<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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 September 30, 1998
----------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-28674 .
CADUS PHARMACEUTICAL CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3660391
- --------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
777 Old Saw Mill River Road, Tarrytown, New York 10591-6705
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (914) 467-6200
----------------------------
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 registrant's common stock, $.01 par value, outstanding
as of October 21, 1998 was 13,068,940.
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CADUS PHARMACEUTICAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS 3
PART I -- CONDENSED FINANCIAL INFORMATION
Item 1 Condensed Financial Statements
Condensed Balance Sheets - September 30, 1998 and 4
December 31, 1997
Condensed Statements of Operations - Three and nine months
ended September 30, 1998 and 1997 5
Condensed Statements of Cash Flows - Nine months ended
September 30, 1998 and 1997 6
Notes to Condensed Financial Statements 7-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II -- OTHER INFORMATION
Item 1 Legal Proceedings 15
Item 2 Changes in Securities and Use of Proceeds 15
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
2
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Special Note Regarding Forward Looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance, or achievements
of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Factors that could cause or contribute to such differences
include, but are not limited to, the Company's lack of developed
pharmaceutical products and uncertainties regarding its ability to
develop safe and efficacious pharmaceutical products, technological
uncertainties regarding the Company's technologies, uncertainties
regarding the Company's future acquisition and licensing of technologies,
the Company's relationship with its collaborative partners and
uncertainties regarding its ability to enter into future collaborative
agreements, the Company's capital needs and uncertainty of future
funding, the Company's history of operating losses, the Company's
dependence on proprietary technology and the unpredictability of patent
protection, intense competition in the pharmaceutical and biotechnology
industries, rapid technological development that may result in the
Company's technologies and future products becoming obsolete,
uncertainties regarding the Company's ability to attract and retain key
officers, employees and consultants, as well as other risks and
uncertainties discussed in the Company's prospectus dated July 17, 1996.
3
<PAGE>
Cadus Pharmaceutical Corporation
Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 34,268,905 $ 36,761,516
Restricted cash (note 4) 286,000 --
Prepaid and other current assets 621,475 405,597
------------ ------------
Total current assets 35,176,380 37,167,113
Fixed assets, net of accumulated depreciation and amortization of
$2,044,835 at September 30, 1998 and $2,582,661 at December 31, 1997 3,087,590 2,646,936
Investments in other ventures (note 3) 2,627,393 1,478,229
Other assets, net 1,282,449 948,912
------------ ------------
Total assets $ 42,173,812 $ 42,241,190
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Deferred revenue $ 902,683 $ 94,190
Accounts payable 693,305 892,636
Accrued expenses and other current liabilities 993,318 604,146
Note payable to partnership 150,000 150,000
------------ ------------
Total current liabilities 2,739,306 1,740,972
Commitments and contingencies
Stockholders' equity:
Common stock 132,106 125,001
Additional paid in capital 59,689,446 54,517,519
Accumulated deficit (20,086,971) (13,842,227)
Treasury stock (300,075) (300,075)
------------ ------------
Total stockholders' equity 39,434,506 40,500,218
------------ ------------
Total liabilities and stockholders' equity $ 42,173,812 $ 42,241,190
============ ============
</TABLE>
See accompanying notes to the condensed financial statements
4
<PAGE>
Cadus Pharmaceutical Corporation
Condensed Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues, principally from
related parties (note 5) $ 2,508,213 $ 2,402,364 $ 9,948,238 $ 6,564,150
Costs and expenses:
Research and development costs 3,743,488 2,962,939 10,980,568 8,331,469
General and administrative expenses 2,703,682 820,070 5,716,983 2,808,670
------------ ------------ ------------ ------------
Total costs and expenses 6,447,170 3,783,009 16,697,551 11,140,139
------------ ------------ ------------ ------------
Operating loss (3,938,957) (1,380,645) (6,749,313) (4,575,989)
------------ ------------ ------------ ------------
Other income and (expenses):
Net interest income 470,968 497,342 1,440,222 1,581,731
Equity in other ventures (248,111) (380,806) (850,836) (680,823)
Net gain on sale of equipment 12,460 -- 1,746 --
------------ ------------ ------------ ------------
Total other income and (expenses) 235,317 116,536 591,132 900,908
------------ ------------ ------------ ------------
Loss before income taxes (3,703,640) (1,264,109) (6,158,181) (3,675,081)
State and local taxes 44,289 (63,165) 86,563 (40,048)
------------ ------------ ------------ ------------
Net loss $ (3,747,929) $ (1,200,944) $ (6,244,744) $ (3,635,033)
============ ============ ============ ============
Basic net loss per share (note 2) $ (0.29) $ (0.10) $ (0.49) $ (0.30)
Shares used in calculation of basic net
loss per share (note 2) 13,068,857 12,295,474 12,725,720 12,185,827
</TABLE>
See accompanying notes to the condensed financial statements
5
<PAGE>
Cadus Pharmaceutical Corporation
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,244,744) $ (3,635,033)
Equity in other ventures 850,836 680,823
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 716,686 980,640
Net gain on sale of equipment (1,746) --
Changes in assets and liabilities:
Increase in prepaid and other current assets (215,878) (80,962)
(Increase) decrease in other assets (87,570) 2,993
Increase (decrease) in deferred revenue 780,000 (1,000,000)
Decrease in accounts payable (199,331) (172,610)
Increase (decrease) in accrued expenses and other current liabilities 389,172 (237,801)
------------ ------------
Net cash used in operating activities (4,012,575) (3,461,950)
------------ ------------
Cash flows from investing activities:
Acquisition of fixed assets (2,407,654) (1,093,283)
Sale of fixed assets 1,336,092 --
(Increase) decrease in restricted cash (286,000) 78,000
Repayment of stockholder's loan -- 5,822
Investments in other ventures (2,000,000) (2,000,000)
Patent costs (301,506) (334,192)
------------ ------------
Net cash used in investing activities (3,659,068) (3,343,653)
------------ ------------
Cash flows from financing activities:
Payments on bank loans -- (29,075)
Proceeds from issuance of common stock 179,032 559,144
Proceeds from issuance of restricted stock 5,000,000 --
------------ ------------
Net cash provided by financing activities 5,179,032 530,069
------------ ------------
Net decrease in cash and cash equivalents (2,492,611) (6,275,534)
Cash and cash equivalents at beginning of period 36,761,516 43,152,677
------------ ------------
Cash and cash equivalents at end of period $ 34,268,905 $ 36,877,143
============ ============
</TABLE>
See accompanying notes to the condensed financial statements
6
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Cadus Pharmaceutical Corporation
Notes to Condensed Financial Statements
(1) Organization and Basis of Preparation
The information presented as of September 30, 1998 and for the three and
nine-month periods then ended, is unaudited, but includes all
adjustments (consisting only of normal recurring accruals) that
the Company's management believes to be necessary for the fair
presentation of results for the periods presented. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted pursuant to the requirements of the Securities and Exchange
Commission, although the Company believes that the disclosures included
in these financial statements are adequate to make the information not
misleading. The December 31, 1997 balance sheet was derived from audited
financial statements. These financial statements should be read in
conjunction with the Company's annual report on Form 10-K for the year
ended December 31, 1997.
The results of operations for the three and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998.
(2) Net Loss Per Share
At December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, Earnings per Share. For the three
and nine-month periods ended September 30, 1998 and 1997, basic net loss
per share is computed by dividing the net loss by the weighted average
number of common shares outstanding. Diluted net loss per share is the
same as basic net loss per share since the inclusion of potential common
stock equivalents (stock options and warrants) in the computation would
be anti-dilutive.
(3) Investments in Other Ventures
In December 1996, the Company issued a $150,000 promissory note bearing
interest at 7% per annum in exchange for a 42% limited partnership
interest in Laurel Partners Limited Partnership ("Laurel"), a limited
partnership of which a shareholder of the Company is the general partner.
An interest payment of $10,500 was accrued at December 31, 1997 and paid
in January 1998. The principal amount and interest accrued thereon is
payable on December 26, 1998. In addition, the Company purchased for
$160,660 a 47% limited partnership interest in Laurel from Tortoise
Corporation, a corporation wholly owned by the shareholder. Laurel's
purpose is to invest, directly or indirectly, in securities of
biotechnology companies. The Company has the right to require the
shareholder to match any future investment made by the Company
in Laurel up to an aggregate investment on the part of the
shareholder of $5.0 million. This right expires on the earlier of
December 31, 1999 or such time that neither the shareholder nor one of
his affiliates is the general partner of Laurel. The Company is not
required to make any additional investment in Laurel. The
investment is accounted for under the equity method with the
recognition of losses limited to the Company's capital contributions. For
the three and nine-month periods ended September 30, 1998, the Company
recognized gains of $2,361 and $9,955, respectively. For the three and
nine-month periods ended September 30, 1997, the Company recognized
losses of $15,973 and $158,177, respectively. The remaining
investment in Laurel of $146,651 is included in
investments in other ventures on the condensed balance sheet.
In May 1997, the Company purchased $2.0 million of convertible preferred
stock in Axiom Biotechnologies Inc. ("Axiom"), representing approximately
26% of the outstanding shares of Axiom on an as converted basis. As part
of the arrangement, Axiom agreed to deliver and license to the Company
its first High Throughput Pharmacology System (HT-PS(Trademark)). The
Company purchased an additional $2.0 million of convertible preferred
stock in Axiom on June 5, 1998 after the Company received and accepted
Axiom's HT-PS(Trademark). The Company also made a payment to Axiom for
the HT-PS(Trademark) which is included in fixed assets in the
7
<PAGE>
Cadus Pharmaceutical Corporation
Notes to Condensed Financial Statements
accompanying condensed balance sheet at September 30, 1998. The
additional investment increased the Company's equity interest in
Axiom to approximately 30% of Axiom's outstanding shares on an as
converted basis, after taking into account a recent investment
in Axiom by JAFCO Co., Ltd., ("JAFCO"), an affiliate of the Nomura Group.
The Company's investment is accounted for under the equity
method with the Company recognizing 100% of Axiom's net losses prior to
the JAFCO investment and 50% after such investment.
Such percentage represents the extent to which the Company is deemed to
be funding Axiom's losses. For the three and nine-month periods ended
September 30, 1998, the Company recognized $250,472 and $860,791,
respectively in losses generated by Axiom. For the three and nine-month
periods ended September 30, 1997, the Company recognized losses of
$364,833 and $522,646, respectively. The remaining investment in
Axiom of $2,480,742 is included in investments in other ventures
on the condensed balance sheet.
(4) Related Party Transaction
In August 1998, the Company guaranteed the payment of a $286,000 loan
made to the Director of Research of the Company (who is also a Board
Member) and secured its guarantee obligation with cash collateral of
$286,000. The Director of Research indemnified the Company from any
liabilities arising from its guarantee and pledged securities owned by
him to secure his indemnification obligation.
(5) Research Collaborations
Pursuant to the Bristol-Myers Squibb Company Research Collaboration and
License Agreement, the Company received and recognized revenue of
approximately $1.1 million and $3.2 million for the three and nine-month
periods ended September 30, 1998. The Company also received and
recognized revenue of approximately $661,000 and $2.0 million, from a
Research Collaboration and License Agreement with Solvay Pharmaceuticals
B.V., for the three and nine-month periods ended September 30, 1998.
Pursuant to the SmithKline Beecham Research Collaboration and License
Agreement, the Company received $1.6 million in cash and recognized
research funding of approximately $780,000 for the three-month period
ending September 30, 1998. For the nine-month period ended September 30,
1998, the Company received $3.5 million in cash and recognized $2.8 million
of research funding. In March 1998, the Company also received and
recognized a one-time technology development fee of $2.0 million from
SmithKline Beecham. On May 8, 1998, the Company exercised its option to
sell 660,962 shares of its common stock to SmithKline Beecham p.l.c. and
SmithKline Beecham Corporation for approximately $7.56 per share or an
aggregate consideration of $5.0 million. The sale closed on May 15, 1998.
(6) Research Agreement
In January 1998, the Company entered into a sponsored research agreement
with the Massachusetts Institute of Technology ("M.I.T.") pursuant to
which M.I.T. will use its expertise in micro-robotics to co-develop the
Living Chip(Trademark), a novel drug discovery screening tool that would
miniaturize and automate the Company's proprietary hybrid yeast cell
technology. If developed, the Living Chip(Trademark) could ultimately
accommodate at least 100,000 yeast-based drug discovery assays on a
single CD-sized synthetic disc and could permit the testing of thousands
of compounds on multiple assays at the individual scientist's lab bench.
The Company is only obligated to provide M.I.T. with research funding for
1998 but has the option to extend the arrangement through 1999. The
Company also entered into a license agreement with M.I.T. pursuant to
which the Company obtained exclusive worldwide rights, for use in
pharmaceutical, animal health and agricultural businesses, to the
technology developed under the sponsored research arrangement. In order
to maintain its exclusive license, the Company must provide M.I.T. with
research funding in 1998 and 1999 and make a minimum level of
expenditures thereafter to commercialize the technology until the
technology is commercialized. The Company is required to pay M.I.T. an
annual license fee, royalties on the sale or lease of Living
Chip(Trademark) systems, royalties on the sale of therapeutics and
diagnostics developed using the Living Chip(Trademark)
8
<PAGE>
Cadus Pharmaceutical Corporation
Notes to Condensed Financial Statements
and royalties on services rendered based on the Living Chip(Trademark).
In lieu of royalty payments on sales by sublicensees of drugs initially
identified by sublicensees through the use of licensed technology, the
Company pays an annual fee for each sublicense in effect, provided that a
license to other technology owned or licensed by the Company was granted
to the sublicensee at the same time.
(7) Commitments and Contingencies
In July 1996, SIBIA Neurosciences, Inc. ("SIBIA") commenced a patent
infringement action against the Company alleging infringement by the
Company of a patent relating to an aspect of drug screening techniques
and seeking injunctive relief and monetary damages. On August 1, 1996,
the Company filed an Answer and Counterclaim, claiming that the patent is
not infringed and is invalid and unenforceable, seeking a declaratory
judgment of patent invalidity, unenforceability and noninfringement, and
claiming unfair competition and intentional interference with prospective
economic advantage by SIBIA with respect to the Company's initial public
offering.
On August 7, 1998, the court granted SIBIA's summary judgment motion to
dismiss the Company's counterclaims for unfair competition and
intentional interference with prospective economic advantage.
On August 20, 1998, the court denied three motions filed by the Company
against SIBIA seeking summary judgment that the patent is invalid and
that the Company does not infringe the patent. The court ruled that the
Company's motions involve questions of fact which must be decided by a
jury.
Trial of the action commenced on November 3, 1998.
On October 9, 1998, the Company filed with the U.S. Patent and Trademark
Office a Request for Reexamination of the patent owned by SIBIA at issue in
the lawsuit.
The Company believes, based on advice of counsel, that none of its
operations infringes any valid claim of the patent and intends to
vigorously defend the action. The Company also believes that if its
operations were found to infringe any valid claim of the patent, the
Company has adequate technical alternatives that would not infringe this
patent. If injunctive relief is granted, certain aspects of the drug
discovery and development efforts of the Company and its collaborative
partners could be delayed. If monetary damages are awarded, the business,
financial condition and results of operations of the Company could be
materially adversely affected.
(8) Supplemental Cash Flow Information
Nine Months
Ended September 30,
1998 1997
----------------------------------
Cash payments for:
Interest.................. $0 $7,365
== ======
Income taxes.............. $69,563 $25,518
======= =======
9
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Cadus Pharmaceutical Corporation
Notes to Condensed Financial Statements
(9) New Accounting Pronouncements
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
Income" and Statement of Financial Accounting Standards No. 131 ("SFAS
131"), "Disclosures about Segments of an Enterprise and Related
Information". SFAS 130 requires that all items recognized under
accounting standards as components of comprehensive income be reported in
an annual financial statement that is displayed with the same prominence
as other annual financial statements. Other comprehensive income may
include foreign currency translation adjustments, minimum
pension liability adjustments and unrealized gains and losses on
marketable securities classified as available-for-sale. The adoption of
SFAS 130 had no impact on the Company's financial statements. SFAS 131
established standards to report information about operating segments and
related discussions about products and services, geographic areas and
major customers and requires that such information be included in the
Company's 1998 annual report. The adoption of SFAS 131 is not expected to
affect the Company's reporting of its results of operations and financial
position.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was incorporated in 1992 and has devoted substantially all of
its resources to the development and application of novel yeast-based and
signal transduction drug discovery technologies. To date, all of the
Company's revenues have resulted from research funding provided by its
collaborative partners.
The Company has incurred operating losses in each year since its
inception including net losses of approximately $6.2 million during the
nine-month period ended September 30, 1998. At September 30, 1998, the
Company had an accumulated deficit of approximately $20.1 million. The
Company's losses have resulted principally from costs incurred in
research and development and from general and administrative expenses
associated with the Company's operations. These costs have exceeded the
Company's revenues and interest income. The Company expects to incur
substantial additional operating losses over the next several years as a
result of increases in its expenses for research and product development.
Results of Operations
Nine months Ended September 30, 1998 and September 30, 1997
Revenues
Revenues for the nine months ended September 30, 1998 increased to $9.9
million from $6.6 million for the same period in 1997. This increase was
attributable primarily to a one time $2.0 million technology development
fee and an increase in the level of research funding from SmithKline
Beecham ("SmithKline"), one of the Company's collaborative partners. The
research collaboration with SmithKline began in February 1997.
Operating Expenses
The Company's research and development expenses for the nine months ended
September 30, 1998 increased to $11.0 million from $8.3 million for the
same period in 1997. This increase was attributable to increases in
staffing, supplies and facility expenses as well as expenses associated
with the Company's sponsored research agreement with M.I.T., which began
in January of 1998.
General and administrative expenses for the nine months ended September
30, 1998 increased to $5.7 million from $2.8 million for the same period
in 1997. This increase was attributable primarily to increased litigation
expenses.
Net Interest Income
Net interest income for the nine months ended September 30, 1998
decreased to $1.4 million from $1.6 million for the same period in 1997.
This decrease related primarily to the decrease in the Company's cash
reserves.
Equity in Other Ventures
Equity in other ventures reflects gains and losses associated with the
Company's two investments. For the nine months ended September
30, 1998 and 1997, the Company recognized a gain and a loss of $9,955 and
$158,177, respectively, related to its investment in Laurel
Partners Limited Partnership. For the nine months ended September 30,
1998 and 1997, the Company recognized $860,791 and $522,646,
respectively, in losses
11
<PAGE>
generated by Axiom Biotechnologies Inc. ("Axiom"). The Company's
investment in Axiom is accounted for under the equity method
with the Company recognizing 100% of Axiom's net losses prior to a recent
investment made by JAFCO Co., Ltd., ("JAFCO") in Axiom.
Following the JAFCO investment the Company began recognizing 50%
of the net losses generated by Axiom which is the extent to which the
Company is deemed to be funding such losses.
Net Loss
The net loss for the nine months ended September 30, 1998 increased to
$6.2 million from $3.6 million for the same period in 1997. This increase
can be attributed to an increase in the Company's expenses, which was
partially offset by an increase in revenues as described above.
Three months Ended September 30, 1998 and September 30, 1997
Revenues
Revenues for the three months ended September 30, 1998 increased to $2.5
million from $2.4 million for the same period in 1997. This increase was
attributable primarily to scheduled increases in research funding from
the Company's research collaborations.
Operating Expenses
The Company's research and development expenses for the three months
ended September 30, 1998 increased to $3.7 million from $3.0 million for
the same period in 1997. This increase was attributable primarily to
increases in staffing, supplies, and facility expenses as well as
expenses associated with the Company's sponsored research agreement with
M.I.T.
General and administrative expenses for the three months ended September
30, 1998 increased to $2.7 million from $820,000 for the same period in
1997. This increase was attributable primarily to increased litigation
expenses.
Net Interest Income
Net interest income for the three months ended September 30, 1998
decreased to $471,000 from $497,000 for the same period in 1997. This
decrease related primarily to the decrease in the Company's cash
reserves.
Equity in Other Ventures
Equity in other ventures reflects losses and gains associated with the
Company's two investments. For the three months ended September
30, 1998 and 1997, the Company recognized a gain and a loss of $2,361 and
$15,973, respectively, related to its investment in Laurel
Partners Limited Partnership. For the three months ended September 30,
1998 and 1997, the Company recognized $250,472 and $364,833,
respectively, in losses generated by Axiom. The Company's
investment in Axiom is accounted for under the equity method
with the Company recognizing 100% of Axiom's net losses prior to a recent
investment made by JAFCO in Axiom. Following the JAFCO
investment the Company began recognizing 50% of the net losses
generated by Axiom, which is the extent to which the Company is deemed to
be funding such losses.
Net Loss
The net loss for the three months ended September 30, 1998 increased to
$3.7 million from $1.2 million for the same period in 1997. This increase
can be attributed to an increase in the Company's expenses, which was
partially offset by an increase in revenues and net interest income as
described above.
12
<PAGE>
Liquidity and Capital Resources
At September 30, 1998, the Company held cash and cash equivalents of
$34.6 million. The Company's working capital at September 30, 1998 was
$32.4 million.
For the nine-month period ended September 30, 1998, the Company invested
approximately $2.4 million in property and equipment and refinanced
approximately $1.3 million of equipment through a sale leaseback
arrangement with GE Capital Corporation. The Company expects to finance
future capital expenditures using its existing lease line of credit with
GE Capital Corporation or other similar arrangements.
The Company intends to increase its expenditures substantially over the
next several years to enhance its technologies and pursue internal
proprietary drug discovery programs. The Company believes that its
existing capital resources, together with interest income and future
payments due under its research collaborations, will be sufficient to
support its current and projected funding requirements through the end of
2000. This forecast of the period of time through which the Company's
financial resources will be adequate to support its operations is a
forward-looking statement that may not prove accurate and, as such,
actual results may vary. The Company's capital requirements may vary as a
result of a number of factors, including the progress of its drug
discovery programs, competitive and technological developments, the
continuation of its existing collaborative agreements and the
establishment of additional collaborative agreements, and the progress of
the development efforts of the Company's corporate partners. The Company
expects that it will require significant additional financing in the
future, which it may seek to raise through public or private equity
offerings, debt financing or additional corporate partnerships. No
assurance can be given that such additional financing will be available
when needed or that, if available, such financing will be obtained on
terms favorable to the Company. To the extent that additional capital is
raised through the sale of equity or convertible debt securities, the
issuance of such securities could result in dilution to the Company's
stockholders.
Year 2000
The Company is aware of challenges associated with the inability of
certain computer systems to properly format information after December
31, 1999 (the "Year 2000 Challenge"). The Company is modifying its
computer systems to address the Year 2000 Challenge and does not expect
that the cost of modifying such systems will be material. The Company
believes it will fully remediate any of its Year 2000 Challenges in
advance of the year 2000 and does not anticipate any material disruption
in its operations as the result of any failure by the Company to fully
remediate such challenges.
The Company is in the process of contacting all significant suppliers and
financial institutions in order to identify potential areas of concern.
It is anticipated that this inquiry will be complete by the second
quarter of 1999.
Improper or inadequate remediation of Year 2000 problems by parties with
whom the Company does business could adversely affect the Company's ability
to conduct its research activities. In addition, administrative functions
essential to day to day operations of the business could be impaired if
Year 2000 remediation is not completed in a timely manner. Due to
uncertainty of the Year 2000 readiness of parties with whom the Company
does business, the Company is unable to determine at this time whether the
consequnces of Year 2000 failures will have material adverse impact on the
Company's results of operations, liquidity or financial condition.
Based on the responses of our significant suppliers and financial
institutions, the Company intends to develop a contingency plan to identify
and document potential business disruptions and continuity planning
procedures. The focus of this activity is on potential failures of external
systems required to carry out normal business operations, including
services provided by the public infrastructure such as electric power and
telecommunications. The Company expects this activity to be an ongoing
process well into the third quarter of 1999.
13
<PAGE>
The above comments on the Year 2000 issue contain forward-looking
statements relating to the Company's plans, strategies, expectations,
intentions, and resources that should be read in conjunction with the
Company's disclosures on Forward-Looking Statements.
New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures about
Pensions and Other Postretirement Benefits". SFAS No. 132 revises
disclosures about pension and other postretirement benefit plans.
Management of the Company does not believe that the implementation of
SFAS No. 132 will have a significant impact on previously reported
information regarding its employee retirement plans.
14
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
This Company is not a party to any material legal proceedings
other than SIBIA Neurosciences, Inc. v. Cadus Pharmaceutical
Corporation. SIBIA Neurosciences, Inc. ("SIBIA") commenced an
action on July 9, 1996 in the United States District Court for
the Southern District of California alleging infringement by
the Company of a patent relating to an aspect of drug screening
techniques and seeking injunctive relief and monetary damages.
On August 1, 1996, the Company filed an Answer and
Counterclaim, claiming that the patent is not infringed and is
invalid and unenforceable, seeking a declaratory judgment of
patent invalidity, unenforceability and noninfringement, and
claiming unfair competition and intentional interference with
prospective economic advantage by SIBIA with respect to the
Company's initial public offering.
On August 7, 1998, the court granted SIBIA's summary judgment
motion to dismiss the Company's counterclaims for unfair
competition and intentional interference with prospective
economic advantage.
On August 20, 1998, the court denied three motions filed by the
Company against SIBIA seeking summary judgment that the patent
is invalid and that the Company does not infringe the patent.
The court ruled that the Company's motions involve questions of
fact which must be decided by a jury.
Trial of the action commenced on November 3, 1998.
On October 9, 1998, the Company filed with the U.S. Patent and
Trademark Office a Request for Reexamination of the patent owned
by SIBIA at issue in the lawsuit.
The Company believes, based on advice of counsel, that none of
its operations infringes any valid claim of the patent and
intends to vigorously defend the action. The Company also
believes that if its operations were found to infringe any
valid claim of the patent, the Company has adequate technical
alternatives that would not infringe this patent. If injunctive
relief is granted, certain aspects of the drug discovery and
development efforts of the Company and its collaborative
partners could be delayed. If monetary damages are awarded, the
business, financial condition and results of operations of the
Company could be materially adversely affected.
Item 2. Changes in Securities and Use of Proceeds
The information provided below represents a reasonable
estimate of the application through September 30, 1998 of
the net proceeds of $19,783,140 which were received from the
Company's initial public offering on July 17, 1996:
Construction of plant, building and facilities $ 684,766
Purchase and installation of machinery and equipment $1,428,098
Research and license payments to others $ 964,930
Investment in companies complementary to the
Company's business $2,000.000
Working capital used to fund operations $2,924,746
Except for payments described in the following sentence, the
application of the net offering proceeds listed above
represents direct payments to others. No payments were made to
directors or officers or to their associates except for
payments made in the ordinary course of
business which include, but may not be limited to, the payment
of officer salaries, fringe benefits, and expense
reimbursements or compensation paid to directors for their
services provided to the
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Company under consulting arrangements. At September 30, 1998, the
Company had $11,780,600 of net offering proceeds that were still
not utilized.
Item 3. Defaults Upon Senior Securities
Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to report.
Item 5. Other Information
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits listed in the Exhibit Index are included in this
report.
(b) Reports on Form 8-K
None
16
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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.
CADUS PHARMACEUTICAL CORPORATION
(Registrant)
Date: November 13, 1998 By /s/ James S. Rielly
-----------------------------------------
James S. Rielly
Vice President of Finance, Treasurer
and Secretary
(Authorized Officer and
Chief Accounting Officer)
17
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EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly
Report on Form 10-Q:
Exhibit No. Description
10.25 Employment Agreement, dated as of June 30, 1998,
between the Company and Charles Woler.
10.26 Employment Agreement, dated as of September 10, 1998,
between the Company and Philip N. Sussman.
27 Financial Data Schedule
18
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), made as of June 30, 1998, by and
between CADUS PHARMACEUTICAL CORPORATION, a Delaware corporation, having its
principal place of business at 777 Old Saw Mill River Road, Tarrytown, New York
10591-6705 (the "Corporation"), and CHARLES WOLER, an individual of French
nationality with an address at 176 Boulevard Bineau, 92200 Neuilly/seine, France
(the "Executive").
WITNESSETH:
WHEREAS, the Corporation desires to provide for the Executive's
employment as President and Chief Executive Officer for a term of three years,
with an option year at the Corporation's election, subject to the terms and
provisions of the Agreement; and
WHEREAS, the Executive desires to accept such employment, subject to
the terms and provisions of the Agreement; and
WHEREAS, the Corporation and the Executive mutually desire to provide
for the grant of certain stock options;
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<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Corporation and the Executive (individually
a "party" and together the "parties") agree as follows:
1. Terms of Employment. The Corporation shall employ the Executive, and
the Executive shall accept employment, as President and Chief Executive Officer
of the Corporation. The Executive's employment by the Corporation pursuant to
the terms of this Agreement shall commence on the Effective Date. The
undersigned members of the Compensation Committee of the Board of Directors
shall use their best efforts to have the Executive appointed or elected to the
Board of Directors. Subject to Section 4 hereof, the Executive's employment by
the Corporation shall continue in full force and effect until the earlier to
occur of the third anniversary of the Effective Date (the "Scheduled Termination
Date") or the date on which the Executive is terminated or resigns from the
Corporation pursuant to Section 4 hereof (the "Actual Termination Date").
Notwithstanding the foregoing, the Corporation shall have the option to extend
the period of the Executive's employment hereunder for one year, by furnishing
written notice to the Executive at least 90 days prior to the initial Scheduled
Termination Date, in which case the Scheduled Termination Date shall thereafter
be the fifth anniversary of the Effective Date.
2. Full Time Commitment. During the period of employment hereunder, the
Executive, except as hereinafter provided, shall devote his full business time
and efforts to the business and affairs of the Corporation, use his best efforts
to promote the business of the
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<PAGE>
Corporation, hold the offices in the Corporation (or in any subsidiary
corporation or other business entity controlled by the Corporation (a
"Subsidiary")) to which from time to time he may be elected or appointed
(provided, however, that the Executive shall not be entitled to additional
compensation for serving as a director of the Corporation or any Subsidiary if
so elected), and perform such duties as shall be assigned to him by the Board of
Directors of the Corporation. The Executive shall take such steps as are
necessary to enable him to complete a Form I-9 upon the Effective Date, to be
filed with the United States immigration authorities, and shall take such other
steps as are necessary to enable him to become, and continue to be, employed
hereunder on a full time basis in the United States. Notwithstanding anything
herein to the contrary, nothing shall preclude the Executive or his spouse from
serving on the boards of directors of a reasonable number of other corporations
or the boards of a reasonable number of trade associations and/or charitable
organizations; engaging in charitable activities and community affairs; and
managing his or her personal investments and affairs; provided, however, that,
in the case of the Executive, such activities do not materially interfere with
the proper performance of his duties and responsibilities as the Corporation's
President and Chief Executive Officer.
3. Base Salary. The Corporation shall compensate the Executive for the
services to be rendered by him hereunder, including all services to be rendered
as an officer or director of the Corporation (or any Subsidiary), by paying the
Executive a base salary at the rate of $300,000 per annum for the first year of
the Executive's employment hereunder, $330,000 per annum for the second year of
the Executive's employment hereunder, $360,000 per annum for the third year of
the Executive's employment hereunder and, if the Corporation exercises its
option to
3
<PAGE>
extend the Executive's employment hereunder pursuant to the last sentence of
Section 1 hereof, $400,000 per annum for the fourth year of the Executive's
employment hereunder. Such salary shall be paid at regular intervals in
accordance with the usual salary payment practices of the Corporation, but not
less frequently than semi-monthly. Furthermore, the Executive shall be entitled
to such bonuses, if any, as the Compensation Committee of the Board of
Directors, in its sole discretion, may determine from time to time.
4. Termination of Employment.
(a) If the Executive's employment terminates for any reason
whatsoever prior to the Scheduled Termination Date, the Corporation shall pay to
the Executive within ten days of such termination the salary specified in
Section 3 hereof earned through the Actual Termination Date.
(b) In the event that
(i) the Executive's employment is terminated by the Corporation
without "cause" (as hereinafter defined in Section 4(f));
(ii) the Executive terminates his employment with the Corporation
within 18 months after a "Change of Control" (as hereinafter
defined in Section 4(g)) and prior to the Scheduled Termination
Date and after the Executive is assigned any duties or
responsibilities that are inconsistent with his position, duties,
4
<PAGE>
responsibilities or status on the Effective Date, or his
reporting responsibilities or titles in effect on the
Effective Date hereof are changed; or
(iii) the Executive terminates his employment with the Corporation
within 3 months of a material change in the Executive's
position, duties or responsibilities with respect to his
employment with the Corporation or a change in the Executive's
principal place of work by more than 75 miles and more than 50
miles from the Executive's principal residence, without the
Executive's prior written consent;
(each termination event described in clauses (i) through (iii), above, being
hereinafter referred to as a "Section 4(b) Termination Event") then in addition
to any payment which may be due pursuant to Section 4(a), the Corporation shall
pay to the Executive, within ten days of such termination, an amount equal to
the amount of base salary which would have been payable to the Executive if the
Executive had remained employed under the terms of the Agreement from the Actual
Termination Date to the earlier of (i) the second anniversary of the Actual
Termination Date or (ii) the Scheduled Termination Date, and all unvested stock
options granted to the Executive will immediately vest as of the date of
termination.
(c) The Executive shall be entitled only to the payments
described in Section 4(a) hereof if the Executive voluntarily terminates his
employment prior to the Scheduled Termination Date for any reason other than a
Section 4(b) Termination Event.
5
<PAGE>
(d) If the Executive fails for any reason to continue to be
able to be lawfully employed in the United States on a full time basis, his
employment hereunder shall terminate immediately and he shall be entitled only
to the payments described in Section 4(a) hereof. In no event shall any such
termination be construed as a Section 4(b) Termination Event.
(e) If the Executive's employment terminates, whether or not
on account of a Section 4(b) Termination Event, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement, if any, on account of any remuneration
attributable to any subsequent employment that he may obtain.
(f) For purposes of this Agreement, "cause" shall mean
(i) the commission of a crime by the Executive which
constitutes a felony;
(ii) the Executive's commission of any fraud,
misappropriation or willful misconduct which causes
material injury to the Corporation; or
(iii) the reckless disregard by the Executive of the
substantial performance of his duties hereunder and his
6
<PAGE>
failure to cure such breach within ten days after
notice thereof from the Corporation.
(g) For purposes of this Agreement, a "Change of Control"
shall be deemed to have occurred when
(i) any "person" (as such term is used in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or group, other than
Carl C. Icahn and his affiliates, is or becomes the
beneficial owner, directly or indirectly, of securities
of the Corporation representing 25% or more of the
combined voting power of the then outstanding securities
of the Corporation (assuming the conversion of all
outstanding convertible preferred stock of the
Corporation);
(ii) a majority of the persons who are elected to the
Board of Directors of the Corporation were not
placed in nomination for that office by the Board of
Directors; or
(iii) the Corporation combines with another company and the
shareholders of the Corporation hold less than 50% of
the total of all voting shares outstanding or to be
7
<PAGE>
outstanding as a result of the combination or the
Corporation's directors constitute less than a majority of
the Board of Directors of the combined entity.
5. Noncompetition. Except as approved in writing by the Board of
Directors of the Corporation, during the period from the Effective Date through
the Scheduled Termination Date, and for a further continuous period thereafter
ending on the first anniversary of the Actual Termination Date if the Actual
Termination Date is within one year of the Scheduled Termination Date, the
Executive shall not:
(a) Engage in or carry on, directly or indirectly, either
for himself or as a member of a partnership or as a stockholder, investor,
lender, officer or director of a corporation (other than the Corporation), or as
an employee or agent of, or consultant or advisor to, any person, partnership,
corporation, joint venture or enterprise (other than the Corporation), or in any
capacity on behalf of any trust or other organization or entity, any business in
competition with (as defined below) any business then carried on by the
Corporation as long as any like business is carried on by the Corporation or by
any person, corporation, partnership, trust or other organization or entity
deriving title to the good will of such business, directly or indirectly, from
the Corporation; provided, however, that nothing herein contained shall prevent
the Executive from purchasing not more than 3% of the amount of any class of
securities of any publicly owned company, the securities of which are listed on
a national securities exchange or registered pursuant to Section 12(g) of the
Exchange Act. The Executive may make investments, without restriction on amount,
in non-competitive private businesses. For the purposes of this Section
8
<PAGE>
5(a), the term "any business then carried on by the Corporation" shall mean
yeast based genetics, or any other area of research or production which is a
significant business activity of the Corporation during the twelve (12) month
period prior to the Executive's Actual Termination Date, but in no event shall
such term be interpreted to mean the entire field of biotechnology; or
(b) Solicit, raid, entice, induce or attempt to persuade any
person that presently is, or at any time during the term of employment hereunder
shall be (or, in the case of termination, is at the time of termination), an
employee of the Corporation to become employed by any person, firm, partnership,
corporation or other enterprise or entity, and the Executive shall not approach
any such employee for such purpose or authorize the taking of such actions by
any other person, firm, partnership, corporation or other enterprise or entity
in taking such action.
6. Assignment of Rights; Confidentiality.
(a) The Executive hereby sells, assigns and transfers to the
Corporation all of his right, title and interest in and to all inventions,
discoveries, improvements and copyrightable subject matter (the "rights") which
during the term of this Agreement are made or conceived by him, alone or with
others, and which are within or arise out of any general field of the
Corporation's business or arise out of any work he performs or information he
receives regarding the business of the Corporation while employed by the
Corporation. The Executive shall fully disclose to the Corporation as promptly
as available all information known or possessed by him concerning the rights
referred to in the preceding sentence, and upon request by the Corporation and
without any further remuneration in any form to him by the Corporation, but at
the expense
9
<PAGE>
of the Corporation, execute all applications for patents and for copyright
registration, assignments thereof and other instruments and do all things which
the Corporation may deem necessary to vest and maintain in it the entire right,
title and interest in and to all such rights.
(b) The Executive agrees that, during or at any time after the
termination of this Agreement, he shall not divulge, furnish or make accessible
to any person, corporation, partnership, trust or other organization or entity,
any information, trade secrets, technical data or know-how relating to the
business, business practices, methods, attorney-client communications, pending
or contemplated acquisitions or other transactions, products, processes,
equipment or any confidential or secret aspect of the business of the
Corporation without the prior written consent of the Corporation, unless such
information shall have become public knowledge or shall have become known
generally to competitors of the Corporation through sources other than the
Executive.
7. Enforcement of Noncompetition and Confidentiality Provisions. The
following provisions shall apply to the covenants contained in Sections 5 and 6
hereof:
(a) The covenants contained in Sections 5 and 6 shall apply
world-wide.
(b) Without limiting the right of the Corporation to pursue all
other legal and equitable remedies, including recovery of damages, available for
violation by the Executive of the covenants contained in Sections 5 and 6
hereof, the Corporation shall be entitled to specific performance of its rights
under such Sections. The Executive agrees that monetary damages
10
<PAGE>
would not be adequate compensation for any loss incurred by the Corporation by
reason of a breach by him of the provisions of Section 5 or 6 hereof, and that
the Corporation would sustain irreparable harm and therefore further agrees that
the Corporation shall be entitled to injunctive relief to prevent any such
breach or any continuing breach thereof.
(c) Each party intends and agrees that if, in any action or
proceeding before any arbitrator, court or agency legally empowered to enforce
the covenants contained in Sections 5 and 6 hereof, any term, restriction,
covenant or promise contained therein is found to be unreasonable and
accordingly unenforceable, then such term, restriction, covenant or promise
shall be deemed modified to the extent necessary to make it enforceable by such
arbitrator, court or agency.
8. Benefits and Reimbursable Expenses.
(a) The Executive shall be entitled to participate in any
medical, dental, life insurance, retirement, pension, profit sharing or other
benefit plans that the Corporation has or may establish and maintain for the
benefit of employees of the Corporation. The Executive shall be entitled to
reasonable vacations during each year of his employment hereunder, consistent
with the policies of the Corporation with respect to vacations, and the
Corporation shall provide the Executive with reasonable perquisites suitable to
the office in the Corporation which he holds.
11
<PAGE>
(b) The Executive shall be reimbursed for all business travel
and other expenses incidental to the performance of services hereunder in
accordance with the usual practices of the Corporation, such reimbursement to be
made within a reasonable time not to exceed thirty (30) days after the Executive
submits written invoices and receipts evidencing such expenses and the purposes
for which the same were incurred.
(c) The Corporation shall advance to the Executive $12,000 on the
Effective Date and an additional $12,000 on the thirtieth day following the
Effective Date, for expenses incurred by the Executive for housing within the
United States during the first six months of his employment hereunder. Within a
reasonable time, and not later than nine months after the Effective Date, the
Executive shall submit written evidence of such housing expenses to the
Corporation. If the Executive's substantiated housing expenses for the six month
period are less than $24,000, he shall repay the difference to the Corporation.
(d) The Corporation shall pay or reimburse the Executive for
legal costs incurred by the Executive in obtaining the necessary U.S.
immigration papers to allow the Executive and his spouse and children to reside
in the United States, and to permit the Executive to perform his duties
hereunder within the United States, during the term of this Agreement.
(e) The Corporation will arrange for, or at the Corporation's
election shall reimburse the Executive for the reasonable cost of, moving his
furniture, household effects and personal property from his current residence in
France to the United States, and the Corporation will reimburse Executive for
reasonable expenses associated with the move, including real estate
12
<PAGE>
agent, legal and other fees associated with the sale of the residence in France,
and legal and other closing costs associated with the purchase of a residence in
the New York area if the purchase occurs within one year of the Effective Date.
Reimbursable expenses shall not include mortgage points associated with the
financing of a residence or the taxes, if any, resulting from being reimbursed
for moving expenses. Any reimbursement under this Subsection (e) shall be made
within a reasonable time not to exceed thirty days after the Executive submits
written invoices or receipts. The total amount payable by the Corporation under
this Subsection (e), whether by direct payment or by reimbursement to the
Executive, shall not exceed $50,000. If the Executive voluntarily terminates his
employment under the Agreement (other than as a result of a Section 4(b)
Termination Event) within one year of the last payment under this Subsection
(e), the amounts paid (directly or as reimbursements by the Corporation under
this Subsection (e)) shall be considered a loan and shall be payable by the
Executive to the Corporation within thirty (30) days of his Actual Termination
Date.
9. Stock Options.
(a) The Corporation, acting by the Compensation Committee of
the Board of Directors ("Compensation Committee"), hereby agrees to grant the
Executive, as of the Effective Date, under the Corporation's 1996 Incentive Plan
(the "1996 Option Plan") or otherwise, the following stock option:
a stock option to purchase 425,000 shares of the
Corporation's common stock with a per share exercise
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price equal to the fair market value of a share of
the Corporation's common stock (as determined under
the 1996 Stock Option Plan) as of the Effective Date,
such option to vest with respect to one-third of the
shares on the first anniversary of the Effective
Date, and the balance to vest in 24 equal monthly
installments commencing on the first day of the month
following the first anniversary of the Effective
Date.
For the purposes of this Agreement, an option shall become exercisable when it
is vested.
(b) With respect to all stock options to be granted to the
Executive pursuant to the terms hereof, the Compensation Committee agrees that
if the Executive so requests at the time of exercise, the Compensation Committee
will permit the Executive to exercise any or all such options by borrowing the
exercise price from the Corporation and using the proceeds thereof to exercise
the options, subject to the terms and conditions of Section 5.6 of the Option
Plan.
10. Withholding. All payments required to be made by the Corporation
hereunder to the Executive shall be subject to the withholding of such amounts
relating to taxes and other governmental assessments as the Corporation may
reasonably determine it should withhold pursuant to any applicable law, rule or
regulation.
11. Entire Agreement. This Agreement sets forth the entire agreement
and
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understanding between the parties and supersedes all proposals, commitments,
writings, negotiations, discussions, agreements and understandings, oral or
written, of every kind and nature between them concerning the subject matter
hereof (other than the 1996 Option Plan or any other employee stock option plan
which may be adopted during the term of the Agreement (together, the "Option
Plans"), any option agreement granted under the Option Plans or otherwise, and
the terms of any employee benefit plan covering the Executive).
12. Amendments and Waivers. This Agreement may not be amended or
otherwise modified except in a writing signed by both parties hereto. No
discharge of the terms hereof shall be deemed valid unless by full performance
by the parties or by a writing signed by the parties. A waiver by any party of
any breach or violation of this Agreement shall not be deemed or construed as a
waiver of any other breach or violation hereof. No failure to exercise or delay
in exercising any right of any party pursuant to this Agreement shall operate as
a modification of the rights of the party vis a vis the other party, or shall be
construed as a waiver of the said right.
13. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (excluding telecopier,
electronic mail or similar writing) and shall be deemed to have been given at
the time when mailed in any general or branch office of the United States Postal
Service, enclosed in a registered or certified postpaid envelope, or sent by
Federal Express or other similar overnight courier service, addressed to the
address of the parties stated above or to such changed address as such party may
have fixed by notice.
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14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Corporation, its successors and assigns, including without
limitation any corporation which may acquire all or substantially all of the
Corporation's assets and business or with or into which the Corporation may be
consolidated or merged, and the Executive, his heirs, executors, administrators
and legal representatives, provided that the obligations of the Executive
hereunder may not be delegated.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York governing
contracts to be made and performed therein without giving effect to principles
of conflicts of law.
16. Currency. All references to dollars hereunder shall refer to the
lawful currency of the United States of America, and all payments or
reimbursements payable under the Agreement shall be made in such currency.
17. Severability. Should any part, term, condition or provision
hereof or the application thereof be declared illegal, invalid or otherwise
unenforceable or in conflict with any other law by a court of competent
jurisdiction, the validity of the remaining parts, terms, conditions or
provisions of this Agreement shall not be affected thereby, and the illegal,
invalid or unenforceable portions of this Agreement shall be and hereby are
redrafted to conform with applicable law, while leaving the remaining portions
of this Agreement intact, except to the extent necessary to conform to the
redrafted portions hereof.
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18. Mediation and Arbitration; Litigation.
(a) Any dispute relating to this Agreement, other than any
dispute relating to the provisions of Section 5, 6 or 7 hereof, shall be
submitted to mediation in accordance with the WIPO (World Intellectual Property
Organization) Mediation Rules. The mediation shall be held in New York City,
N.Y. and shall be in the English language.
If, and to the extent that, any such dispute has not been settled pursuant to
the mediation within 90 days of the commencement of mediation, it shall, upon
the filing of a Request for Arbitration by either party, be referred to and
finally determined by Arbitration in accordance with the WIPO Expedited
Arbitration rules. Alternatively, if, before the expiration of the said period
of 90 days, either party fails to participate or to continue to participate in
the mediation, the dispute shall, upon the filing of a Request for Arbitration
by the other party, be referred to and finally determined by Arbitration in
accordance with the WIPO Expedited Arbitration Rules. In either case, the
arbitration shall be held in New York City, N.Y. and shall be in the English
language. The dispute referred to arbitration shall be decided in accordance
with the laws of the State of New York.
(b) Any action or proceeding brought to enforce or interpret the
provisions of Section 5, 6 or 7 of this Agreement, or to determine or resolve
any claim or controversy arising under Section 5, 6 or 7 hereof, shall be
brought in a court of competent jurisdiction in the State of New York. Both
parties agree to waive their right to a jury trial in any such action or
proceeding, and such waiver shall be irrevocable.
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(c) The Corporation will pay or reimburse the Executive for all
costs and expenses (including court costs and attorney's fees) incurred by
Executive as a result of any claim, action or proceeding arising out of, or
challenging the validity, or enforceability of, this Agreement or any provision
hereof, but only if the Executive is the prevailing party with respect to such
claim, action or proceeding.
19. Review by Executive. The Executive acknowledges that he has
carefully reviewed the terms of this Agreement and that he has not relied on the
Corporation or its counsel and that this Agreement fairly and accurately
reflects the terms of his employment by the Corporation.
20. Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
21. Counterparts. This Agreement may be executed in two or more
counterparts.
22. Effective Date and Survival of Certain Provisions.
(a) This Agreement shall become effective as of a date (the
"Effective Date") to be agreed upon in writing by the Corporation and the
Executive, and shall continue in effect through the earlier of the Actual
Termination Date or the Scheduled Termination Date. If the Agreement does not
become effective on or before 150 days after the date first set forth in this
Agreement (the expiration of said 150-day period being herein referred to as the
"Cancellation
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<PAGE>
Date"), then except as is otherwise provided in this Section 22, the Agreement
shall be null and void, ab initio.
(b) The parties may agree in writing to extend the date by
which the Agreement must become effective pursuant to Subsection (a), provided
that any such extension shall be for no more than thirty days from the
Cancellation Date, as it may have been previously extended.
(c) Notwithstanding anything set forth in this Agreement to
the contrary, following the execution of the Agreement by the Corporation and
the Executive, the Corporation shall pay for or reimburse the Executive for the
reasonable costs and expenses of a one week relocation visit to New York City,
including round-trip business class airfare, lodging and meals and local travel
expenses, for the Executive and his spouse. The Corporation may, at its election
arrange for all or any part of the travel and lodging associated with the visit
The Executive shall be entitled to take the one week relocation visit prior to
the Effective Date (but not after the Cancellation Date, as the same may have
been extended) and the Executive shall be entitled to reimbursement for
out-of-pocket expenses pursuant to this Subsection (c) whether or not the
Agreement becomes effective or becomes null and void. The Executive shall be
entitled to reimbursement for such expenses within a reasonable time not to
exceed thirty days after the Executive submits written invoices and receipts
evidencing such expenses.
(d) Sections 4, 5, 6 and 7 shall survive the termination of
the Agreement to the extent provided therein.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: The Compensation Committee of the Board
of Directors
/s/ Harold First
-----------------------------------------
Harold First, Member
/s/ Nicole Vitullo
-----------------------------------------
Nicole Vitullo, Member
/s/ Jack Wasserman
-----------------------------------------
Jack Wasserman, Member
EXECUTIVE:
/s/ Charles Woler
-----------------------------------------
Charles Woler
20
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), made as of September 10, 1998 (the
"Effective Date"), by and between CADUS PHARMACEUTICAL CORPORATION, a Delaware
corporation, having its principal place of business at 777 Old Saw Mill River
Road, Tarrytown, New York 10591-6705 (the "Corporation"), and PHILIP N. SUSSMAN,
an individual with an address at 145 West 86th Street, Apt. 7A, New York, N.Y.
10024 (the "Executive").
WITNESSETH:
WHEREAS, the Corporation desires to provide for the Executive's
employment as Senior Vice President of Finance and Corporate Development and
Chief Financial Officer for a term of three years, subject to the terms and
provisions of the Agreement; and
WHEREAS, the Executive desires to accept such employment, subject to
the terms and provisions of the Agreement; and
WHEREAS, the Corporation and the Executive mutually desire to provide
for the grant of certain stock options;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually
<PAGE>
acknowledged, the Corporation and the Executive (individually a "party" and
together the "parties") agree as follows:
1. Terms of Employment. The Corporation shall employ the Executive,
and the Executive shall accept employment, as Senior Vice President of Finance
and Corporate Development and Chief Financial Officer of the Corporation. The
Executive's employment by the Corporation pursuant to the terms of this
Agreement shall commence on the Effective Date. Subject to Section 4 hereof, the
Executive's employment by the Corporation shall continue in full force and
effect until the earlier to occur of September 9, 2001 (the "Scheduled
Termination Date") or the date on which the Executive is terminated or resigns
from the Corporation pursuant to Section 4 hereof (the "Actual Termination
Date"). During the term of this Agreement, the Executive shall report directly
to the Chief Executive Officer of the Corporation.
2. Full Time Commitment. During the period of employment hereunder,
the Executive, except as hereinafter provided, shall devote his full business
time and efforts to the business and affairs of the Corporation, use his best
efforts to promote the business of the Corporation, hold the offices in the
Corporation (or in any subsidiary corporation or other business entity
controlled by the Corporation (a "Subsidiary")) to which from time to time he
may be elected or appointed (provided, however, that the Executive shall not be
entitled to additional compensation for serving as a director of the Corporation
or any Subsidiary if so elected), and perform such duties as shall be assigned
to him by the Board of Directors of the Corporation. Notwithstanding anything
herein to the contrary, nothing shall preclude the Executive from serving on the
boards of directors of a reasonable number of other corporations
2
<PAGE>
or the boards of a reasonable number of trade associations and/or charitable
organizations; engaging in charitable activities and community affairs; and
managing his personal investments and affairs; provided, however, that such
activities do not materially interfere with the proper performance of his duties
and responsibilities as the Corporation's Senior Vice President of Finance and
Corporate Development and Chief Financial Officer.
3. Base Salary. The Corporation shall compensate the Executive for
the services to be rendered by him hereunder, including all services to be
rendered as an officer or director of the Corporation (or any Subsidiary), by
paying the Executive a base salary at the rate of $225,000 per annum for the
first year of the term of the Executive's employment hereunder, $250,000 per
annum for the second year of the term of the Executive's employment hereunder
and $275,000 per annum for the third year of the term of the Executive's
employment hereunder. Such salary shall be paid at regular intervals in
accordance with the usual salary payment practices of the Corporation.
Furthermore, the Executive shall be entitled to such bonuses, if any, as the
Compensation Committee of the Board of Directors, in its sole discretion, may
determine from time to time.
4. Termination of Employment.
(a) If the Executive's employment terminates for any reason
whatsoever prior to the Scheduled Termination Date, the Corporation shall pay to
the Executive within ten days of such termination the salary specified in
Section 3 hereof earned through the Actual Termination Date.
3
<PAGE>
(b) In the event that
(i) the Executive's employment is terminated by the
Corporation without "cause" (as hereinafter defined in
Section 4(e));
(ii) the Executive terminates his employment with the
Corporation within 18 months after a "Change of
Control" (as hereinafter defined in Section 4(f)) and
prior to the Scheduled Termination Date and after the
Executive is assigned any duties or responsibilities
that are inconsistent with his position, duties,
responsibilities or status on the Effective Date, or
his reporting responsibilities (including but not
limited to his reporting directly to the Chief
Executive Officer) or titles in effect on the Effective
Date hereof are changed;
(iii) the Executive terminates his employment with the
Corporation within 3 months of a material change in the
Executive's position, duties or responsibilities with
respect to his employment with the Corporation
(including but not limited to his reporting directly to
the Chief Executive Officer) or a change in the
Executive's
4
<PAGE>
principal place of work (A) by more than 75 miles and
more than 50 miles from the Executive's principal
residence, or (B) to an office other than the principal
executive offices of the Corporation, without the
Executive's prior written consent; or
(iv) the Corporation fails to offer, at least 120 days prior
to the Scheduled Termination Date, to extend this
Agreement for at least one year beyond the Scheduled
Termination Date on terms no less favorable to the
Executive than the terms in effect immediately prior to
the offer, and the Executive terminates his employment
at the Scheduled Termination Date
(each termination event described in clauses (i) through (iv), above, being
hereinafter referred to as a "Section 4(b) Termination Event"), then in
addition to any payment which may be due pursuant to Section 4(a), the
Corporation shall pay to the Executive, within ten days of such termination, an
amount equal to the greater of (A) the amount of base salary which would have
been payable to the Executive from the Actual Termination Date to the Scheduled
Termination Date if the Executive had remained employed under the terms of the
Agreement through the Scheduled Termination Date or (B) $275,000. Furthermore,
upon the occurrence of a Section 4(b) Termination Event, all unvested stock
options granted to the Executive (other than stock options granted pursuant to
Section 9(a)(iii)-(v) hereof) will immediately vest as of the date of
termination, and, to the extent permitted under applicable law, the Corporation
shall continue to
5
<PAGE>
provide the Executive with employee benefits, at the level in effect on the date
of termination, for a period of one year after the Actual Termination.
(c) The Executive shall be entitled only to the payments
described in Section 4(a) hereof if the Executive voluntarily terminates his
employment for any reason other than a Section 4(b) Termination Event.
(d) If the Executive's employment terminates, whether or not
on account of a Section 4(b) Termination Event, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement, if any, on account of any remuneration
attributable to any subsequent employment that he may obtain.
(e) For purposes of this Agreement, "good reason" shall mean
any event or change in circumstance which is described in Section 4(b)(ii) or
(iii), above. If the Executive believes that he has good reason to terminate his
employment but he has not yet resigned, he may, in his sole discretion, provide
the Corporation with written notice ("Notice of Good Reason"), stating that he
believes good reason exists and that he intends to terminate his employment as a
result thereof, if not cured, and describing therein the event or circumstance
he asserts constitutes good reason. A Notice of Good reason can only be
furnished within 60 days after the date of the first occurrence of the event or
circumstance which the Executive asserts constitutes good reason (and within the
18 month or 3 month period set forth in Section 4(b)(ii) or (iii), as
applicable). The Corporation shall have 45 days following receipt of the
Executive's
6
<PAGE>
Notice of Good Reason within which to correct or cure the event or circumstance
which constitutes the asserted good reason (the "Correction Period"). Within the
Correction Period, the Corporation shall advise the Executive, in writing,
either (i) that it agrees that the Executive has good reason to terminate his
employment and that the Corporation cannot or does not intend to correct or cure
the good reason, (ii) that it agrees with the Executive that good reason for
termination of employment exists, but that the Corporation has corrected or
cured, or intends to correct or cure, the good reason within the Correction
Period, together with a written explanation of how that has been or will be
accomplished or (iii) that it disagrees with the Executive and believes that
good reason does not exist, and stating the reason for its position. Failure by
the Corporation to provide any written response to the Executive's Notice of
Good Reason within the Correction Period shall be deemed to be a determination
by the Corporation that it disagrees with the Executive's stated position as to
the existence of good reason. If the parties do not agree whether good reason
for the Executive's termination of employment exists, or the Executive does not
agree that the Corporation has corrected or cured the good reason within the
Correction Period, or both, any such dispute shall be arbitrated or litigated
pursuant to Section 17 hereof. The 18 month and 3 month period for termination
of employment for good reason under Sections 4(b)(ii) and (iii), respectively,
shall be tolled from the date on which the Executive furnishes a Notice of Good
Reason to the Corporation through the date on which the Corporation agrees that
good reason exists (and will not be corrected or cured), or the date of a final
and nonappealable award or order in favor of the Executive, whichever is
applicable. If the Executive resigns without furnishing a Notice of Good Reason
and the parties dispute whether it is a Section 4(b) Termination Event under
Section 4(b)(ii) or (iii), any such dispute shall be subject to arbitration or
litigation pursuant to Section 17 hereof.
7
<PAGE>
(f) For purposes of this Agreement, "cause" shall mean
(i) the commission of a crime by the Executive which
constitutes a felony;
(ii) the Executive's commission of any fraud,
misappropriation or willful misconduct which causes
material injury to the Corporation; or
(iii) the reckless disregard by the Executive of the
substantial performance of his duties hereunder and
his failure to cure such breach within ten days after
notice thereof from the Corporation.
(g) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred when
(i) any "person" (as such term is used in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) or group,
other than Carl C. Icahn and his affiliates, is or
becomes the beneficial owner, directly or indirectly,
of securities of the Corporation representing 25% or
more of the
8
<PAGE>
combined voting power of the then outstanding
securities of the Corporation (assuming the conversion
of all outstanding convertible preferred stock of the
Corporation);
(ii) a majority of the persons who are elected to the Board
of Directors of the Corporation were not placed in
nomination for that office by the Board of Directors;
or
(iii) the Corporation combines with another company and the
shareholders of the Corporation hold less than 50% of
the total of all voting shares outstanding or to be
outstanding as a result of the combination or the
Corporation's directors constitute less than a majority
of the Board of Directors of the combined entity.
5. Noncompetition. Except as approved in writing by the Board of
Directors of the Corporation, during the period from the Effective Date through
the Scheduled Termination Date, and for a further continuous period thereafter
ending on the first anniversary of the Actual Termination Date if the Actual
Termination Date occurs during the twelve month period ending on the Scheduled
Termination Date, the Executive shall not:
9
<PAGE>
(a) Engage in or carry on, directly or indirectly, either for
himself or as a member of a partnership or as a stockholder, investor, lender,
officer or director of a corporation (other than the Corporation), or as an
employee or agent of, or consultant or advisor to, any person, partnership,
corporation, joint venture or enterprise (other than the Corporation), or in any
capacity on behalf of any trust or other organization or entity, any business in
competition with (as defined below) any business then carried on by the
Corporation as long as any like business is carried on by the Corporation or by
any person, corporation, partnership, trust or other organization or entity
deriving title to the good will of such business, directly or indirectly, from
the Corporation; provided, however, that nothing herein contained shall prevent
the Executive from purchasing not more than 1% of the amount of any class of
securities of any publicly owned company, the securities of which are listed on
a national securities exchange or registered pursuant to Section 12(g) of the
Exchange Act. The Executive may make investments, without restriction on amount,
in non-competitive private businesses. For the purposes of this Section 5(a),
the term "any business then carried on by the Corporation" shall mean yeast
based genetics, or any other area of research or production which is a
significant business activity of the Corporation during the twelve (12) month
period prior to the Executive's Actual Termination Date, but in no event shall
such term be interpreted to mean the entire field of biotechnology; or
(b) Solicit, raid, entice, induce or attempt to persuade any
person that presently is, or at any time during the term of employment hereunder
shall be (or, in the case of termination, is at the time of termination), an
employee of the Corporation to become employed by any person, firm, partnership,
corporation or other enterprise or entity, and the Executive shall
10
<PAGE>
not approach any such employee for such purpose or authorize the taking of such
actions by any other person, firm, partnership, corporation or other enterprise
or entity in taking such action.
6. Assignment of Rights; Confidentiality.
(a) The Executive hereby sells, assigns and transfers to the
Corporation all of his right, title and interest in and to all inventions,
discoveries, improvements and copyrightable subject matter (the "rights") which
during the term of this Agreement are made or conceived by him, alone or with
others, and which are within or arise out of any general field of the
Corporation's business or arise out of any work he performs or information he
receives regarding the business of the Corporation while employed by the
Corporation. The Executive shall fully disclose to the Corporation as promptly
as available all information known or possessed by him concerning the rights
referred to in the preceding sentence, and upon request by the Corporation and
without any further remuneration in any form to him by the Corporation, but at
the expense of the Corporation, execute all applications for patents and for
copyright registration, assignments thereof and other instruments and do all
things which the Corporation may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.
(b) The Executive agrees that, during or at any time after the
termination of this Agreement, he shall not divulge, furnish or make accessible
to any person, corporation, partnership, trust or other organization or entity,
any of the Corporation's information, trade secrets, technical data or know-how
relating to the business, business practices, methods, attorney-client
communications, pending or contemplated acquisitions or other transactions,
11
<PAGE>
products, processes, equipment or any confidential or secret aspect of the
business of the Corporation without the prior written consent of the
Corporation, unless such information shall have become public knowledge or shall
have become known generally to competitors of the Corporation through sources
other than the Executive.
7. Enforcement of Noncompetition and Confidentiality Provisions. The
following provisions shall apply to the covenants contained in Sections 5 and 6
hereof:
(a) The covenants contained in Sections 5 and 6 shall apply
world-wide.
(b) Without limiting the right of the Corporation to pursue all
other legal and equitable remedies, including recovery of damages, available for
violation by the Executive of the covenants contained in Sections 5 and 6
hereof, the Corporation shall be entitled to specific performance of its rights
under such Sections. The Executive agrees that monetary damages would not be
adequate compensation for any loss incurred by the Corporation by reason of a
breach by him of the provisions of Section 5 or 6 hereof, and that the
Corporation would sustain irreparable harm and therefore further agrees that the
Corporation shall be entitled to injunctive relief to prevent any such breach or
any continuing breach thereof.
(c) Each party intends and agrees that if, in any action or
proceeding before any arbitrator, court or agency legally empowered to enforce
the covenants contained in Sections 5 and 6 hereof, any term, restriction,
covenant or promise contained therein is found to be unreasonable and
accordingly unenforceable, then such term, restriction, covenant or promise
12
<PAGE>
shall be deemed modified to the extent necessary to make it enforceable by such
arbitrator, court or agency.
8. Benefits. The Executive shall be entitled to participate in any
medical, dental, retirement, pension, profit sharing or other benefit plans that
the Corporation has or may establish and maintain for the benefit of employees
of the Corporation. The Executive shall be reimbursed for all business travel
and other expenses incidental to the performance of services hereunder in
accordance with the usual practices of the Corporation, after the Executive
submits written vouchers evidencing such expenses and the purposes for which the
same were incurred, but in any event within 30 days after the Executive submits
such vouchers. The Executive shall be entitled to reasonable vacations during
each year of his employment hereunder, consistent with the policies of the
Corporation with respect to executive vacations, and the Corporation shall
provide the Executive with reasonable perquisites suitable to the office in the
Corporation which he holds.
9. Stock Options.
(a) The Corporation, acting by the Compensation Committee of
the Board of Directors ("Compensation Committee"), hereby agrees to grant the
Executive, under the Corporation's 1996 Incentive Plan (the "Incentive Plan")
stock options in the amounts and subject to the terms set forth below, and such
other terms as the Compensation Committee shall determine which are not
inconsistent with this Subsection (a):
13
<PAGE>
(i) a stock option to purchase 100,000 shares of the
Corporation's common stock, such option to vest in 36
equal monthly installments commencing on the first day
of the month following the Effective Date;
(ii) a stock option to purchase 95,000 shares of the
Corporation's common stock, such option to vest on the
third anniversary of the Effective Date;
(iii) a stock option to purchase 20,000 shares of the
Corporation's common stock, such option to vest as of
the date of renewal or extension (for a period of not
less than two years) of the existing research
collaboration agreement between the Corporation and
Bristol Myers-Squibb Company, or the signing of a new
research collaboration agreement between the parties
(with such vesting to be effectuated only if such
renewal, extension or new agreement occurs);
(iv) a stock option to purchase 20,000 shares of the
Corporation's common stock, such option to vest as of
the date of renewal or extension (for a period of not
less
14
<PAGE>
than two years) of the existing research collaboration
agreement between the Corporation and Solvay Duphar
B.V., or the signing of a new research collaboration
agreement between the parties (with such grant to be
effectuated only if such renewal, extension or new
agreement occurs);
(v) a stock option to purchase 20,000 shares of the
Corporation's common stock, such option to vest as of
the date of renewal or extension (for a period of not
less than two years) of the existing research
collaboration agreement between the Corporation and
SmithKline Beecham Corporation and SmithKline Beecham
p.l.c. or the signing of a new research collaboration
agreement among the parties (with such grant to be
effectuated only if such renewal, extension or new
agreement occurs).
For purposes of this Section 9, (A) an option shall become exercisable when it
is vested and (B) each option granted pursuant to this Subsection (a) shall have
a per share exercise price equal to the fair market value of a share of the
Corporation's common stock on the Effective Date, as determined pursuant to the
Incentive Plan.
15
<PAGE>
(b) With respect to all stock options to be granted to the
Executive pursuant to the terms hereof, the Compensation Committee agrees that
if the Executive so requests at the time of exercise, the Compensation Committee
will permit the Executive to exercise any or all such options by borrowing the
exercise price from the Corporation and using the proceeds thereof to exercise
the options, subject to the terms and conditions of Section 5.6 of the Incentive
Plan.
10. Withholding. All payments required to be made by the Corporation
hereunder to the Executive shall be subject to the withholding of such amounts
relating to taxes and other governmental assessments as the Corporation may
reasonably determine it should withhold pursuant to any applicable law, rule or
regulation.
11. Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties and supersedes all proposals,
commitments, writings, negotiations, discussions, agreements and understandings,
oral or written, of every kind and nature between them concerning the subject
matter hereof (other than the Incentive Plan or any other employee stock option
plan which may be adopted during the term of the Agreement (together, the
"Option Plans"), any option agreement granted under the Option Plans or
otherwise, and the terms of any employee benefit plan covering the Executive).
12. Amendments and Waivers. This Agreement may not be amended or
otherwise modified except in a writing signed by both parties hereto. No
discharge of the terms hereof shall be deemed valid unless by full performance
by the parties or by a writing signed by the
16
<PAGE>
parties. A waiver by any party of any breach or violation of this Agreement
shall not be deemed or construed as a waiver of any other breach or violation
hereof.
13. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the United States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the address of the parties
stated above or to such changed address as such party may have fixed by notice
or, if given by telecopier, when such telecopy is transmitted and the
appropriate answerback is received.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Corporation, its successors and assigns, including without
limitation any corporation which may acquire all or substantially all of the
Corporation's assets and business or with or into which the Corporation may be
consolidated or merged, and the Executive, his heirs, executors, administrators
and legal representatives, provided that the obligations of the Executive
hereunder may not be delegated.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York governing
contracts to be made and performed therein without giving effect to principles
of conflicts of law.
17
<PAGE>
16. Severability. Should any part, term, condition or provision
hereof or the application thereof be declared illegal, invalid or otherwise
unenforceable or in conflict with any other law by a court of competent
jurisdiction, the validity of the remaining parts, terms, conditions or
provisions of this Agreement shall not be affected thereby, and the illegal,
invalid or unenforceable portions of this Agreement shall be and hereby are
redrafted to conform with applicable law, while leaving the remaining portions
of this Agreement intact, except to the extent necessary to conform to the
redrafted portions hereof.
17. Mediation and Arbitration; Litigation.
(a) Any dispute relating to this Agreement, other than any
dispute relating to the provisions of Sections 5, 6 or 7 hereof, shall be
submitted to arbitration in accordance with the rules of the American
Arbitration Association then in effect; provided, that damages awarded in
arbitration shall be limited to actual losses in compensation, bonus payments,
benefits and expenses (including legal costs and expenses referenced in, and
subject to the terms and conditions of, Subsection(c)), and to reinstatement.
The arbitration shall be held in New York City, N.Y. and shall be decided in
accordance with the laws of the State of New York.
(b) Any action or proceeding brought to enforce or interpret the
provisions of, or to determine or resolve any claim or controversy arising
under, Section 5, 6 or 7 hereof, or to confirm the results of an arbitration
award under Subsection(a) shall be brought in a court of competent jurisdiction
in the State of New York. Both parties agree to waive their right to a jury
trial in any such action or proceeding, and such waiver shall be irrevocable.
18
<PAGE>
(c) The Corporation will pay or reimburse the Executive for all
costs and expenses (including court costs and attorney's fees) incurred by
Executive as a result of any claim, action or proceeding arising out of, or
challenging the validity, or enforceability of, this Agreement or any provision
hereof, but only if the Executive is the prevailing party with respect to such
claim, action or proceeding.
18. Review by Executive. The Executive acknowledges that he has
carefully reviewed the terms of this Agreement and that he has not relied on the
Corporation or its counsel and that this Agreement fairly and accurately
reflects the terms of his employment by the Corporation.
19. Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts.
21. Term of Agreement. This Agreement shall be effective as of the
Effective Date and shall continue in effect through the earlier of the Actual
Termination Date or the Scheduled Termination Date; provided, however, that
Sections 4, 5, 6, 7, 9, 10, 15, 16 and 17 shall survive the termination of the
Agreement except as otherwise provided therein.
19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: The Compensation Committee of the Board
of Directors
/s/ Harold First
-----------------------------------------
Harold First, Member
/s/ Nicole Vitullo
-----------------------------------------
Nicole Vitullo, Member
/s/ Jack Wasserman
-----------------------------------------
Jack Wasserman, Member
EXECUTIVE:
/s/ Philip N. Sussman
-----------------------------------------
Philip N. Sussman
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Balance Sheet, and Statement of
Operations and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 34,268,905
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,176,380
<PP&E> 5,132,425
<DEPRECIATION> 2,044,835
<TOTAL-ASSETS> 42,173,812
<CURRENT-LIABILITIES> 2,739,306
<BONDS> 150,000
0
0
<COMMON> 132,106
<OTHER-SE> 39,302,400
<TOTAL-LIABILITY-AND-EQUITY> 42,173,812
<SALES> 0
<TOTAL-REVENUES> 9,948,238
<CGS> 0
<TOTAL-COSTS> 16,697,551
<OTHER-EXPENSES> 849,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,440,222)
<INCOME-PRETAX> (6,158,181)
<INCOME-TAX> 86,563
<INCOME-CONTINUING> (6,244,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,244,744)
<EPS-PRIMARY> (0.49)
<EPS-DILUTED> 0
</TABLE>
