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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-21972
INNOVIR LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3536290
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 EAST 73RD STREET, NEW YORK, NEW YORK 10021
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(Address of principal executive offices)
(212) 249-4703
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(Registrant's telephone number, including area code)
FORMER ADDRESS: NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares of the registrant's common stock outstanding as of May 9,
1997 was 18,050,786.
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<PAGE>
INDEX
INNOVIR LABORATORIES, INC.
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
December 31, 1996 and March 31, 1997................. 2
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1997
and 1996 and for the period from January
6, 1995 (inception) to March 31, 1997................ 3
Condensed Consolidated Statement of Changes in
Stockholders' Equity for the three
months ended March 31, 1997 ......................... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1997
and 1996 and for the period from January
6, 1995 (inception) to March 31, 1997................ 5
Notes to Financial Statements.............................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 10
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<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets (unaudited)
March 31, 1997 and December 31, 1996
1997 1996
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents ................................................................... $ 4,300,000 $ 6,412,000
Prepaid expenses and other current assets ................................................... 186,000 203,000
----------- -----------
Total current assets .................................................................. 4,486,000 6,615,000
Fixed assets less accumulated depreciation and amortization ................................... 2,804,000 2,439,000
Amount due from VIMRx Pharmaceuticals Inc. 535,000
Goodwill ...................................................................................... 1,133,000 1,236,000
Other assets .................................................................................. 242,000 249,000
----------- -----------
Total assets .......................................................................... 8,665,000 11,074,000
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued expenses ...................................................... $ 1,153,000 $ 1,319,000
Capital lease - current portion ............................................................ 472,000 472,000
Term note payable - warrantholder; current portion includes
accrued interest of $5,000 ............................................................... 36,000 36,000
Other current liabilities .................................................................. 108,000
----------- -----------
Total current liabilities ............................................................. 1,769,000 1,827,000
Amount due to VIMRx Pharmaceuticals Inc. ...................................................... 135,000
Term note payable - warrantholder; includes accrued interest of $39,000 ....................... 227,000 227,000
Capital leases ................................................................................ 379,000 463,000
----------- -----------
Total Liabilities ..................................................................... 2,510,000 2,517,000
----------- -----------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, par value $.06; 15,000,000 shares authorized:
Class B Convertible Preferred Stock; 2,500,000 shares designated;
295,000 shares issued and outstanding at March 31, 1997,
297,000 shares issued and outstanding at December 31, 1996
(liquidation value, $1,475,000 at March 31, 1997 and $1,485,000
at December 31, 1996) .................................................................. 18,000 18,000
Class D Convertible Preferred Stock; 8,667,000 shares designated,
issued and outstanding at March 31, 1997 and December 31, 1996,
(liquidation value, $13,000,000) ........................................................ 520,000 520,000
Common stock, par value $.013: 35,000,000 shares authorized;
18,050,000 shares issued and outstanding at March 31,1997,
17,946,000 shares issued and outstanding at December 31, 1996 ............................. 235,000 233,000
Additional paid-in capital .................................................................. 29,675,000 29,667,000
Cumulative translation adjustment ........................................................... (16,000) (8,000)
Unearned compensation ....................................................................... (88,000) (181,000)
Deficit accumulated during the development stage ............................................ (24,189,000) (21,692,000)
----------- -----------
Total stockholders' equity ............................................................ 6,155,000 8,557,000
----------- -----------
Total liabilities and stockholders' equity ............................................ $ 8,665,000 $11,074,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES,INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations (unaudited)
Period
Three months ended January 6, 1995
March 31, (inception)
-------------------------------- through
1997 1996 March 31, 1997
----------- --------- --------------
<S> <C> <C> <C>
Revenue:
Interest income ............................... $ 73,000 $ 86,000
Other 151,000
----------- ------------
Total revenue ........................... 73,000 237,000
----------- ------------
Expenses:
Research and development ...................... $ 1,664,000 $ 228,000 $ 5,044,000
General and administrative .................... 766,000 96,000 1,840,000
Interest ...................................... 37,000 65,000
Purchased in process research
and development 225,000 17,374,000
Amortization of Goodwill ...................... 103,000 103,000
----------- --------- ------------
Total expenses .......................... 2,570,000 549,000 24,426,000
----------- --------- ------------
Net Loss ................................ $(2,497,000) $(549,000) $(24,189,000)
=========== ========= ============
Loss-per-share data:
Weighted average number of
common shares outstanding ................... 18,042,470 9,500,000
=========== =========
Net loss per share ........................ $(0.14) $(0.06)
=========== =========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Condensed Consolidated Statement of Changes in Stockholders' Equity (unaudited)
For the Three Months Ended March 31, 1997
<TABLE>
<CAPTION>
Class B Convertible Class D Convertible
Preferred Stock Preferred Stock Common Stock
------------------- ------------------- ---------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 .................... 297,000 $18,000 8,667,000 $520,000 17,946,000 $233,000
Exercise of options and warrants ..................... 120,000 2,000
Costs incurred in connection with issuance
of equity securities ................................
Conversion of Class B Convertible Preferred Stock .... (2,000) 3,000
Adjustment for shares held in escrow in connection
with stockholder's litigation...................... (19,000)
Compensation expense incurred in connection with
the issuance of stock options
Amortization of unearned compensation ................
Cumulative translation adjustment ....................
Net Loss for the three months ended March 31,1997 ...
Balance at March 31, 1997 ...................... 295,000 $18,000 8,667,000 $520,000 18,050,000 $235,000
======= ======= ========= ======== ========== ========
<CAPTION>
Deficit
Accumulated
Additional Cumulative During The
Paid-in Translation Unearned Development
Capital Adjustment Compensation State Total
----------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 .................... $29,667,000 $(8,000) $(181,000) $(21,692,000) $ 8,557,000
Exercise of options and warrants .................... 12,000 14,000
Costs incurred in connection with issuance
of equity securities .............................. (24,000) (24,000)
Conversion of Class B Convertible Preferred Stock ...
Adjustment for shares held in escrow in connection
with stockholder's litigation......................
Compensation expense incurred in connection with
the issuance of stock options ..................... 20,000 20,000
Amortization of unearned compensation ............... 93,000 93,000
Cumulative translation adjustment ................. (8,000) (8,000)
Net Loss for the three months ended March 31,1997 ... (2,497,000) (2,497,000)
Balance at March 31, 1997 ...................... $29,675,000 ($16,000) ($88,000) ($24,189,000) $ 6,155,000
=========== ======== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows (unaudited)
Period
Three months ended January 6, 1995
March 31, (inception)
-------------------------- through
1997 1996 March 31, 1997
----------- --------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) .......................................... $(2,497,000) $(549,000) $(24,189,000)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Depreciation .................................... 184,000 3,000 334,000
Amortization of goodwill ....................... 103,000 103,000
Amortization of unearned compensation .......... 93,000 93,000
Purchased in process research and
development ................................ 17,374,000
Provision for losses on notes receivable ....... 85,000
Non-cash compensation expense .................. 20,000 227,000
Changes in operating assets and liabilities:
Decrease (increase) in other current assets .... 17,000 (2,000) (23,000)
Decrease in other assets ....................... 7,000 7,000
Decrease (increase) in accounts payable and
and accrued expenses ....................... (166,000) (24,000) 417,000
Increase in other current liabilities .......... 108,000 108,000
----------- --------- ------------
Net cash (used in) operating activities .... (2,131,000) (572,000) (5,464,000)
----------- --------- ------------
Cash flows from investing activities:
Purchase of equipment .......................... (549,000) (1,000) (1,203,000)
Cash acquired in acquisitions .................. 3,532,000
----------- --------- ------------
Net cash (used in) provided by investing
activities ............................ (549,000) (1,000) 2,329,000
----------- --------- ------------
Cash flows from financing activities:
Proceeds from sales of common stock ............. 14,000 26,000
Advances and contributed capital from VIMRx
Pharmaceuticals, Inc. ...................... 670,000 490,000 7,536,000
Costs incurred in connection with issuance of
equity securities .......................... (24,000) (24,000)
Proceeds received from Ribonetics GmbH.......... 125,000
Repayment of capital leases ..................... (84,000) (84,000)
----------- --------- ------------
Net cash provided by financing activities 576,000 615,000 7,454,000
----------- --------- ------------
Effect of exchange rate changes on cash ............... (8,000) (19,000)
----------- --------- ------------
Net (decrease) increase in cash and cash
equivalents ........................... $(2,112,000) 42,000 $ 4,300,000
Cash and cash equivalents at beginning of period ...... 6,412,000 68,000
----------- --------- ------------
Cash and cash equivalents at end of period $ 4,300,000 $ 110,000 $ 4,300,000
=========== ========= ============
Supplemental disclosure of cash flow information:
Cash paid for interest .................... $ 37,000 $ 37,000
=========== ========= ============
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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<PAGE>
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed interim consolidated financial statements of Innovir
Laboratories, Inc. and Subsidiaries (the "Company") reflect all
adjustments, consisting only of normal recurring accruals, which are, in
the opinion of the Company's management, necessary for a fair presentation
of the Company's results of operations for the respective periods
presented. Operating results for any interim period are not necessarily
indicative of results for a full year. These notes do not include all the
information required by generally accepted accounting principles. The
condensed interim consolidated financial statements should be read in
conjunction with the audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1996
and for the transition report for the transition period from October 1,
1996 to December 31, 1996, filed on Form 10-Q.
2. Statements of Cash Flows - Supplemental schedule of noncash activities:
During the three months ended March 31, 1997, the Company converted 2,000
shares of Class B Convertible Preferred Stock into 3,000 shares of Common
Stock.
3. Contingency:
The Company may be considered to be in violation of the terms of its
office and laboratories sublease by not obtaining the required approval
from the owner of the property prior to the consummation of the
transactions with VIMRx Pharmaceuticals, Inc. ("VIMRx") whereby VIMRx
acquired 68% of Innovir Laboratories, Inc. ("Innovir"), and Innovir
acquired all of the issued and outstanding shares of VIMRx Holding, Ltd.
("VHL"), a wholly owned subsidiary of VIMRx, in December l996. In
addition, the owner of the property has alleged and the Company's
sublandlord disputes, that the sublandlord may also be in breach of its
lease with the owner of the property. If the sublandlord is evicted, the
Company would lose its right to occupy its current space. While the
Company believes these matters may be resolved without a materially
adverse effect on the Company's business or financial position, no
assurance can be given as to the ultimate outcome.
4. During February 1996, Innovir was named as defendant in an action filed
by an investor alleging that Innovir wrongfully refused to honor the
investor's request to convert certain shares of Innovir's preferred
stock into Innovir's common stock. During February 1997, the
investor and Innovir settled the action at no material cost to Innovir
or the Company. In connection with the settlement, 19,000 shares of
common stock which had been held in escrow pending the resolution of
the action were returned to the Company.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements which involve risks and
uncertainties. Such statements are subject to certain factors which may cause
the Company's plans to differ. Factors that may cause such differences include,
but are not limited to, the progress of the Company's research and development
programs, the Company's ability to obtain additional funds, the Company's
ability to compete successfully, the Company's ability to attract and retain
qualified personnel, the Company's ability to successfully enter into
collaborations with third parties, the Company's ability to enter into and
progress in clinical trials, the time and costs involved in obtaining regulatory
approvals, the costs involved in obtaining and enforcing patents and any
necessary licenses, the ability of the Company to establish development and
commercialization relationships, the cost of manufacturing, and those other
risks discussed under the heading Risk Factors included in the Company's Form
S-3 Registration Statement (Reg. No. 333-12865).
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto contained herein and the Company's
Annual Report on Form 10-K for the year ended September 30, 1996 and the
transition report for the transition period from October 1, 1996 to December 31,
1996, filed on Form 10-Q.
BACKGROUND
On December 23, 1996, Innovir Laboratories, Inc. ("Innovir"), VIMRx
Pharmaceuticals Inc. ("VIMRx") and certain stockholders of Innovir ("The Aries
Funds") consummated a transaction (the "Transaction") whereby VIMRx acquired 68%
of the outstanding stock of Innovir and Innovir acquired all of the issued and
outstanding shares of VIMRx Holdings, Ltd. ("VHL"), a wholly-owned subsidiary of
VIMRx. Innovir's acquisition of VHL and VIMRx's partial acquisition of Innovir
have been accounted for as a purchase in accordance with APB Opinion No. 16,
Business Combinations and Emerging Issues Task Force Issue No. 90-13, Accounting
for Simultaneous Common Control Mergers (EITF No. 90-13"). The application of
APB No. 16 and EITF No. 90-13 requires that the Transaction be accounted for as
a reverse acquisition and accordingly, for accounting purposes, (i) VHL is
deemed to be the acquirer and surviving entity, (ii) because Innovir is deemed
to be the legal acquirer, VHL's historic capital accounts have been
retroactively restated (recapitalized) to reflect Innovir's capital accounts and
the equivalent number of shares received by VIMRx in the Transaction, (iii)
Innovir has fair valued its assets and liabilities to the extent acquired by
VIMRx (68%) and (iv) the assets and liabilities of VHL are carried at VHL's
historic cost. Since VHL is deemed to be the surviving entity, the statement of
operations includes the operations of VHL for the period from January 6, 1995
(inception) through March 31, 1997. The operations of Innovir are included only
since the date of acquisition, i.e., for the period from December 23, 1996 to
March 31, 1997. For accounting purposes, VHL assumed the name of Innovir
Laboratories, Inc. and Subsidiaries, and, for purposes of this Quarterly Report,
all references to the "Company" shall mean the consolidated entity consisting of
Innovir, VHL and subsidiaries.
-7-
<PAGE>
On February 11, 1997, Innovir elected to change its fiscal year end date
from September 30 to December 31 of each year, effective January 1, 1997. This
change was made to conform Innovir's fiscal year end date with that of VHL. This
Quarterly Report on Form 10-Q covers the first quarter of the new fiscal year,
that is January 1 to March 31, 1997.
RESULTS OF OPERATIONS
Since its inception, substantially all of the Company's resources have been
applied to research and development, patent and licensing matters and other
general and administrative matters. The Company has no commercially viable
products and does not anticipate having any for several years. The Company has
had no operating revenues to date and has sustained net losses since its
inception. In the future, the Company intends to increase its research and
development activities and, accordingly, its rate of operating losses and
expenditures. The Company expects losses, which may increase, to continue for
the foreseeable future.
Three month period ended March 31, 1997 vs. March 31, 1996
- - -----------------------------------------------------------
Research and development expenses increased $1,436,000 or 630% due to the
acquisition of Innovir's operations in December 1996 ($1,046,000) and increased
efforts in VHL ($390,000).
General and administrative expenses increased $670,000 or 698% due to the
acquisition of Innovir ($725,000) and a decrease in VHL expenses related to the
European operations ($55,000).
Purchased in process research and development in the three months ended
March 31, 1996 relate to the write off of loans to Ribonetics GmbH.
Amortization of goodwill relates to the asset recorded in the transaction
with VIMRx described under "Background" above.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had cash and cash equivalents of $4,300,000
as compared to $6,412,000 at December 31, 1996. The Company had working capital
of $2,717,000 at March 31, 1997, as compared to working capital of $4,788,000 at
December 31, 1996. The decrease in cash and working capital positions resulted
from cash expended for operations and capital assets.
The Company may be considered to be in violation of the terms of its
sublease by not obtaining the required approval from the owner of the property
prior to the consummation of the transactions with VIMRx in December 1996. See
the notes to the Company's financial statements. In addition, the owner of the
property has alleged, and the Company's sublandlord disputes, that the
sublandlord may also be in breach of its lease with the owner of the property.
If the sublandlord is evicted, the Company would lose its right to occupy its
current space. While the Company believes that these matters may be resolved
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<PAGE>
without a materially adverse effect on the Company's business or financial
position, no assurances can be given as to the ultimate outcome.
In addition, VIMRx has agreed to exercise two million warrants upon the
request of the Company specifying that the Company has insufficient funds to
continue operations beyond 30 days from the date of such request, which will
yield the Company aggregate proceeds of $3 million. In addition, The Aries Funds
have agreed to exercise their remaining two million warrants upon VIMRx's
exercise of its warrants, which will yield the Company aggregate proceeds of $1
million.
The Company expects to incur substantial expenditures in the foreseeable
future for the research and development and commercialization of its proposed
products and the upgrading of its laboratory facilities. As of March 31, 1997,
the Company had cash and cash equivalents of approximately $4.3 million. Based
on current projections, which are subject to change (such change may be
significant), the Company's management believes that this, along with the
proceeds from the exercise of the warrants held by VIMRx and the remaining
warrants held by The Aries Funds, will be sufficient to fund its operations into
the second quarter of the year ended December 31, 1998. Thereafter, the Company
will require additional funds, which it may seek to raise through public or
private equity or debt financings, collaborative or other arrangements with
corporate sources, or through other sources of financing. There can be no
assurance that such additional financing can be obtained on terms reasonable to
the Company, if at all. In the event the Company is unable to raise additional
capital, planned operations would need to be scaled back or discontinued during
1998.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Amended and Restated Employment Agreement, made as of
December 1, 1996, between the Company and Allan R. Goldberg.
10.2 Form of Research Agreement, effective as of March 18,
1997, between the Company and Albert Einstein College of
Medicine of Yeshiva University.
11 Statement of Computation of Per Share Data.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
During the quarter for which this report is filed, the Company
filed the following reports on Form 8-K:
(i) Current Report on Form 8-K, dated December 23, 1996 as
filed on January 7, 1997, regarding the Transaction with
VIMRx and The Aries Funds, including the acquisition of
VHL (Items 1 & 2); no financial statements were filed in
connection with such report. See "Item 2 - Background."
(ii) Current Report on Form 8-K, dated February 11, 1997 as
filed on February 14, 1997, regarding the settlement of
a litigation (Item 4) and the change in the Company's
fiscal year to the 12-month period ended December 31
(Item 8); no financial statements were filed in
connection with such report.
(iii) Amendment No. 1 to Current Report on Form 8-K/A, dated
December 23, 1996 as filed on March 10, 1997, providing
certain audited financial statements and unaudited pro
forma financial information relating to the acquisition
of VHL (Item 7).
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<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.
May 15, 1997
INNOVIR LABORATORIES, INC.
By: /s/ ALLAN R. GOLDBERG
----------------------------------------
Name: Allan R. Goldberg
Title: Chairman and Chief Executive
Officer (Principal executive
officer)
By: /s/ FRANCIS M. O'CONNELL
----------------------------------------
Name: Francis M. O'Connell
Title: Chief Financial Officer
(Principal financial and
accounting officer)
-11-
EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of December 1, 1996, between INNOVIR
LABORATORIES, INC., a Delaware corporation ("Employer"), and ALLAN R. GOLDBERG
("Employee"):
WHEREAS, the parties wish to amend and restate herein in its entirety the
Employment Agreement, dated as of April 1, 1992 (previously amended as of April
1, 1996), between Employer and Employee (the "Superseded Agreement");
NOW, THEREFORE, in consideration of employment and other good and valuable
consideration which consideration is acknowledged to be sufficient, Employee and
Employer desire to enter into and be bound by this Agreement.
1. Definitions. For purposes of this Agreement, the following terms shall
have the meaning specified below:
(A) "Services" - Employee shall act in the capacity of Chief Executive
Officer of Employer, shall be elected as a member of the Board of
Directors, and shall serve (at the sole discretion of the Board of
Directors) as Chairman of the Board. Employee shall have authority and
power to perform, and shall perform all duties that are customary for the
office of capacities in which he serves, subject at all times to the
ultimate control and direction of the board of directors of the Employer
and subject to this Agreement. As more particularly provided in sections 9
and 10, Employee shall be prohibited from competing with Employer since
Employee shall specifically and directly supervise and participate in
research and business activities of the Employer to develop and market
products relating to scientific know-how and core technology including
reagents, diagnostics derived from viroid and viroid-like agents, and
ribozymes and vectors and supervise and participate in the management of
such development and marketing efforts.
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<PAGE>
(B) "Territory" - the geographic area comprising of all countries in
the world.
(C) "Confidential Information" - information relating to Employer's
business which derives economic value, actual or potential, from not being
generally known to other persons or entities and is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy or
confidentiality, including, but not limited to, technical or nontechnical
data, a formula, pattern, compilation, program, device, method, technique,
drawing, process, financial data, or list of actual or potential customers
or suppliers and which is marked or treated by Employer as confidential.
Confidential Information does not include: (i) any information that is in
the public domain, or enters the public domain, or that is or shall become
generally known through no fault of Employee; (ii) any information received
in good faith from a third party who has a right to disclose such
information; (iii) any information that Employee can demonstrate was within
his legitimate possession prior to the time of his employment by Employer;
(iv) any information which Employee is authorized in writing by Employer to
disclose; or (v) any confidential business information not constituting a
trade secret after one (1) year from termination of Employee's employment
with Employer. Notwithstanding the foregoing all scientific data developed
by Employer and all business plans of Employer shall be deemed to be
Confidential Information.
2. Duties and Responsibilities of Employee. Employer hereby employs
Employee to provide Services for Employer in the Territory and Employee hereby
accepts such employment. During the term of this Agreement, Employee shall
devote his full business time to his Services, shall perform such Services in a
commercially reasonable manner to the best of his abilities and shall not engage
in or undertake any activities, business or otherwise that would materially
interfere with or limit the performance of such Services. It is understood that
Employee has and will continue to have a position as an adjunct professor
without salary with the Rockefeller University. Employee will be responsible to,
and will report to, the Board of Directors of Employer. The duties and
responsibilities of Employee include, but are not limited
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<PAGE>
to, reporting to Employer's Board of Directors, raising capital to finance the
growth and development of Employer's business, hiring, training and providing
leadership to all employees of Employer, setting standards of conduct and
performance for all employees of Employer, establishing operating policies for
Employer's business, and maintaining the confidentiality of Employer's
intellectual property, patent information and trade secrets. In conjunction with
the Board of Directors, Employee will play an instrumental role in defining
strategic goals and policies of Employer.
3. Place of Employment. Employee shall perform Services from Employer's
facility in New York City and, except with the consent of Employee, Employee
shall not be required to perform Services which require relocation from such
area; provided, however, that Employee agrees to undertake all reasonable and
customary travel required by Employer in connection with the performance of
such Services in the Territory and in accordance with standards established by
the Board of Directors.
4. Term. Employee's term of employment shall continue from the date of this
Agreement through November 30, 1999, unless sooner terminated in accordance with
this Agreement. Employee's last day of employment, regardless of how terminated
pursuant to this Agreement, shall be the "Termination Date."
5. Compensation.
(a) Salary. As compensation for the Services rendered by Employee
under this Agreement, Employer shall pay Employee a salary at the annual
rate of $200,000 ("Salary"). Employee's Salary shall be payable in arrears
in equal monthly installments, subject to such deductions and withholding
as may be required by law or by agreement of Employee. Employee's Salary
shall be reviewed annually and shall be subject to such upward adjustment,
if any, as shall be determined by the Board of Directors.
(b) Expenses. Employer shall reimburse Employee for all reasonable,
proper and necessary out-of-pocket expenses that Employee may incur in
connection with the
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performance of Services, upon submission to Employer of itemized statements
supported by documentation specified by Employer.
(c) Fringe Benefits. Employee shall be entitled to all rights and
benefits generally provided to executive employees as decided by the Board
of Directors from time to time, including, without limitation, vacation,
medical, accident and disability insurance, life insurance (provided that
Employee and Employer are joint beneficiaries), pension, vehicle use and
related expenses.
(d) Facilities. Employer shall provide Employee with appropriate
research facilities, office space, equipment, furniture, supplies and
clerical staff.
(e) Stock Options. Within 30 days after the date of this Agreement,
Employer shall cause the grant to Employee of the following non-incentive
stock options pursuant to its then current employee stock option plan (the
"Plan") in substitution for any and all stock options to acquire capital
stock of Employer currently held by Employee, subject to obtaining any
approvals of the Board of Directors (or a committee thereof) or other
parties with respect thereto which are required under the Plan or
applicable law:
(i) a stock option to purchase 500,000 shares of common stock
of Employer at an exercise price of $1.25 per share (the "Regular
Option"), which option shall vest in one-third increments upon each of
November 30, 1997, 1998 and 1999; and
(ii) a stock option to purchase 300,000 shares of common stock of
Employer at an exercise price of $1.25 per share (the "Milestone Option"),
which option shall vest in increments of 30,000 shares for each of the ten
milestones described on Exhibit B hereto which are determined by the Board
of Directors of Employer to have been achieved prior to November 30, 1999.
Notwithstanding the foregoing, (i) in the event that the employment of Employee
is terminated
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prior to December 1, 1997 as a result of a Termination Not For Cause (as defined
in Section 6(a)), one-third of the Regular Option shall automatically vest on
the Termination Date and if such termination shall occur on or after December 1,
1997 and prior to November 30, 1999, the entire unvested portion of such option
shall automatically vest; and (ii) the Regular Option shall vest in full (prior
to November 30, 1999) immediately upon the consummation of any merger or other
transaction pursuant to which any person or entity acquires more than 50% of the
outstanding voting stock of Employer (a "Change in Control") or in the event
that shares of common stock of Employer are no longer traded on the Nasdaq Small
Cap Market (and not then traded on another recognized market or exchange) as a
result of the acquisition by VIMRx Pharmaceuticals Inc. ("VIMRx") of shares of
common stock of Employer and such option is not replaced with an option
(containing substantially similar terms except for any adjustment by VIMRx of
the exercise price per share and number of shares purchasable under the option
based upon the then relative fair market values per share of common stock of
Employer and VIMRX) to purchase shares of common stock of VIMRx (a "Delisting");
(iii) in the event of a Change in Control, a Delisting, or a Termination Not For
Cause prior to November 30, 1999, for each milestone which the Board determines
to have not been achieved in full prior to the date of such Change in Control,
Delisting or Termination Not For Cause, the 30,000 shares under the Milestone
Option related to achievement of such milestone shall be deemed vested in a
percentage equal to the percentage of such milestone which the Board determines
to have been achieved by that date; (iv) in the event of any Termination Not For
Cause prior to November 30, 1999, Employee may exercise both the Regular Option
and the Milestone Option notwithstanding such termination (to the extent such
options are deemed exercisable as of the Termination Date pursuant to the terms
hereof).
(f) Key Performance Bonus. A cash bonus may be paid to Employee at the
reasonable discretion of Employer's Board of Directors upon the achievement of
specific and reasonable key performance objectives to be established and
measured by the Board of
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Directors. These objectives will be established by the Board based upon a set of
specific critical tasks prepared by Employee and recommended by Employee to the
Board of Directors for review and approval. At a minimum, each set of critical
tasks will be prepared by Employee and authorized by the Board of Directors once
each fiscal year, or more frequently as may be appropriate.
6. Termination.
(a) Events of Termination. This Agreement shall terminate prior to the
expiration of its term:
i) upon mutual written agreement of Employer and Employee; or
ii) upon death of Employee; or
iii) at the election of Employer upon the "Permanent Disability"
(as hereinafter defined) of Employee; or
iv) at the election of Employer "For Cause" (as hereinafter
defined); or
v) upon at least 60 days' notice to Employee, at the election of
Employer for any reason other than those specified in clauses (i)
through (iv) and (vi), inclusive, of this Section 6(a) ("Termination
Not For Cause");
vi) at the election of Employee in the event Employer becomes
subject, voluntarily or involuntarily to any proceeding in bankruptcy
or upon the liquidation of the Employer.
(b) Definition of Certain Terms. i) "Permanent Disability" shall have
the same meaning as it does in the contract for the disability insurance
purchased by Employer and covering Employee. Any determination of Permanent
Disability shall be made by a physician chosen by the majority of the Board
of Directors of Employer (excluding Employee, if he is at the time a
director).
ii) "For Cause" shall mean a determination by the majority of the
board of directors of Employer (other than Employee, if he is at the
time a director) to remove
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Employee due to any act of Employee constituting (1) conviction of a
felony involving moneys or other property of Employer or any affiliate
of Employer, (2) conviction of a felony offense for any crime of moral
turpitude, (3) conviction of a felony for an act of dishonesty, fraud
or embezzlement, or (4) material and repeated failure to discharge his
Services in any material manner or to perform substantially any
material covenant or agreement hereunder; provided, Employer will
provide written and timely notice to Employee of such failure or
default and a reasonable period, at least fifteen (15) days but not to
exceed thirty (3) days, to cure such default.
(c) Effect of Termination. Upon any termination pursuant to this
Section 6, all rights of Employee hereunder shall cease to be effective as
of the Termination Date, Employee shall be removed or resign from any
position held hereunder, and except to the extent otherwise provided by law
or mutually agreed to, Employee shall have no rights to receive any
payments or benefits hereunder, except for:
i) Salary payable pursuant to Subsection 5(a) up to the
Termination Date;
ii) reimbursement of expenses incurred in accordance with
Subsection 5(b) prior to the Termination Date;
iii) in the case of termination for death or Permanent
Disability, the continuation of payment by the Employer of the monthly
Salary which would have been payable herewith up to a maximum of
twelve months following the Termination Date;
iv) in the case of any Termination Not For Cause, the balance of
the bonus due to the Employee pursuant to subparagraph 5(f)
notwithstanding his termination of employment;
v) in the case of termination by Employer in connection with a
Change in Control of Employer (or resignation by Employee upon a
Change in Control if the Services of Employee hereunder shall have
substantially reduced in connection therewith),
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Employee shall be entitled to a monthly severance payment equal to his
monthly Salary, in consideration of past services, for a period of
twelve months following such Change in Control.
vi) Notwithstanding anything to the contrary herein, in the case
of a Termination Not For Cause prior to November 30, 1999, the
Employer shall continue to pay Employee his monthly Salary for a
period of twelve months following the Termination Date during which
time the Employee shall serve as a consultant to the Employer and
perform such duties as may reasonably be determined by the Employer
(but during which time the Employee may obtain full-time employment
with another entity, subject to his obligations under Sections 7
through 12 hereof).
(d) Laboratory Equipment. Employer acknowledges that certain equipment
as set forth on Exhibit A hereto which is being used and will be used by
its employees and consultants was or will be loaned to it by Employee, that
all such equipment remains the property of Employee, and that in the event
Employee's employment is terminated, Employer will promptly return said
equipment as requested to Employee, regardless of whether Employee is in
breach of any item of this Agreement, except in the event of termination by
Employee, Employer will be provided with a reasonable time to procure
substitute equipment, provided, however:
(i) Employee and Employer shall each cooperate so as to minimize
the burden and expense of any transfer for each party;
(ii) Employer will maintain adequate insurance to repair to the
satisfaction of Employee or replace the equipment during the period
the equipment remains on Employer's premises; and
(iii) Employee's right hereunder is personal to Employee, and is
not transferable or assignable by Employee.
7. Confidential Information. Employee agrees to use his best efforts to
maintain the confidentiality of Confidential Information. Employee will not use,
except in connection
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with work for Employer, and will not disclose or give to others during or after
Employee's employment with Employer, any of Employer's Confidential Information.
8. Return of Materials. Upon termination of Employee's employment with
Employer for any reason or at any time at Employer's request, Employee agrees to
deliver to Employer all of Employer's materials, documents, plans, records,
notes, drawings, or papers and any copies thereof which constitute or embody
Confidential Information and are in Employee's possession or control.
9. Employment with Competitors. During the term of this Agreement and for a
period of twelve (12) months after termination of Employee's employment with
Employer for any reason, Employee agrees not to provide Services within the
Territory to any person or entity engaging in commercial activities which could
result in the manufacture or marketing of products identical to or reasonably
substitutable for Employer's products.
10. Post-Employment Hiring or Solicitation of Employer Employees and
Representatives. During the term of this Agreement and for a period of twelve
(12) months immediately following termination of Employee's employment with
Employer for any reason, Employee will not induce or solicit any other employee
of the Employer to leave employment with Employer or any person to terminate an
independent contractor relationship with the Employer.
11. Inventions, Ideas and Patents. Employee will promptly disclose to
Employer, and only to Employer, any invention or idea of his or to which he
contributes in any way connected with Employee's employment or related to
Employer's business conceived or made during his employment by Employer or
within three (3) months after termination of Employee's employment and all such
inventions or ideas shall become the property of Employer. Employee agrees to
cooperate with Employer and sign all papers deemed necessary by Employer to
enable it, at its expense, to obtain, maintain, and protect patents covering
such inventions and ideas and Employee hereby irrevocably constitutes and
appoints Employer as Employee's agent and
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attorney-in-fact, with full power of substitution, in Employee's name, place and
stead, to execute and delivery any and all such assignments or other instruments
which Employee shall fail or refuse promptly to execute and deliver, this power
and agency being coupled with an interest and being irrevocable.
12. Copyrights. All writings, tapes, recordings, computer programs and
other works in any tangible medium of expression, regardless of the form of
medium, which have been or are prepared by Employee, or to which Employee
contributes, in connection with employment by Employer (collectively the
"Works") and all copyrights and other rights in and to the Works, belong solely,
irrevocably and exclusively throughout the world to Employer as works made for
hire. However, to the extent any court or agency should conclude that the works
(or any one of them) do not constitute or qualify as a "work made for hire,"
Employee hereby assigns, grants, and delivers, solely, irrevocably, exclusively
and throughout the world to Employer, all copyrights and other rights to the
Works. Employee also agrees to cooperate with Employer and to execute such other
further grants and assignments of all rights as Employer from time to time
reasonably may request for the purpose of evidencing, enforcing, registering or
defending its ownership of the Works and the copyrights in them, and Employee
hereby irrevocably constitutes and appoints Employer as Employee's agent and
attorney-in-fact, with full power of substitution, in Employee's name, place and
stead, to execute and deliver any and all such assignments or other instruments
which Employee shall fail or refuse promptly to execute and deliver, this power
and agency being coupled with an interest and being irrevocable. Without
limiting the preceding provisions of this paragraph, Employee agrees that
Employer may edit and otherwise modify, and use, publish and otherwise exploit,
the Works in all media and in such manner as Employer, in its discretion, may
determine.
13. Notices. Any notice required or permitted to be given hereunder shall
be in writing and shall be delivered personally, by facsimile, telecopied or
telexed, or sent by certified registered or express mail, postage prepaid, and
shall be deemed given when so delivered
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personally, facsimiled, telecopied or telexed, or if so mailed, three days after
the date of mailing, addressed as follows:
(1) If to Employer:
Innovir Laboratories, Inc.
510 E. 73rd St.
New York, New York 10021
Attn: Gary Pokrassa
With a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
Attn: Merrill M. Kraines, Esq.
and
Epstein Becker & Green, P.C.
250 Park Avenue
New York, New York 10177
Attn: Lowell S. Lifschultz, Esq.
(2) If to Employee:
Dr. Allan R. Goldberg
200 East 66th Street
Apt. E1607
New York, New York 10021
14. Entire Agreement; Amendments and Waivers. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
cancels and supersedes all prior agreements, written or oral, with respect
thereto (including, without limitation, the "Superseded Agreement"). This
Agreement may be amended or modified and the terms and conditions hereof may be
waived, only by a written instrument signed by the parties or, in the case of
waiver, by the party waiving compliance. No delay on the part of either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The
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rights and remedies provided herein are cumulative and are not exclusive of any
rights or remedies that either party may otherwise have at law or in equity.
15. Successors and Assigns. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto, the heirs and legal
representatives of Employee and the successors and assigns of Employer. Employee
shall not be entitled to assign his rights and obligations hereunder.
16. Interpretation; Severability of Invalid Provisions. All rights and
restrictions contained in this Agreement may be exercised and shall be
applicable and binding only to the extent that they do not violate any
applicable laws and are intended to be limited to the extent necessary so that
they will not render this Agreement illegal, invalid or unenforceable. If any
term of this Agreement shall be held to be illegal, invalid or unenforceable by
a court of competent jurisdiction, the remaining terms shall remain in full
force and effect.
The provisions of this Agreement do not in any way limit or abridge
Employer's rights under the laws of unfair competition, trade secret, copyright,
patent, trademark or any other applicable law(s), all of which are in addition
to and cumulative of Employer's rights under this Agreement. Employee and
Employer agree that the existence of any claim by Employee against Employer or
by Employer against Employee, whether predicated on this Agreement or otherwise,
shall not constitute a defense to enforcement by Employer or Employee,
respectively, of any or all of such provisions or covenants.
17. Equitable Relief. The parties acknowledge that a breach or threat to
breach any of the terms of this Agreement by Employee would result in material
and irreparable damage and injury to Employer, and that it would be difficult or
impossible to establish the full monetary value of such damage. Therefore,
Employer shall be entitled to injunctive relief without the requirement of a
bond or other condition by a court of appropriate jurisdiction in the event of
Employee's breach or threatened breach of any of the terms contained in this
Agreement.
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18. Survival; Tolling Provisions. Post-termination obligations in this
Agreement shall survive termination of this Agreement, except to the extent
otherwise provided herein. The duration of any post-termination obligation
contained in this Agreement shall be extended by the length of time during which
Employee is in breach of the provision.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within the state.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EMPLOYER
INNOVIR LABORATORIES, INC.
By: /s/ GARY POKRASSA
--------------------------------
Name: Gary Pokrassa
Title: Vice President--Finance
EMPLOYEE
/s/ ALLAN R. GOLDBERG
------------------------------------
Allan R. Goldberg, Ph.D.
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EXHIBIT A
EQUIPMENT LOANED TO INNOVIR BY
ALLAN R. GOLDBERG
------------------------------
1. Bath Lauda (constant Temp.)
2. Millipore Cassette Filtration System
3. FPLC columns
4. Savant Concentrator/Evaporator
5. Beckman Detector
6. Bellco Harvester
7. Lunaire Incubator
8. Queue Incubator Shaker
9. VWR Labline
10. WP Inst. Pipette-Puller
11. ISCO Power Supply (2)
12. IBI Power Supply
13. Dupont/Sorvall Rotor
14. Radiometer PHM62 Standard pH Meter
15. New Brunswick Colony Counter
16. Gilson Micro Fractionator
17. Kenmore Freezer (-20(degree) upright)
18. Sears Coldspot [freezer/refrigerator-upright](2)
19. Refigerator (extra large)
20. Brinkmann Rotavapor (Buchi)
21. Burrell Wrist Action Shaker
22. GE vacuum pumps (2)
23. Hoefer Slab Gel Dryer (2)
24. Eppendorf Microfuge (3)
25. Baker Biogard Hood (Model B6000-1)
26. Wild M40 Inverted Microscope
27. Bell-Stir Multi-Stir
28. Lab-Line Orbit Shaker
29. Sorvall GLC-2 Table Top Centrifuge
30. Thermontix 1480 [Braun] (2)
31. BTX Transfector and Power Plus
32. Hotpack incubator
33. Glassware, test tube racks, automatic pipetoors, chemical supplies
34. Electrophoresis and chromatography supplies
35. Tissue culture supplies and small equipment
36. Journals and reference book collection
37. Certain Wall Cabinets and Desks
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EXHIBIT B
Milestone Objectives
--------------------
o Two or more significant strategic alliances for therapeutics that
are valued at >$30 million each, including up-front license fees,
milestone payments and R&D payments.
o Several strategic alliances for therapeutics that are valued at $60
million in the aggregate.
o Target validation alliances that have a value to Innovir of at least $30
million in the aggregate.
o File IND for HBV Therapeutic by the end of 1997.
o One therapeutic product in Phase IIb.
o One additional therapeutic product in Phase IIa.
o Achieve exercise of A and B warrants.
o Operate within Board-approved budget.
o Position Innovir so that the stock price is at least $10 per share.
o Integrate effectively the efforts of Innovir in NYC and its Laboratories
in UK and Germany.
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EXHIBIT 10.2
RESEARCH AGREEMENT
Effective on this 18th day of March, 1997 (the "Effective Date"),
ALBERT EINSTEIN COLLEGE OF MEDICINE OF YESHIVA UNIVERSITY, a New York
nonprofit corporation with offices located at 1300 Morris Park Avenue, Bronx,
New York 10461 (hereinafter "University") and
INNOVIR LABORATORIES, INC., a Delaware corporation having its principal
place of business at 510 East 73rd Street, New York, New York 10021 (hereinafter
"Innovir"), in consideration of the mutual covenants contained herein, AGREE AS
FOLLOWS:
ARTICLE 1
BACKGROUND AND DEFINITIONS
1.1 University, through the Principal Investigator, has developed technology
based on a Woodchuck Hepatitis Mouse model for testing antiviral agents
against woodchuck hepatitis virus (WHV).
1.2 Innovir has proprietary oligonucleotide based anti-HBV compounds called
external guide sequences ("EGS(s)") which has been shown to inhibit HBV
replication in hepatoma cells producing human HBV.
1.3 The parties wish to determine if the woodchuck hepatitis mouse model will
be useful in determining the effectiveness of anti-human HBV EGS compounds.
1.4 The parties wish to collaborate in a program of research described in
Schedule 1 hereto (the "Research") under terms and conditions of this
Agreement.
ARTICLE 2
DESCRIPTION OF THE RESEARCH
2.1 The Research to be conducted hereunder is fully described in Schedule and
relates to the use of the Woodchuck Hepatitis mouse model to test the
effectiveness of EGSs developed, licensed or owned by Innovir against WHV
replication.
ARTICLE 3
UNIVERSITY STAFF AND FACILITIES
3.1 The Research shall be carried out at University within the Marion Bessin
Liver Research Center under the direction of Charles E. Rogler, Ph.D.
("Principal Investigator"), who shall assign one or more post-doctoral
fellows, students or employees ("Researcher(s)") to the Research and will
notify Innovir of the selection. If the Principal Investigator or
Researcher(s) are unable to continue the Research, Innovir in its sole
discretion shall (i) consult with University to select a mutually
acceptable
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replacement or replacements from the University staff to direct and conduct
the Research, and/or (ii) terminate the Research upon twenty (20) days
written notice to University. Upon such termination, University shall
return to Innovir any of the unexpended funds budgeted for mice and
supplies and/or any uncommitted salary amounts.
3.2 University shall provide Principal Investigator and Researcher(s) the
laboratory, and service facilities, guidance and scientific equipment as
required to carry out the Research; provided, however, University shall not
be obligated to incur any costs in excess of the amount specified in
Schedule 2 to perform the Research.
ARTICLE 4
REPORTS AND TANGIBLE TECHNICAL INFORMATION
4.1 University and Principal Investigator shall keep Innovir informed of the
progress of the research he conducts hereunder on a regular basis as
mutually agreed to by both parties. Principal Investigator shall provide
Innovir with bimonthly reports of progress and a complete written report at
the end of the Term.
4.2 Innovir shall have the right to use the reports submitted by Principal
Investigator as it sees fit, however, Innovir may not make any reference to
Albert Einstein College of Medicine of Yeshiva University or any affiliate
institution without first obtaining written consent from University;
provided however, Innovir may make such reference if Innovir's counsel
deems it necessary or appropriate to comply with statute, court order or
government regulation, for filing with a regulatory agency or for filing a
patent application.
4.3 University and Principal Investigator shall in a timely fashion permit
Innovir full access to, and at the request of Innovir, shall deliver to
Innovir copies of all laboratory notebooks and other technical and research
data prepared during the work under this Agreement. Innovir agrees to
reimburse University for its reasonable cost in providing such copies.
ARTICLE 5
NO RIGHTS IN INNOVIR TECHNOLOGY
5.1 Except as expressly provided in this Agreement, no rights are provided to
University (including the Principal Investigator and Researchers) or
Innovir under any patents, patent applications, trade secrets or other
proprietary rights of the other party. No rights are provided to use the
materials or modifications or any related patents of Innovir for profit
making or commercial purposes, such as sale of the materials or
modifications used in manufacturing, provision of a service to a third
party in exchange for consideration, or use in research or consulting for a
for-profit or non-profit entity under which the entity obtains rights to
research results.
ARTICLE 6
PUBLICATION
6.1 University agrees to provide Innovir with an advance copy of any proposed
publication
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on the Research. Innovir agrees to review proposed publications and to
inform University of any information Innovir considers confidential
information within thirty (30) days. University shall not publish such
confidential information. If a publication does result from Research,
authorship shall be jointly decided by Innovir and University based on
accepted scientific practice.
6.2 Innovir shall have the right to use the data generated in the Research in
filing patent applications, in filing for regulatory approvals and for
other commercial purposes.
ARTICLE 7
INVENTIONS
7.1 Intellectual Property shall only mean discoveries, inventions, improvements
and/or commercially useful products or processes, whether patentable or
not, which were developed or made under this Agreement. University and
Innovir will promptly notify the other party of any Intellectual Property
conceived and/or made during the term of this Agreement under the Research.
7.2 Results of the Research shall be owned as follows:
(a) If all inventors are employees of Innovir, by Innovir, and such
Intellectual Property will not be subject to this Agreement.
(b) If all inventors are faculty, students or employees of
University, by University.
(c) If Intellectual Property is invented jointly by at least one
person employed by Innovir and at least one person with an
obligation to assign to the University, jointly by both Innovir
and University.
7.3 If Intellectual Property is solely owned by University, Section 7.2(b),
University shall notify and consult with Innovir before filing and
prosecuting U.S. or foreign patent applications. If Innovir requests that a
patent application or other intellectual property protection be filed and
University concurs, Innovir shall bear all costs incurred in connection
with such preparation, filing, prosecution and maintenance of U.S. and
foreign application(s) directed to said Intellectual Property using counsel
selected by University and reasonably acceptable to Innovir. University and
Innovir shall cooperate to assure that such application(s), will cover, to
the best of their combined knowledge, all items of commercial interest and
importance. While University shall be responsible for making all decisions
regarding scope and content of application(s) to be filed and prosecution
thereof, Innovir shall be given an opportunity to review and provide input
thereto and University will not unreasonably reject Innovir's input. If
Innovir licenses the Intellectual Property, University shall keep Innovir
advised as to all developments with respect to such application(s) and
shall promptly supply to Innovir copies of all papers received and filed in
connection with the prosecution thereof within a reasonable time for
Innovir to comment thereon. Further, University shall promptly notify
Innovir in writing of any matter which has been patented under this
Agreement.
7.4 If Intellectual Property is jointly owned by University and Innovir,
Section 7.2(c) and Innovir requests that a patent application or other
intellectual property protection be filed, Innovir shall promptly take
action to have prepared, filed, and prosecuted such U.S. and foreign
application. Innovir shall pay all costs incurred in connection with such
preparation, filing, prosecution and maintenance of U.S. and foreign
application(s)
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directed to said Intellectual Property. Innovir shall cooperate with
University to assure that such application(s) will cover, to the best of
their combined knowledge, all items of commercial interest and importance.
While Innovir shall be responsible for making decisions regarding scope and
content of application(s) to be filed and prosecution thereof, University
shall be given an opportunity to review and provide input thereto. Innovir
shall keep University advised as to all developments with respect to such
application(s) and shall promptly supply to University copies of all papers
received and filed in connection with the prosecution thereof within a
reasonable time for University to comment thereon. Further, Innovir shall
promptly notify University in writing of any matter which has been patented
under this Section 7.4.
7.5 If Innovir elects to discontinue the financial support of the prosecution
or maintenance of the protection of Intellectual Property under Sections
7.3 and/or 7.4, University shall be free to file or continue prosecution or
maintain any such application(s), and to maintain any protection issuing
thereon in the U.S., and in any foreign country at its sole expense.
7.6 If Innovir wants an exclusive license to any patent application or patent
owned, jointly by Innovir and University under this Agreement, it shall
have an option to obtain an exclusive, worldwide license to the
Intellectual Property or any interest therein. If Innovir is paying the
costs of patent protection for such Intellectual Property, this option
shall expire six (6) months from the date of issuance of the patent, and
the Parties shall negotiate in good faith to reach the terms of the
exclusive, worldwide license; provided, however, if University and Innovir
do not reach agreement, University, for two (2) years, will not offer the
Intellectual Property to a third party on terms less favorable in material
respects than the terms offered Innovir under this Section 7.6. If Innovir
is not paying the costs of patent protection, this option shall expire on
the date Innovir stopped paying the patent prosecution costs. Any license
shall include a reasonable royalty based on the respective party's
contributions and relevant industry standards and, subject to University's
policies, shall include such other terms as are typical in licenses of
similar technology from nonprofit organizations to for-profit
organizations.
7.7 If not restricted by agreements with third parties, University shall
negotiate a limited right to use any technologies it owns that were
developed by the Principal Investigator to the extent necessary for Innovir
to make, use or sell a product incorporating Intellectual Property licensed
under Section 7.6. In addition, and if not restricted by agreements with
third parties, University shall discuss with Innovir the possibility of
licensing a limited right to use any other technologies University owns to
the extent necessary for Innovir to make, use or sell a product
incorporating Intellectual Property licensed under Section 7.6.
ARTICLE 8
REPRESENTATION
8.1 This Agreement shall not be construed to limit the freedom of individuals
participating in the Research to engage in any other research; provided,
however, the Principal Investigator and Researcher(s) agree that they will
not individually or together seek sponsored research funds from a
for-profit third party for the Research defined herein. The Principal
Investigator and Researcher(s) will represent to the University that they
have not entered into any research agreement with a for-profit third party
that would
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prevent them from performing their obligations under the terms of this
Agreement.
ARTICLE 9
COMPENSATION
9.1 In support of the Research to be conducted at University, Innovir shall pay
University according to the amounts specified and under the terms shown in
Schedule 2.
9.2 If the parties agree in writing that the results of the testing described
in Schedule 1 show that the Woodchuck Hepatitis Mouse model is successful
in testing for antihuman HBV EGS compounds, then Innovir shall pay
University the bonus specified in Schedule 2 within thirty (30) days of
such written agreement of successful testing.
ARTICLE 10
TERM AND TERMINATION
10.1 This Agreement shall commence the on Effective Date and shall continue for
a six (6) month period (the Term).
10.2 Innovir may terminate this Agreement if University, the Principal
Investigator, or the Researcher(s) is in breach of this Agreement and
(where the breach is remediable) fails to remedy the breach within thirty
(30) days of being requested to do so by Innovir, Innovir shall be entitled
to terminate this Agreement at any time by notice in writing to University.
Termination shall be without prejudice to Innovir's other rights in respect
of the breach of the Agreement.
10.3 If Innovir is in breach of this Agreement and (where the breach is
remediable) fails to remedy the breach within thirty (30) days of being
requested to do so by the University, the University shall be entitled to
terminate this Agreement at any time by notice in writing to Innovir.
Termination shall be without prejudice to the University's other rights in
respect to the breach of the Agreement.
10.4 Articles 5, 6, 7, 11 and 12 and Sections 4.2 and 4.3 shall survive the
termination of this Agreement; provided, however Articles 6 and 7 and
Section 4.2 shall not survive a termination of this Agreement pursuant to
Section 10.3.
ARTICLE 11
RETURN OF DOCUMENTS AND MATERIALS
11.1 Upon termination of this Agreement, either party may request the return of
all papers, records and other documents including any materials such as
reagents, that it supplied to the other party, which are then in the
possession of the other party, except:
(a) each party may retain one copy for archival purposes;
(b) University shall not require Innovir to return any documents or
materials which Innovir requires to make an evaluation of its
interest in exercising its license option pursuant to Section 7.6
hereof, until after the conclusion of said license option period;
(c) University shall not require Innovir to return the written
reports and
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<PAGE>
tangible technical information made by University pursuant to
Article 4; and
(d) Innovir may retain materials required for government approval.
ARTICLE 12
DISCLAIMER OF WARRANTIES, INDEMNIFICATION
12.1 UNIVERSITY MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WARRANTIES WITH RESPECT TO THE
CONDUCT, COMPLETION, SUCCESS OR PARTICULAR RESULTS OF THE SPONSORED
RESEARCH, OR THE CONDITION, OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE OF THE SPONSORED RESEARCH OR ANY RESULTS OR INTELLECTUAL
PROPERTY. UNIVERSITY SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT,
CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES SUFFERED BY SPONSOR OR ANY OTHER
PERSON RESULTING FROM THE SPONSORED RESEARCH OR THE USE OF ANY INTELLECTUAL
PROPERTY.
12.2 Innovir shall defend, indemnify and hold harmless University, the Principal
Investigator and any of University's faculty, students, employees,
trustees, officers, affiliates and agents (hereinafter referred to
collectively as the "Indemnified Persons") from and against any and all
liability, claims, lawsuits, losses, damages, costs or expenses (including
attorneys' fees), which the Indemnified Persons may hereafter incur, or be
required to pay as a result of Innovir's use of the results of Sponsored
Research or any Intellectual Property or as a result of any breach of this
Agreement or any act or omission of Innovir, its employees, affiliates,
contractors, licensees or agents. University shall notify Innovir upon
learning of the institution or threatened institution of any such
liability, claims, lawsuits, losses, damages, costs and expenses and
University shall cooperate with Innovir in every proper way in the defense
or settlement thereof at Innovir's request and expense.
ARTICLE 13
GENERAL PROVISIONS
13.1 Both parties shall, at all times during the performance of this Agreement,
remain as independent contractors and the Agreement shall not make the
parties partners, joint venturers, or agents of one another. No party to
this Agreement shall have the power to bind or obligate the other party.
13.2 None of the materials supplied under this Agreement by either party to the
other, shall be used in human subjects without obtaining appropriate
government approvals.
13.3 Neither party assumes responsibility or liability for the nature, conduct,
or results of any research, testing or other work performed by the other
party.
13.4 This Agreement may not be assigned by either party without the prior
written consent of the other party.
13.5 Any notice, report or communication to be given under this Agreement may be
delivered personally, sent by registered or certified mail, return receipt
requested, or transmitted
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<PAGE>
by facsimile copy or electronic mail to the parties at the addresses given
below or such other addresses may be notified from time to time. Any
notice, report or communication so sent shall not be deemed to have been
given until it has been received by the party to whom it has been
addressed.
Albert Einstein College of Medicine of Yeshiva University
Office of Industrial Liaison
1300 Morris Park Avenue
Bronx, New York 10461
Attention: Dr. Sidney Goldfischer
Telephone 718-430-3357
Facsimile 718-430-8822
with a copy to:
Amster Rothstein & Ebenstein
90 Park Avenue
New York, New York 10016
Attention: Kenneth George
Telephone 212-647-5995
Facsimile 212-286-0854
Innovir Laboratories, Inc.
510 East 73rd Street
New York, NY 10021
Attention: Allan R. Goldberg, Ph.D.
Telephone 212-249-4703
Facsimile 212-249-4513
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Thomas D. Paul
Telephone 713-651-5325
Facsimile 713-651-5105
13.6 The terms and conditions herein contained constitute the entire Agreement
between the parties and supersede all previous communications, whether oral
or written, between the parties hereto with respect to the subject matters
hereof, and no previous agreement or understanding varying or extending the
same shall be binding upon either party hereto.
13.7 No amendment or modification of this Agreement shall be effective unless it
is in writing and signed by duly authorized representatives of all parties.
13.8 The parties covenant and agree that, if either party fails or neglects for
any reason to take advantage of any of the terms provided for the
termination of this Agreement, or
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<PAGE>
if either party, having the right to declare this Agreement terminated
shall fail to do so, any such failure or neglect by either party shall not
be a waiver or be deemed or be construed to be a waiver of any cause for
the termination of this Agreement subsequently arising or as a waiver of
any of the terms, covenants or conditions of this Agreement, or the
performance thereof. None of the terms, covenants or conditions of this
Agreement may be waived by either party except by its written consent.
13.9 All parties hereby especially agree and contract that neither party intends
to violate any public policy, statutory or common law, rule or regulation,
treaty or decision of any government agency or executive body thereof of
any country or community or association of countries; if any word,
sentence, paragraph or clause or combination thereof of this Agreement is
found, by a court or executive body with judicial powers having
jurisdiction over this Agreement or any of its parties hereto, in a final
unappealed order to be in violation of any such provision in any country or
community or association of countries, such words, sentences, paragraphs or
clauses or combination shall be inoperative in such country or community or
association of countries and the remainder of this Agreement shall remain
binding upon the parties hereto.
13.10 Neither party shall be liable for delays caused by bona fide labor
disputes, war, civil or military disturbances, acts or lack of action of
governments or governmental authorities, accidents, fires, explosions,
epidemics, forces of nature, acts of God or other causes reasonably beyond
its control, but each party shall use all reasonable efforts to avoid such
delays and to minimize the extent of any delays that do occur.
13.11 This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and
permitted assigns.
13.12 This Agreement shall be deemed to have been made under, and shall be
construed and interpreted in accordance with the laws of the State of New
York, U.S.A.
IN WITNESS WHEREOF, University and Innovir have caused this Agreement to be
executed in duplicate by their respective duly authorized officers.
INNOVIR LABORATORIES, INC. ALBERT EINSTEIN COLLEGE OF MEDICINE
OF YESHIVA UNIVERSITY
By: ALLAN R. GOLDBERG By: CHARLES E. ROGLER
---------------------------- --------------------------------
Allan R. Goldberg, Ph.D
Chairman and President
Date: Date:
----------------------- --------------------------
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Exhibit 11
INNOVIR LABORATORIES, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
STATEMENT OF COMPUTATION OF NET LOSS PER SHARE
Three months ended March 31,
----------------------------
1997 1996
------------ ------------
Primary:
Net loss ....................................... ($ 2,497,000) ($ 549,000)
============ ============
Per share data:
Weighted average number of Common
shares outstanding during the period.. 18,042,470 9,500,000
============ ============
Net loss per share ................... ($ 0.14) ($ 0.06)
============ ============
Fully diluted:
Net loss ....................................... ($ 2,497,000) ($ 549,000)
============ ============
Per share data:
Weighted average number of Common
shares outstanding during the period.. 18,042,470 9,500,000
Shares issuable upon conversion of convertible
equity securities .................... 9,120,512 8,666,666
Shares issuable upon exercise of outstanding
options and warrants ................. 3,018,156 2,000,000
Shares assumed to be repurchased under
the treasury stock method ............ (1,981,097) (685,714)
------------ ------------
Number of common shares used in computing per
share data ........................... 28,200,041 19,480,952
============ ============
Net loss per share ........ ($ 0.09) ($ 0.03)
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,300,000
<SECURITIES> 0
<RECEIVABLES> 186,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,486,000
<PP&E> 4,197,000
<DEPRECIATION> 1,393,000
<TOTAL-ASSETS> 8,665,000
<CURRENT-LIABILITIES> 1,769,000
<BONDS> 0
0
0
<COMMON> 773,000
<OTHER-SE> 29,675,000
<TOTAL-LIABILITY-AND-EQUITY> 8,665,000
<SALES> 0
<TOTAL-REVENUES> 73,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,533,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,000
<INCOME-PRETAX> (2,497,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,497,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,497,000)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> 0
</TABLE>
