement may not be assigned by either party without the express prior written
consent of the other party. No assignment by any party shall release such party
of its obligations hereunder. Any assignment without the consent required
hereunder shall be null and void.
10.04 INDEMNIFICATION. (a) As used in this Section 10.04, a "Claim"
shall mean and include any and all liabilities, obligations, losses, damages,
deficiencies, claims, assessments, penalties, actions, proceedings, suits,
judgments, costs and expenses (including reasonable attorneys' fees).
(b) The Subsidiary shall indemnify and hold the Corporation
harmless from and against, and will reimburse the Corporation for, any and all
Claims to the extent that such Claims are based upon, arise out of, or relate
to: (i) any obligation or liability of the Corporation assumed by the Subsidiary
pursuant to the provisions hereof; (ii) any misrepresentation or breach of any
warranty made by the Subsidiary in this Agreement or in any certificate,
instrument or agreement delivered by the Subsidiary pursuant hereto; and (iii)
the nonfulfillment or breach of any term, covenant, agreement or condition to be
performed by the Subsidiary pursuant to this Agreement.
(c) The Corporation shall indemnify and hold the Subsidiary
harmless from and against, and will reimburse the Subsidiary for, any and all
Claims to the extent that such Claims are based upon, arise out of, or relate
to: (i) any obligation or liability of the Corporation not assumed by the
Subsidiary pursuant to the provisions hereof; (ii) any misrepresentation or
breach of any warranty made by the Corporation in this Agreement or in any
certificate, instrument or
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agreement delivered by the Corporation pursuant hereto; and (iii) the
nonfulfillment or breach of any term, covenant, agreement or condition to be
performed by the Corporation pursuant to this Agreement.
(d) Upon obtaining knowledge thereof, the indemnified party
shall promptly notify the indemnifying party in writing of any claim or demand
which it has determined has given or could reasonably be expected to give rise
to a right of indemnification under this Agreement. If such claim or demand
relates to a claim asserted by a third party, the indemnifying party shall
notify the indemnified party within 30 days if it intends to contest any such
claim or demand and shall have the right to employ counsel reasonably acceptable
to the indemnified party, and the indemnified party shall cooperate in the
defense of any such claim or demand. So long as the indemnifying party is
defending in good faith any such claim or demand asserted by a third party, the
indemnified party shall not settle or compromise such claim or demand. The
indemnified party shall make available to the indemnifying party and its agents
all records and other materials in its possession reasonably required for use in
contesting any third party claim or demand. Whether or not the indemnifying
party so elects to defend any such claim or demand, the indemnified party shall
not have any obligation to do so and the indemnified party shall not be deemed
to have waived any rights it may have against the indemnifying party hereunder
with respect to any such claim or demand by not defending same.
(e) Subject to the indemnifying party's right to defend third
party claims as set forth above, the indemnifying party shall reimburse the
indemnified party within 45 days upon demand for any claim made or loss suffered
by the indemnified party in respect of any liability, loss, damage or expense to
which this Section 10.04 relates.
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10.05 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which when taken together shall constitute the same instrument.
10.06 HEADINGS. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
10.07 WAIVER. Any of the terms or conditions of this Agreement may be
waived in writing at any time by the party which is entitled to the benefits
thereof. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of such provision at any time in the future or a
waiver of any other provision hereof.
10.08 BROKER'S FEES. Each of the parties hereto: (a) represents and
warrants that it has not taken and will not take any action that would cause the
other party hereto to have any obligation or liability to any person for a
finders' or brokers' fee; and (b) agrees to indemnify the other party hereto for
any breach of the foregoing representation and warranty, whether or not the
Closing occurs.
10.09 EXPENSES. The Corporation and the Subsidiary shall each pay
all costs and expenses incurred by it or on its behalf in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, fees and expenses of its own financial consultants, accountants and
counsel.
10.10 NOTICES. Any notice, request, instruction, consent or other
document to be given hereunder by either party hereto to the other party shall
be in writing and delivered personally or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
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IF TO THE SUBSIDIARY:
Cytokine Sciences, Inc.
c/o EntreMed, Inc.
9610 Medical Center Drive
Suite 200
Rockville, MD 20850
Attention: President
AND TO:
Donald S. Brooks, Esq.
Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, NJ 07068
IF TO THE CORPORATION:
Innovative Therapeutics, Inc.
4860 North Broadway
Denver, CO 80216
Attn: Charles H. Kirkpatrick
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the fifth day after the day
it is so placed in the mail.
10.12 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Maryland applicable to agreements made
and to be performed wholly within such jurisdiction.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf as of the date first above written.
[SEAL]
ATTEST: CYTOKINE SCIENCES, INC.
By: /s/ John Thomas, Secretary By: /s/ Dr. John Holaday, President
-------------------------- -------------------------------------
John Thomas, Secretary Dr. John Holaday, President
[SEAL]
ATTEST: INNOVATIVE THERAPEUTICS, INC.
By: /s/ M. Hugo Menk, Secretary By: /s/ Dr. Charles Kirkpatrick, Presdient
--------------------------- --------------------------------------
M. Hugo Menk, Secretary Dr. Charles Kirkpatrick, President
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LIST OF EXHIBITS
EXHIBIT NUMBER EXHIBIT
1.01(a) Fixed Assets
1.01(b) Intangible Assets
1.02(b) Retained Assets
1.06 Purchase Price Allocation
2.02(f) Corporation's Counsel Legal Opinion
2.02(g) Form of Consulting Agreements
2.02(h) Form of Employment Agreements
4.22 Form of Employee Non-Competition, etc. Agreement
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LIST OF SCHEDULES
SCHEDULE NUMBER SCHEDULE
4.02 Capitalization
4.07 Financial Statements
4.08 Permits and Licenses
4.09 Leases
4.11 Contracts
4.12 Liabilities
4.13 Litigation
4.16 Investments and Loans
4.18 Insurance
4.19 Board of Directors
4.20(a) Property
4.20(d) Substances
4.20(e) Hazardous Material Locations
4.20(f) Environmental Audits
4.22 Employees
4.23 Bank Accounts and any Certificates
of Deposit, Securities, etc.
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Exhibit 10.84
MASTER CONSULTING AGREEMENT
This Master Consulting Agreement (hereinafter "Agreement") when signed by both
parties will set forth the terms and conditions between Interneuron
Pharmaceuticals, Inc. (hereinafter "Interneuron") and Quintiles, Inc.
(hereinafter "Quintiles") under which Quintiles agrees to provide consulting
services as described below to Interneuron as hereinafter set forth.
1.0 TERM. This Agreement shall commence on the date of execution and shall
continue until terminated as hereinafter provided by either party.
2.0 CONFIDENTIALITY. It is understood that during the course of this
Agreement, Quintiles and its employees may be exposed to data and
information which is confidential and proprietary to Interneuron. All
such data and information (hereinafter "Interneuron Confidential
Information") written or verbal, tangible or intangible, made
available, disclosed, or otherwise made known to Quintiles and its
employees as a result of services under this Agreement shall be
considered confidential and shall be considered the sole property of
Interneuron. All information regarding clinical trials or clinical
trial management and all information regarding Quintiles' operations,
including but not limited to Quintiles Property (as defined in Section
3.0 below), disclosed by Quintiles to Interneuron in connection with
this Agreement is proprietary, confidential information belonging to
Quintiles (the "Quintiles Confidential Information", and together with
the Interneuron Confidential Information, the "Confidential
Information"). The Confidential Information shall be marked as
confidential or otherwise represented by the disclosing party as
confidential either before or within a reasonable time after its
disclosure. The Confidential Information shall be used by the receiving
party and its employees only for purposes of performing the receiving
party's obligations hereunder. Each party agrees that it will not
reveal, publish or otherwise disclose the Confidential Information of
the other party to any third party without the prior written consent of
the disclosing party, provided that the foregoing obligations shall not
apply to Confidential Information which:
(a) is or becomes generally available to the public other than as a
result of a disclosure by the receiving party;
(b) becomes available to the receiving party on a non-confidential
basis from a source which is not prohibited from disclosing such
information by a legal, contractual or fiduciary obligation to the
disclosing party;
(c) the receiving party develops independently of any disclosure by
the disclosing party;
(d) was in the receiving party's possession or known to the receiving
party prior to its receipt from the disclosing party; or
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(e) is required by law to be disclosed.
This obligation of confidentiality and non-disclosure shall remain in
effect for a period of five years after the termination of this
Agreement.
3.0 SERVICES TO BE PROVIDED. Quintiles shall provide strategic planning,
expert consultation, clinical, statistical, statistical programming,
data processing, data management, regulatory, clerical, and project
management services as requested by Interneuron. The specific details
of each assignment or task will be separately negotiated and contracted
for in writing subject to the terms and conditions of this Agreement.
All data and information necessary for Quintiles to conduct project
assignments will be forwarded by Interneuron to Quintiles. All data and
information generated or derived by Quintiles as the result of services
performed by Quintiles under this Agreement shall be and remain the
exclusive property of Interneuron. Any inventions that may evolve from
the data and information described above or as the result of services
performed by Quintiles under this Agreement shall belong to Interneuron
and Quintiles agrees to assign all inventions and/or patents to
Interneuron. It is acknowledged that Quintiles is possessed of certain
computer technical expertise and software which have been independently
developed by Quintiles without the benefit of any information provided
by Interneuron. Interneuron and Quintiles agree that any computer
software programs, statistical methodologies or other formulae or
analyses used by Quintiles under or during the term of this Agreement
are the product of Quintiles' technical expertise possessed and
developed by Quintiles prior to the date of the Agreement and are the
sole and separate property of Quintiles. It is further acknowledged
that Quintiles' professional staff is possessed of certain technical
expertise and conceptual expertise in areas of drug development which
have been independently developed by Quintiles without the benefit of
any information provided by Interneuron. Interneuron and Quintiles
agree that such technical expertise processes, methods, approach or
analyses used by Quintiles under or during the term of the Agreement
are the product of Quintiles' technical expertise possessed and
developed by Quintiles prior to the date of this Agreement and are the
sole and separate property of Quintiles.
At the completion of services by Quintiles, all materials and all other
data, regardless of the method of storage or retrieval, shall either be
(i) delivered to Interneuron at its offices in Lexington,
Massachusetts, and in such form as is then currently in the possession
of Quintiles, (ii) retained by Quintiles for Interneuron for a period
of two years, or (iii) disposed of, at the direction and written
request of Interneuron unless such materials are otherwise required to
be stored or maintained by Quintiles as a matter of law or regulation.
4.0 INDEPENDENT CONTRACTOR RELATIONSHIP. For the purposes of this
Agreement, the parties hereto are independent contractors and nothing
contained in this Agreement shall be construed to place them in the
relationship of partners, principal and agent, employer/employee or
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joint venturers. Quintiles agrees that it shall have no power or right
to bind or obligate Interneuron, nor shall Quintiles hold itself out as
having such authority.
5.0 PERFORMANCE OF SERVICES. In carrying out its responsibilities under
this Agreement, Quintiles agrees to assure that these services are
conducted in compliance with, when appropriate, any applicable protocol
and specifications and with all applicable laws, rules and regulations
including, but not limited to, the U.S. Food, Drug and Cosmetic Act and
the regulations promulgated pursuant thereto.
6.0 CONFLICT OF AGREEMENT. Quintiles represents and warrants to Interneuron
that it is not a party to any agreement which would prevent it from
fulfilling its obligations under this Agreement and that during the
term of this Agreement, Quintiles will not enter into an agreement to
provide services which would in any way prevent it from providing the
services contemplated under this Agreement.
7.0 PUBLICATION. From time to time it may be to the mutual interest of
Quintiles and Interneuron to publish articles relating to services
performed as a part of this Agreement. Publication of project
assignment results in whole or in part, shall be within the sole and
absolute discretion of Interneuron. Results may not be published or
referred to, in whole or in part, without the prior expressed written
consent of Interneuron. Interneuron reserves the unqualified right to
reject any article utilizing any data generated from Quintiles'
services under this Agreement before such article is presented or
submitted for publication.
8.0 LIMITATION OF LIABILITY. Neither Quintiles nor its affiliates nor any
of its or their respective directors, officers, employees or agents
shall have any liability whatsoever under this Agreement or otherwise
except with respect to damages attributable to Quintiles' gross
negligence or intentional misconduct. Notwithstanding the foregoing,
neither Quintiles, nor its affiliates, nor any of its or their
respective directors, officers, employees or agents shall have any
liability for any special, incidental, or consequential damages,
including, but not limited to the loss of opportunity, loss of the use
of any data or information supplied hereunder, loss of revenue or
profit, in connection with or arising out of this Agreement, the
services performed by Quintiles hereunder or the existence, furnishing,
functioning, or Interneuron's use of any information, documentation or
services provided pursuant to this Agreement, even if Quintiles shall
have been advised of the possibility of such damages. In addition, in
no event shall the collective, aggregate liability of Quintiles and its
affiliates and its and their respective directors, officers, employees
and agents under this Agreement exceed the amount of compensation
actually received by Quintiles from Interneuron pursuant to this
Agreement for the assignment or task from which such liability arose;
provided, however, if Quintiles is determined to have acted in a manner
that constitutes gross negligence or intentional misconduct, then, with
respect to such acts, the collective, aggregate liability shall not
exceed 1.5 times the amount of compensation specified above (but in no
event shall the collective, aggregate liability of Quintiles and its
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affiliates and its and their respective directors, officers, employees
and agents under this Agreement for all tasks and assignments exceed
the amount of compensation actually received by Quintiles from
Interneuron pursuant to this Agreement).
9.0 INDEMNIFICATION. Interneuron shall indemnify, defend and hold harmless
Quintiles, its affiliates and its and their respective directors,
officers, employees and agents (each, an "Indemnified Party") from and
against any and all losses, claims, actions, damages, liabilities,
costs and expenses, (including reasonable attorney's fees and court
costs) (collectively, "Losses"), relating to or arising from or in
connection with this Agreement (including, without limitation, any
Losses alleged to arise from or in connection with any study, test,
product or potential product to which this Agreement relates) or any
litigation, investigation or other proceeding relating to any of the
foregoing, except to the extent such Losses are determined to have
resulted solely from gross negligence or intentional misconduct of the
Indemnified Party seeking indemnity hereunder. Interneuron shall not
indemnify, hold harmless, or defend an Indemnified Party from claims or
damages to the extent such claims or damages are determined to have
resulted solely from the following:
a. negligent acts and/or omissions of any of the Indemnified Parties;
b. failure of any of the Indemnified Parties to adhere to all
provisions of the protocol relating to the Study furnished to
Quintiles by Interneuron and to written recommendations and written
instructions that have been delivered by Interneuron to Quintiles
concerning the administration and use of any of the drug
substances, including placebo, involved in the Study; or
c. failure of any of the Indemnified Parties to comply with any
applicable laws or regulations.
10.0 INDEMNIFICATION PROCEDURE. Quintiles shall: (a) give Interneuron notice
of any such claim or law suit (including a copy thereof served upon
Quintiles) and all relevant data relating thereto within fifteen (15)
days after such claim or law suit was served upon Quintiles; and (b)
Quintiles and its employees shall fully cooperate with Interneuron and
its legal representatives in the investigation of any matter the
subject of indemnification; (c) Quintiles shall not unreasonably
withhold its approval of the settlement of any such claim, liability,
or action by Interneuron the subject of this Indemnification provision;
; and (d) Quintiles shall not, except at its own cost, voluntarily make
any payment or incur any expense in connection with any Losses without
the prior written consent of Interneuron.
11.0 TERMINATION. This Agreement may be terminated without cause by
Interneuron or by Quintiles at any time during the term of the
Agreement on ninety (90) days prior written notice to Quintiles or
Interneuron, as appropriate. In the event this Agreement is
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terminated, Interneuron's sole obligation to Quintiles shall be to pay
to Quintiles any fees for services rendered then due and owing to
Quintiles because of any completed performance of Quintiles'
obligations hereunder; Interneuron will pay all actual costs to
complete activities associated with the termination and close out of
projects; Interneuron will pay all additional costs incurred by the
project that are required to fulfill regulatory requirements, provided
that Interneuron shall not pay any such costs incurred after ninety
(90) days from the date of written notice of termination, unless
approved in writing by Interneuron. Upon the termination of this
Agreement, Quintiles shall deliver to Interneuron all data and
materials provided by Interneuron to Quintiles for the conduct of
services under this Agreement. All statistical data, all statistical
reports, all data entries and any other documentation produced as the
result of services performed by Quintiles under the terms of this
Agreement shall be delivered to Interneuron at such time as payment has
been made to Quintiles for all services performed.
In the event this Agreement is terminated, Quintiles reserves the right
to retain one copy of all materials provided to Interneuron as the
result of services performed by Quintiles under this Agreement for a
period of five (5) years which will remain sealed unless a dispute
arises regarding the services performed by Quintiles hereunder.
12.0 FORCE MAJEURE. In the event Quintiles shall be delayed or hindered in
or prevented from the performance of any act required, hereunder by
reasons of strike, lockouts, labor troubles, inability to procure
materials, failure of power or restrictive government or judicial
orders, or decrees, riots, insurrection, war, Acts of God, inclement
weather or other similar reason or cause beyond Quintiles' control,
then performance of such act shall be excused for the period of such
delay.
13.0 FEE SCHEDULE. It is the understanding of the parties that the total
cost of project assignments under this Agreement will not exceed the
amounts which may be agreed to in individual assignment agreements
which must be separately negotiated and contracted for.
Quintiles will invoice Interneuron monthly or as separately agreed for
services rendered hereunder and payment shall be made by Interneuron
within thirty (30) days of receipt of itemized invoices for work
completed.
14.0 EXPENSES. Quintiles shall be reimbursed by Interneuron for all usual
and customary travel and lodging expenses incurred in the performance
of services provided herein which have been requested or approved by
Interneuron. Payment for such services shall be made to Quintiles
within thirty (30) days of receipt by Interneuron of invoices or other
evidence of such expenditures.
15.0 REVIEW OF WORK. During the term of this Agreement, Quintiles will
permit Interneuron's representative(s) to examine the work performed
hereunder and the facilities at which the work is conducted at
reasonable times and in a reasonable manner to determine that the
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project assignment is being conducted in accordance with the agreed
task and that the facilities are adequate. Furthermore, upon reasonable
prior notice, Interneuron shall be permitted to inspect all potential
patient records, and all pertinent information pertaining to the Study
and, at its option, monitor the Study or any portion thereof, at the
various clinical sites prior to, during and for a reasonable time after
the Study is completed, all subject any applicable legal restrictions
regarding the confidentiality of patient records.
16.0 NOTICES. Any notice required or permitted to be given hereunder by
either party hereunder shall be in writing and shall be deemed given on
the date received if delivered personally or three days after the date
postmarked if sent by registered or certified U.S. mail, return receipt
requested, postage prepaid or by nationally recognized overnight
delivery service to the following addresses:
If to Quintiles: Kenneth A. Williams, Dr.P.H.
Vice President, Contracts Management and
Planning Quintiles, Inc.
P.O. Box 13979
Research Triangle Park, North Carolina 27709-3979
If to Interneuron: Bobby W. Sandage, Jr., Ph.D.
Executive Vice President Research and Development
Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue, Suite 340
Lexington, Massachusetts 02173
17.0 ASSIGNMENT. Quintiles may assign or subcontract all or a portion of the
work provided for in any separately contracted amendment to this
Agreement to an affiliate of Quintiles; provided, however, that in no
event shall such assignment or subcontracting of work to an affiliate
release Quintiles from any of its obligations hereunder and any such
affiliate shall be bound by the terms and conditions of this agreement
as if such affiliate was an original party hereto.
18.0 GOVERNING LAW. This Agreement shall be construed, governed,
interpreted, and applied in accordance with the laws of the State of
North Carolina. If any one or more provisions of this Agreement shall
be found to be illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
19.0 SURVIVAL. The obligations of the parties contained in Sections 2.0, 7.0
and 8.0 hereof, including, without limitation, the indemnity
obligations contained in Sections 9.0 and 10.0 shall survive the
closing of this Agreement.
20.0 ENTIRE AGREEMENT. This Agreement contains the entire understandings of
the parties with respect to the subject matter herein, and supersedes
all previous Agreements (oral
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and written), negotiations and discussions. The parties, from time to
time during the term of this Agreement, may modify any of the
provisions hereof only by an instrument in writing duly executed by the
parties.
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers on the date(s) set forth below.
ACKNOWLEDGED, ACCEPTED AND AGREED TO:
Quintiles, Inc. Interneuron Pharmaceuticals, Inc.
By: /s/ K.A. Williams By: /s/ Glenn L. Cooper
-------------------------- -----------------------------
K. A. Williams, Dr. P.H. Glenn L. Cooper
Vice President President
Contracts Management and Planning
Date: July 12, 1996 Date: July 12, 1996
------------------------------- ------------------------------
FEDERAL ID # 56-1323952
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EXHIBIT 2.02(h)
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into the 2nd day of July, 1996 between CYTOKINE
SCIENCES, INC., a Delaware corporation (the "Corporation") and Charles
Kirkpatrick, M.D. (the "Employee").
WITNESSETH:
WHEREAS, the Corporation desires to employ the Employee as its
President; and
WHEREAS, the Employee desires to accept such employment upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT. The Corporation hereby employs the Employee, and
the Employee hereby accepts employment by the Corporation as President of the
Corporation and a member of its Board of Directors upon the terms and conditions
set forth herein. The Employee represents and warrants that his employment
agreement with Innovative Therapeutics, Inc. has terminated.
2. TERM. The term of this Agreement shall commence on July 2,
1996 (the "Effective Date") and end on the day prior to the third anniversary of
the Effective Date of this Agreement (the "Term of Employment").
3. DUTIES. The Employee shall perform such duties and services and
shall be allocated such resources, consistent with his position, as may be
assigned to him from time to time by the Board of Directors of the Corporation.
In furtherance of the foregoing, the Employee hereby agrees to perform well and
faithfully such duties and responsibilities.
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4. TIME TO BE DEVOTED TO EMPLOYMENT.
(a) Except for vacations, holidays and personal days and absences due
to temporary illness, during the Term of Employment, the Employee shall devote
his full time and energy to the business of the Corporation.
(b) During the Term of Employment, the Employee shall not be engaged in
any other business activity; provided that Employee may continue as a consultant
to EntreMed, Inc. and continue his teaching responsibilities associated with his
appointment as a member of the faculty of the University of Colorado School of
Medicine. Employee hereby represents that he is not a party to any agreement
which would be an impediment to entering into this Agreement and that he is
permitted to enter into this Agreement and perform the obligations hereunder.
5. COMPENSATION; REIMBURSEMENT.
5.1(a) During the Term of Employment, the Corporation (or at the
Corporation's option, any subsidiary or affiliate thereof) shall pay to the
Employee an annual base salary ("Base Salary") of One Hundred Thirty-Five
Thousand Dollars ($135,000), payable in bi-monthly installments. The Base Salary
shall be reviewed annually and be subject to increase at the option and in the
sole discretion of the Board of Directors of the Corporation.
(b) During the Term of Employment, the Employee shall be entitled to
such fringe benefits as are made available from time to time to the executives
of the Corporation.
(c) The Corporation shall reimburse Employee, in accordance with its
practice from time to time for other employees of the Corporation, for all
reasonable and necessary travel expenses, disbursements and other reasonable and
necessary incidental expenses
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<PAGE>
incurred by him for or on behalf of the Corporation in the performance of his
duties hereunder upon presentation by the Employee to the Corporation of
appropriate vouchers.
6. INVOLUNTARY TERMINATION. If the Employee dies during the Term of
Employment, his employment hereunder and the Term of Employment shall be deemed
to cease as of the date of his death. In the event the Employee is permanently
disabled in that he cannot perform his duties for a period of ninety (90)
consecutive days as certified by a physician chosen by the Corporation and
reasonably acceptable to Employee, his employment hereunder and the Term of
Employment shall be deemed to cease at the end of the aforesaid ninety (90) day
period. A termination under this Section 6 is hereinafter called an "Involuntary
Termination".
7. TERMINATION FOR CAUSE. The Corporation may terminate the employment
of the Employee hereunder and the Term of Employment at any time during the Term
of Employment for "cause" (such termination being hereinafter called a
"Termination For Cause") by giving the Employee notice of such termination, upon
the giving of which such termination shall take effect immediately. For the
purposes of this Section 7, "cause" shall mean (i) the Employee's willful
misconduct with respect to the business and affairs of the Corporation or any
subsidiary or affiliate thereof, which action materially and adversely affects
the business or affairs of the Corporation or any subsidiary or affiliate
thereof, (ii) the Employee fails in any material respect to observe and perform
his obligations and duties hereunder, (iii) the commission by the Employee of an
act involving embezzlement or fraud against the Corporation or commission or
conviction of a felony, or (iv) failure to abide in
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some material respect by the Corporation's rules of conduct, terms and
conditions set forth in the Corporation's handbook, as amended from time to
time.
8. TERMINATION WITHOUT CAUSE. The Corporation may terminate the
employment of the Employee hereunder and the Term of Employment at any time
without "cause" upon thirty (30) days prior written notice (such termination
being hereinafter called a "Termination Without Cause"). Upon a Termination
without Cause during the Term of Employment, Employee shall be entitled to
receive his Base Salary, for six (6) months or until Employee obtains comparable
employment, whichever occurs sooner. In addition, upon a Termination Without
Cause at any time, the Corporation shall continue to pay the Employee's family
medical insurance premiums under the Corporation's medical insurance plan for
six (6) months following such termination or until Employee obtains comparable
employment, whichever occurs sooner.
9. VOLUNTARY TERMINATION. Any termination of the employment of
the Employee hereunder otherwise then as a result of an Involuntary Termination,
a Termination For Cause or a Termination Without Cause shall be deemed to be a
"Voluntary Termination". A Voluntary Termination shall be deemed to be effective
immediately upon such termination.
10. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) Upon the termination of the Employee's employment hereunder
pursuant to a Voluntary Termination, Involuntary Termination or a Termination
For Cause, neither the Employee nor his beneficiary or estate shall have any
further rights or claims against the Corporation under this Agreement except to
receive:
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<PAGE>
(i) the unpaid portion of the Base Salary provided for in
Section 5.1(a), computed on a pro rata basis to the date of
termination, plus any accrued and unpaid bonus with respect to any
prior year;
(ii) reimbursement for any expenses for which the Employee shall
not have theretofore been reimbursed as provided in Section 5.1(c);
(iii) payment of all accrued and unused vacation time; and
(iv) in the case of an Involuntary Termination or a Termination
Without Cause, Employee's beneficiary or estate shall continue to
receive any royalties payable under Section 18 hereof. (b) Upon the
termination of the Employee's employment hereunder pursuant to a
Termination Without Cause, neither the Employee nor his beneficiary or
estate shall have any further rights or claims against the Corporation
under this Agreement except to receive a termination payment equal to
that provided for in Section 10(a) hereof, plus the amounts set forth
in Section 8, if any.
11. GENERAL PROVISIONS
(a) This Agreement and any or all terms hereof may not be changed,
waived, discharged, or terminated orally, but only by way of an instrument in
writing signed by the parties.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, without reference to the conflicts of
laws of the State of Maryland or any other jurisdiction.
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(c) If any portion of this Agreement shall be found to be invalid or
contrary to public policy, the same may be modified or stricken by a Court of
competent jurisdiction, to the extent necessary to allow the Court to enforce
such provision in a manner which is as consistent with the original intent of
the provision as possible. The striking or modification by the Court of any
provision shall not have the effect of invalidating the Agreement as a whole.
(d) The obligations of Sections 8, 10, 11, 12, 13, 14 and 18 shall
survive termination of this Agreement.
12. CORPORATION RIGHTS TO INTELLECTUAL PROPERTY. The Employee shall
promptly disclose, grant and assign ownership to the Corporation for its sole
use and benefit any and all inventions, improvements, information, copyrights
and suggestions (whether patentable or not), which he may develop, acquire,
conceive or reduce to practice while employed by the Corporation (whether or not
during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof that may at any time be granted for or
upon any such invention, improvement or information. In connection therewith:
(i) The Employee shall without charge, but at the
expense of the Corporation, promptly at all times hereafter execute and
deliver such applications, assignments, descriptions and other
instruments as may be reasonably necessary or proper in the opinion of
the Corporation to vest title to any such inventions, improvements,
technical information, patent applications, patents, copyrights or
reissues thereof in the Corporation and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and
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(ii) The Employee shall render to the Corporation at its expense
(including reimbursement to the Employee of reasonable out-of-pocket
expenses incurred by the Employee and a reasonable payment for the
Employee's time involved in case he is not then in its employ) all such
assistance as it may reasonably require in the prosecution of
applications for said patents, copyrights or reissues thereof, in the
prosecution or defense of interferences which may be declared involving
any said applications, patents or copyrights and in any litigation in
which the Corporation may be involved relating to any such patents,
inventions, improvements or technical information. 13. PROTECTION OF
INFORMATION. (a) Employee hereby covenants with Corporation that,
throughout the term of his employment by Corporation, Employee will
serve Corporation's best interests loyally and diligently. Throughout
the course of employment by Corporation and thereafter, Employee will
not disclose or provide to any person, firm, corporation or entity
(except when authorized by Corporation) any information, materials,
biologics or animals which are owned by the Corporation or which come
into the possession of the Corporation from a third party under an
obligation of confidentiality, including without limitation,
information relating to trade secrets, business methods, products,
processes, procedures, development or experimental projects, suppliers,
customer lists or the needs of customers or prospective customers,
clients, etc. (collectively "Confidential Information"), which
Confidential Information, comes into his possession or knowledge during
the Term of Employment, and he will not use such Confidential
Information for his own purpose or for the purpose of any person, firm,
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<PAGE>
corporation or entity, other than the Corporation.
(b) The provisions of Section 13(a) shall not apply to the
following Confidential Information:
(i) Confidential Information which at the time of disclosure is
already in the public domain;
(ii) Confidential Information which subsequently becomes part of
the public domain through no fault of the Employee;
(iii) Confidential Information which becomes known to the
Employee through a third party who is under no obligation of
confidentiality to the Corporation; and
(iv) Confidential Information which is required to be disclosed
by law or by judicial or administrative proceedings.
14. NON-COMPETE. Employee agrees that during the Term of Employment and
for one year after termination or expiration of his Term of Employment he shall
not directly or indirectly be engaged in or assist others in engaging in any
business or activity which is involved in researching, developing or selling
products, processes or services which compete with any significant product,
process or service which Corporation is researching, developing or selling at
the time of such termination whether his involvement shall be as an owner
(except for passive ownership of up to five percent (5%) of the securities of a
company), officer, director, employee, consultant, partner or agent. For
purposes of this provision, products, processes or services which Corporation is
marketing or selling shall be deemed "significant" if sales of such products,
processes or services exceed ten percent (10%) of the Corporation's total sales.
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15. NOTICES. Notices and other communications hereunder shall be in
writing and shall be delivered personally or sent by air courier or first class
certified or registered mail, return receipt requested and postage prepaid,
addressed as follows unless the party specifies a new address in writing:
If to the Employee: Charles Kirkpatrick, M.D.
295 Leyden Street
Denver, CO 80220
If to the Corporation: Cytokine Sciences, Inc.
c/o EntreMed, Inc.
9610 Medical Center Drive
Rockville, MD 20850
Attention: President
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 delivery if personally delivered; on the business day after the date
when sent if sent by air courier; and on the third business day after the date
when sent if sent by mail, in each case addressed to such party as provided in
this Section or in accordance with the latest unrevoked direction from such
party.
16. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. ASSIGNMENT. This Agreement is personal in its nature and the
parties hereto shall not, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder; provided, however, that
the provisions hereof shall inure to the benefit of, and be binding upon each
successor of the Corporation, whether by merger,
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consolidation, transfer of all or substantially all assets, or
otherwise and the heirs and legal representatives of the Employee.
18. ADDITIONAL CONSIDERATION. As further consideration for this
Agreement, the Corporation agrees to pay to the Employee a royalty of one
quarter of one percent (.25%) of Net Sales of products sold by the Corporation
and based on or derived from a method to treat disease by stimulating cellular
immunity ("Products"), which technology has been transferred to the Corporation
by Innovative Therapeutics, Inc. ("ITI") by a separate agreement of even date
herewith (the "Transferred Technology"). For purposes of this provision Net
Sales shall mean the total amount received from the sale of Products by the
Corporation or its affiliates or sublicensees less transportation charges and
insurance, sales taxes, use taxes, excise taxes, value added taxes, customs
duties or other imposts, normal and customary quantity and cash discounts,
rebates granted and disallowed reimbursements and allowances and credit on
account of rejection or return of Products. Such royalties will be paid from
first commercial sale of the first Product subject to royalty herein so long as
such Product is covered by a valid claim of an issued patent of the Corporation
in the country where sold.
19. OPTION. In addition in the event the Corporation determines to
totally abandon its interest in the Transferred Technology, the Employee is
hereby granted an exclusive option to exclusively license such Transferred
Technology from the Corporation for a payment to the Corporation of two hundred
fifty thousand dollars ($250,000) and payment to the Corporation of royalties
equivalent to the royalties to the Employee described in Paragraph 18 above.
Such option may only be exercised by written notice from the Employee to the
Corporation within sixty (60) days of the Corporation notifying the
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Employee of its total abandonment of the Transferred Technology or the
expiration of the six (6) month period set forth below, whichever is earlier. If
such option is not so exercised within said period, the option shall lapse and
terminate. If such option is exercised, the Employee shall have sixty (60) days
from the date such option is exercised to close, including, without limitation,
to pay the $250,000 sum described above. If the closing shall not occur within
said period, the exercise of the option shall be void and of no effect and the
option shall lapse and terminate. For purposes of this provision the Corporation
will be deemed to have totally abandoned its interest in the Transferred
Technology at such time as it has made a good faith scientific judgment that a
commercial product cannot be developed from such technology and/or it has not
conducted any research or development activities with respect to any aspect of
the technology for at least six (6) months, including but not limited to, the
failure to fund such activities for at least six (6) months.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
Corporation: CYTOKINE SCIENCES, INC.
By: /s/ Dr. John Holaday, President
-------------------------------
Dr. John Holaday, President
Employee: /s/ Charles Kirkpatrick, M.D.
-------------------------------
Charles Kirkpatrick, M.D.
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EXHIBIT 10.24
RESEARCH AGREEMENT
This Agreement is effective July 2, 1996 (the "Effective Date") by and
between EntreMed, Inc. a Delaware Corporation located at 9610 Medical Center
Drive, Rockville, Maryland 20850 ("EntreMed") and Cytokine Sciences, Inc. a
Delaware Corporation located at 4860 North Broadway, Denver, Colorado 80216
("Subsidiary").
WHEREAS, EntreMed desires to fund certain work to be performed at
Subsidiary in exchange for certain rights to use the results of such work; and
WHEREAS, Subsidiary desires to receive such funding and is willing to
grant the rights desired by EntreMed.
NOW THEREFORE in consideration of the mutual promises and other good
and valuable consideration, the parties agree as follows:
SECTION 1. - DEFINITIONS
The terms used in this Agreement have the following meanings:
1. The term "Affiliate" with respect to any party, shall mean any
individual, partnership, corporation, group or trust that directly or indirectly
controls, is controlled by or is under common control with such party, with
"control" being the power to direct or cause the direction of management and
policies, whether through ownership of voting securities, by contract or
otherwise.
2. The term "Agreement Year" shall mean the twelve month period
beginning on the Effective Date and each subsequent twelve month period
thereafter.
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3. The term "Research" shall mean research into the treatment of
disease by stimulating cellular immunity.
SECTION 2. - FUNDING
1. In consideration of the undertaking of Research by Subsidiary,
EntreMed shall make annual research grants to Subsidiary as follows:
(a) In the first Agreement Year the grant shall be $600,000 (which
shall be in addition to the capital investment in Subsidiary by
EntreMed of $250,000), less the amount of any payments contributed by
EntreMed for Research at Innovative Therapeutics, Inc. since March 31,
1996;
(b) In the second Agreement Year the grant shall be $1,000,000; and (c)
In the third Agreement Year the grant shall be $1,500,000 provided that
EntreMed, in its sole discretion, may terminate Research and funding
for Research sixty (60) days prior to the end of the second Agreement
Year or at any time thereafter on sixty (60) days prior written notice
to Subsidiary.
2. Each annual grant shall be paid in four equal quarterly payments.
The first payment shall be paid upon the Effective Date.
3. At least sixty (60) days prior to the end of an Agreement Year, and
for the first Agreement Year as soon as practical after the Effective Date,
Subsidiary shall submit to EntreMed for its approval a plan and budget for the
use of the funding for the following Agreement Year, which approval shall not be
unreasonably withheld. In addition within sixty (60) days of the end of an
Agreement Year Subsidiary shall provide EntreMed with an accounting of the
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<PAGE>
expenditure of Research funds for such year. Any funds granted
hereunder which have not been expended by Subsidiary within the Agreement Year
shall be retained by Subsidiary for Research.
4. During the period in which EntreMed is funding Research under this
Agreement, Subsidiary may not, without EntreMed's consent (which shall not be
unreasonably withheld), seek or accept funding from a commercial sponsor in the
fields of Immunology, T Cell Immunity, Transfer Factor, Herpes, Viral Diseases,
bacterial diseases and fungal diseases.
SECTION 3. - WORK OF SUBSIDIARY
1. Beginning on the Effective Date and thereafter unless sooner
terminated Subsidiary shall:
(a) Conduct Research and apply the funds paid by EntreMed to support
the expenses of Research and shall use reasonable efforts and diligence
consistent with professional standards to achieve the goals set forth
for such Research;
(b) Promptly and regularly disclose to EntreMed information and
inventions resulting from Research and EntreMed shall be entitled to
use such information and inventions for research purposes only and not
for other commercial purposes unless in accordance with a separate
agreement between EntreMed and Subsidiary;
(c) For the purpose of facilitating disclosure of information and
inventions permit duly authorized employees of or representatives of
EntreMed to visit the laboratories and other facilities where Research
is conducted at reasonable times and with reasonable notice;
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(d) Promptly advise EntreMed of Subsidiary's intent to file and the
filing, allowance and issuance of patents; and
(e) At EntreMed's request provide EntreMed with samples of materials
produced in the Research which may be used by EntreMed in its internal
research only and not for other commercial purposes.
2. Subsidiary shall, on a continuing basis, advise EntreMed of the
results of the Research and at least once every three (3) months provide
EntreMed with written progress reports concerning Research. A final written
report setting forth in detail the results achieved under and pursuant to the
Research shall be submitted to EntreMed within thirty (30) days of the
termination of the Research.
3. Notwithstanding anything else to the contrary, Subsidiary agrees not
to publish or disclose to third parties results of Research without supplying
EntreMed with a copy of the material to be disclosed or published to third
parties at least thirty (30) days prior to submission for publication or
disclosure so that EntreMed may evaluate such material to determine whether the
material contains patentable subject matter on which a patent application should
be filed or contains EntreMed Confidential Information. At EntreMed's request,
Subsidiary will delay publication and/or disclosure and will cooperate with
EntreMed in assuring that such publication or disclosure is in the best interest
of Subsidiary and EntreMed.
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SECTION 4. - ASSIGNMENT; SUCCESSORS.
1. This Agreement shall not be assignable by either of the parties
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that each party without the consent of the other
may assign this Agreement to an Affiliate or to a successor in interest or
transferee of all or substantially all of the portion of the business to which
this Agreement relates.
2. Subject to the limitations on assignment herein, this Agreement
shall be binding upon and inure to the benefit of said successors in interest
and assigns of EntreMed and Subsidiary. Any such successor or assignee of a
party's interest shall expressly assume in writing the performance of all the
terms and conditions of this Agreement to be performed by said party and such
Assignment shall not relieve the Assignor of any of its obligations under this
Agreement.
SECTION 5. - TERMINATION.
1. Except as otherwise specifically provided herein, this Agreement
shall remain in full force and effect for three (3) years from the Effective
Date.
2. Upon material breach of any material provisions of this Agreement by
either party to this Agreement, in the event the breach is not cured within
sixty (60) days after written notice to the breaching party by the other party,
in addition to any other remedy it may have, the other party at its sole option
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<PAGE>
may terminate this Agreement, provided that such other party is not then in
breach of this Agreement.
3. The obligations of Section 3.1(b) and (e) and Section 6 of this
Agreement shall survive any termination of this Agreement.
SECTION 6. - CONFIDENTIALITY.
1. During the term of this Agreement, it is contemplated that each
party will disclose to the other proprietary and confidential technology,
inventions, technical information, biological materials and the like which are
owned or controlled by the party providing such information or which that party
is obligated to maintain in confidence and which is designated by the party
providing such information as confidential ("Confidential Information"). Each
party agrees to retain the other party's Confidential Information in confidence
and not to disclose any such Confidential Information to a third party without
the prior written consent of the party providing such information and to use the
other party's Confidential Information only for the purposes of this Agreement,
which obligation shall terminate five (5) years after the expiration or
termination of this Agreement.
2. The obligations of confidentiality will not apply to Confidential
Information which: (i) was known to the receiving party or generally known to
the public prior to its disclosure hereunder; or (ii) subsequently becomes
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<PAGE>
known to the public by some means other than a breach of this Agreement;
(iii) is subsequently disclosed to the receiving party by a third party having
a lawful right to make such disclosure; (iv) is required by law or BONA FIDE
legal process to be disclosed, provided that the party required to make
the disclosure takes all reasonable steps to restrict and maintain
confidentiality of such disclosure and provides reasonable notice to the party
providing the Confidential Information; (v) is approved for release by the
parties; or (vi) is independently developed by the employees or agents of either
party without any knowledge of the Confidential Information provided by the
other party.
3. Notwithstanding the foregoing and upon notice to Subsidiary,
EntreMed shall have the right to disclose Confidential Information of Subsidiary
to a third party who undertakes an obligation of confidentiality and non-use
with respect to such information, at least as restrictive as EntreMed's
obligation under this Section 6.
SECTION 7. - GENERAL PROVISIONS
1. This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter thereof and supersedes all prior
agreements in this respect. There shall be no amendments or modifications to
this Agreement, except by a written document which is signed by both parties.
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<PAGE>
2. This Agreement shall be construed and enforced in accordance with
the laws of the State of Maryland without reference to its choice of law
principles.
3. The headings in this Agreement have been inserted for the
convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or section.
4. Any delay in enforcing a party's rights under this Agreement or any
waiver as to a particular default or other matter shall not constitute a waiver
of a party's right to the future enforcement of its rights under this Agreement,
excepting only as to an express written and signed waiver as to a particular
matter for a particular period of time.
5. Notices. Any notices given pursuant to this Agreement shall be in
writing and shall be deemed to have been given and delivered upon the earlier of
(i) when received at the address set forth below, or (ii) three (3) business
days after mailed by certified or registered mail postage prepaid and properly
addressed, with return receipt requested, or (iii) on the day when sent by
facsimile as confirmed by certified or registered mail. Notices shall be
delivered to the respective parties as indicated:
To ENTREMED: EntreMed, Inc.
4610 Medical Center Drive
Rockville, Maryland 20850
Attn: President
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Copy to: Carella, Byrne, Bain, Gilfillan,
Cecchi, Stewart & Olstein
6 Becker Farm Road
Roseland, New Jersey 07068
Fax No. (201) 597-0250
Attn: Donald S. Brooks, Esq.
To SUBSIDIARY: Cytokine Sciences, Inc.
4860 North Broadway
Denver, Colorado 80216
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
ENTREMED, INC. CYTOKINE SCIENCES, INC.
By: /s/ Carol Nacy By: /s/ Dr. John Holaday
---------------------------------- -------------------------------
Carol Nacy, Executive Vice President Dr. John Holaday, President
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Exhibit 11
ENTREMED, INC.
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Weighted average common and common
equivalent shares outstanding during the period 7,696,696 5,388,321 7,068,703 5,268,838
Effect of common stock issued and stock options
and warrants granted subsequent to April 12, 1995
computed in accordance with the treasury stock
method as required by the SEC (2) - 1,462,163 425,663 1,731,662
-------------------------------------------------------------
Total common and common equivalent shares 7,696,696 6,850,484 7,494,366 7,000,500
-------------------------------------------------------------
Net loss $ (464,938) $ (1,503,921) $ (2,140,345) $(3,550,381)
-------------------------------------------------------------
Net loss per share $ (0.06) $ (0.22) $ (0.29) $ (0.51)
-------------------------------------------------------------
</TABLE>
(1) All share information have been adjusted to reflect a two-for-three reverse
stock split.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common and Preferred Stock issued and stock options and warrants grants at
prices below the initial public offering price of $15.00 per share during the
12-month period immediately preceding the initial filing date of the Company's
Registration Statement for its initial public offering have been included as
outstanding for all periods presented using the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets and the condensed consolidated statements
of operations and is qualified in its entirety by refernce to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 7,600,058 55,497,455
<SECURITIES> 0 0
<RECEIVABLES> 100,000 100,000
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,715,447 55,840,618
<PP&E> 978,818 1,054,330
<DEPRECIATION> 234,408 283,877
<TOTAL-ASSETS> 8,606,849 56,713,275
<CURRENT-LIABILITIES> 3,988,329 4,193,940
<BONDS> 0 0
0 0
3,000,000 0
<COMMON> 64,606 119,939
<OTHER-SE> (1,012,753) 50,007,730
<TOTAL-LIABILITY-AND-EQUITY> 8,606,849 56,713,275
<SALES> 0 0
<TOTAL-REVENUES> 1,092,500 2,185,000
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 2,834,681 4,552,950
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,547 18,1900
<INCOME-PRETAX> (1,675,407) (2,140,345)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,675,407) (2,140,345)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,675,407) (2,140,345)
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</TABLE>
