<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO ____________
COMMISSION FILE NUMBER 0-22872
---------
SYMBOLLON CORPORATION
- --------------------------------------------------------------------------------
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
Delaware 36-3463683
- ---------------------------------- ----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
122 Bost Post Road, Sudbury, MA 01776
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
508-443-0165
- --------------------------------------------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED
SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
August 12, 1996
---------------
Class A Common Stock 1,283,699
Class B Common Stock 1,199,713
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE> 2
SYMBOLLON CORPORATION
(a development stage company)
INDEX
-----
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- June 30, 1996 and December 31, 1995 1
Unaudited Condensed Statements of Operations
and Deficit Accumulated During the Development
Stage - For the six and three months
ended June 30, 1996 and June 30, 1995 2
Unaudited Condensed Statements of Cash Flows
- For the six months ended June 30, 1996
and June 30, 1995 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 5
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURE 8
INDEX TO EXHIBITS 9
<PAGE> 3
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
--------- ------------
Current assets: (unaudited)
<S> <C> <C>
Cash and cash equivalents .......................................... $ 1,794,322 $ 2,087,753
Accounts receivable ................................................ 20,488 30,870
Inventory .......................................................... 49,316 31,279
Prepaid expenses ................................................... 62,921 80,554
----------- -----------
Total current assets ........................................... $ 1,927,047 $ 2,230,456
Equipment and leasehold improvements, net of
accumulated depreciation .............................................. 145,481 159,990
Other assets:
Patent and trademark cost, net of accumulated amortization ......... 117,936 90,099
Deposit ............................................................ 5,000 5,000
----------- -----------
TOTAL .......................................................... $ 2,195,464 $ 2,485,545
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable ................................................... $ 49,945 $ 30,385
Notes payable to stockholder ....................................... 47,549 47,549
Legal fees payable to related party ................................ 4,289 4,782
Accrued Interest ................................................... 23,649 21,989
Other accrued professional fees .................................... 137,005 3,822
Other current liabilities .......................................... 70,128 44,963
----------- -----------
Total current liabilities ...................................... 332,565 153,490
Accrued rent ........................................................... 21,500 24,500
----------- -----------
Total liabilities .................................................. 354,065 177,990
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares
authorized, none issued
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 1,265,423 and 1,283,699 shares issued at
December 31, 1995 and June 30, 1996, respectively ..................... 1,284 1,265
Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 1,214,713 and 1,199,713 shares issued at
December 31, 1995 and June 30, 1996, respectively,
each convertible into one share of Class A common stock ............... 1,200 1,215
Additional paid-in capital ............................................. 6,739,288 6,732,739
Deficit accumulated during the development stage ....................... (4,900,373) (4,427,664)
----------- -----------
Total stockholders' equity ......................................... 1,841,399 2,307,555
----------- -----------
TOTAL .............................................................. $ 2,195,464 $ 2,485,545
=========== ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE> 4
SYMBOLLON CORPORATION
(a development stage company)
<TABLE>
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
Period From
July 15, 1986
Three Months Ended Six Months Ended (Inception) to
June 30, June 30, June 30,
1996 1995 1996 1995 1996
----------- ----------- ---------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ....................................... $ 3,447 $ 43,063 $ 16,732 $ 58,259 $ 139,713
License fee and contract revenue ................ 582,587 50,000 582,587 75,000 947,587
----------- ----------- ----------- ----------- -----------
Total income ................................ 586,034 93,063 599,319 133,259 1,087,300
Operating Expenses:
Manufacturing costs ........................... $ 6,653 $ 21,979 $ 13,514 $ 79,970 $ 117,114
Research and development costs ................ 307,014 224,862 652,335 434,799 3,124,465
General and administrative expenses ........... 232,324 209,027 450,691 456,925 2,747,374
----------- ----------- ----------- ----------- -----------
Total operating expenses .................... 545,991 455,868 1,116,540 971,694 5,988,953
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations ................... 40,043 (362,805) (517,221) (838,435) (4,901,653)
Interest and other income ....................... 22,296 35,110 46,172 76,251 340,906
Interest expense ................................ (830) (831) (1,660) (1,651) (339,626)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................... 61,509 (328,526) (472,709) (763,835) (4,900,373)
Deficit accumulated during the development stage,
beginning of period ............................ (4,961,882) (3,489,262) (4,427,664) (3,053,953)
----------- ----------- ----------- ----------- -----------
Deficit accumulated during the development stage,
end of period .................................. $(4,900,373) $(3,817,788) $(4,900,373) $(3,817,788) $(4,900,373)
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE OF
COMMON STOCK ................................... $0.03 $(0.19) $(0.27) $(0.45)
=========== =========== =========== =========== ===========
Weighted average number of common
shares outstanding ............................. 1,780,136 1,700,000 1,780,136 1,700,000
=========== =========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 5
SYMBOLLON CORPORATION
(a development stage company)
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Period From
July 15, 1986
Six Months Ended (Inception) to
June 30, June 30,
1996 1995 1996
---------------- ----------------- -------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss .............................................. $ (472,709) $ (763,835) $(4,900,373)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization expense ............... 30,004 27,631 291,849
Amortization of debt issuance costs 130,000
Accrued rent ........................................ (4,500) (1,500) 20,000
Changes in operating assets and liabilities:
Accounts receivable ............................... 10,382 (9,750) (20,488)
Inventory ......................................... (18,037) 8,262 (49,316)
Prepaid expenses .................................. 17,633 39,430 (62,921)
Deferred revenue .................................. 112,500
Accounts payable and other current liabilities .... 179,075 (31,113) 285,016
---------- ---------- -----------
Net cash used in
operating activities .............................. (258,152) (618,375) (4,306,233)
---------- ---------- -----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements ...... (4,406) (57,735) (253,898)
Patent and trademark costs ............................ (37,425) (700) (299,867)
Deposit ............................................... (5,000)
---------- ---------- -----------
Net cash used in investing activities ............... (41,831) (58,435) (558,765)
---------- ---------- -----------
Cash flows from financing activities:
Warrant conversion .................................... 629,204
Borrowings from stockholders .......................... 253,623
Repayment to stockholders ............................. (106,074)
Sale of common stock and units ........................ 6,552 7,225,969
Sale of option to purchase units ...................... 100
Public offering costs ................................. (1,343,502)
---------- ---------- -----------
Net cash provided by
financing activities ................................ 6,552 6,659,320
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH ........................... (293,431) (676,810) 1,794,322
Cash at beginning of period ............................... 2,087,753 2,998,375
---------- ---------- -----------
CASH AT END OF PERIOD ..................................... $1,794,322 $2,321,565 $ 1,794,322
========== ========== ===========
</TABLE>
See notes to condensed financial statements.
<PAGE> 6
SYMBOLLON CORPORATION
(a development stage company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note A - Description of Business:
-----------------------
Symbollon Corporation (the "Company") was originally incorporated as an
Illinois corporation on July 15, 1986 as Symbollon, Inc. On May 21, 1991,
Symbollon, Inc. was merged into Symbollon Corporation, a newly formed
Massachusetts corporation (which was subsequently reincorporated in Delaware in
August 1993), to carry on the business of Symbollon Inc. Except where otherwise
indicated, references to the Company in these financial statements and notes
thereto include the activities of Symbollon, Inc.
The Company was formed to develop and commercialize proprietary
enzyme-based products for infection control and treatment in biomedical and
bioagricultural industries.
The Company is in the development stage and its efforts since inception
have been principally devoted to research and development, securing patent and
trademark protection and raising capital. In connection with its research and
development efforts, several grants under the Small Business Innovation Research
program concerning the Company's technology have been funded and additional
grants are being pursued. Management of the Company anticipates that additional
losses will be incurred as these efforts are pursued.
In 1995, the Company signed a marketing and supply agreement for its first
product and commenced shipping.
Note B - Accounting Policies and Disclosure:
----------------------------------
The accompanying unaudited financial statements do not contain all of the
disclosures required by generally accepted accounting principles and should be
read in conjunction with the financial statements and related notes included in
the Company's Form 10-KSB for the year ended December 31, 1995 filed with the
Securities and Exchange Commission.
In the opinion of management, the financial statements reflect all
adjustments, all of which are of a normal recurring nature, to fairly present
the Company's financial position, results of operations and cash flows. The
results of operations for the six and three-month periods ended June 30, 1996
are not necessarily indicative of the results to be expected for the full year.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a development stage company. Since inception of the
Company's predecessor in 1986, the Company's efforts have been principally
devoted to research and development, securing patent and trademark protection
and raising capital, most of which efforts commenced after May 1991. Except for
revenue earned since 1995 on sales of IodoZyme, the Company's sole revenue to
date has been from research and development contracts with corporate partners
and interest income.
Forward-Looking Statements
Any statements set forth below or otherwise made in writing or orally by
the Company with regard to its expectations as to financial results and other
aspects of its business may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company makes such statements based on assumptions which it believes to be
reasonable, the Company's business is subject to significant risks and there can
be no assurance that actual results will not differ materially from the
Company's expectations. Accordingly, the Company hereby identifies the following
important factors, among others, which could cause its results to differ from
any results which might be projected, forecasted or estimated by the Company in
any such forward-looking statements: (i) the timely development and acceptance
of new products, (ii) the achievement of product development milestones by the
Company's corporate partners, (iii) the timely receipt of regulatory clearances
required to market the Company's proposed products, and (iv) the continued sale
of IodoZyme, the Company's only product.
Results of Operations
Symbollon experienced net losses for the six month periods ended June 30,
1996 and 1995 and the three month period ended June 30, 1995 of $472,709,
$763,835 and $328,526, respectively, and had net income of $61,509 for the three
month period ended June 30, 1996. The net income for the three month period
ended June 30, 1996 was primarily the result of $582,587 of license/contract
revenues being realized during that period due to a new research and development
contract. However, the Company expects to incur additional operating losses in
the foreseeable future.
Product revenues from sales of IodoZyme for the three and six month periods
ended June 30, 1996 were $3,447 and $16,732, respectively, reflecting a decrease
of $39,616 (or 92.0%) and $41,527 (or 71.3%), respectively, from the product
sales in the comparable 1995 periods. IodoZyme sales were below the 1996 sales
forecast during the first half of the year, and the Company has no reason to
believe that sales will materially increase during the second half of 1996.
5
<PAGE> 8
Manufacturing costs for IodoZyme for the three and six month periods ended
June 30, 1996 were $6,653 and $13,514, respectively, reflecting a decrease of
$15,326 (or 69.7%) and $66,456 (or 83.1%), respectively, from the manufacturing
costs in the comparable 1995 periods. Thus, the gross profit margin on product
sales for the three and six month periods ended June 30, 1996 were (93.0)% and
19.2%, respectively, compared to 49% and (37.3)% in the comparable 1995 periods.
The decrease in the gross profit margin on product sales for the three month
period ended June 30, 1996, from the comparable 1995 period, was primarily due
to low sales volume. The increase in the gross profit margin on product sales
for the six month period ended June 30, 1996, from the comparable 1995 period,
was primarily due to resolution of prior period manufacturing problems, and
reduced labor costs associated with certain manufacturing activities now being
internally performed, partially offset by increased per unit overhead due to low
sales volume.
General and administrative expenses for the three and six month periods
ended June 30, 1996 were $232,324 and $450,691, respectively, reflecting an
increase (decrease) of $23,297 (or 11.2%) and $(6,234) (or (1.4)%),
respectively, from the general and administrative expenses in the comparable
1995 periods. General and administration expenses remain stable as the Company
continues to focus on cost containment. Research and development expenses for
the three and six month periods ended June 30, 1996 were $307,014 and $652,335,
respectively, reflecting an increase of $82,152 (or 36.5%) and $217,536 (or
50.0%), respectively, from the research and development expenses in the
comparable 1995 periods. These increases resulted from increased development
expenses, including third party testing and consultant fees, related to the
preparation of the 510(k) filing with the Federal Food and Drug Administration
covering the Company's high level disinfectant formulation.
Liquidity and Capital Resources
The Company has funded its activities through proceeds from Class A Warrant
exercises, its IPO and prior thereto through loans from principal stockholders
and private placements of equity and debt securities. Independent research and
development activities regarding the Company's technology have been funded
through SBIR grants received and administered by Biomedical Development
Corporation. As of June 30, 1996, the Company had working capital of $1,594,482.
The Company has had no significant product revenue and has incurred a
cumulative loss through June 30, 1996 of $4,900,373. However, the Company
believes that it has the necessary liquidity and capital resources, together
with anticipated future revenues, to sustain planned operations for the twelve
months following June 30, 1996. In the event that the Company's internal
estimates relating to its planned revenues or expenditures prove materially
inaccurate, the Company may be required to reallocate funds among its planned
activities and curtail certain planned expenditures. In any event, the Company
anticipates that it will require additional funds after June 30, 1997.
6
<PAGE> 9
During the remainder of 1996, the Company anticipates paying approximately
$140,000 as compensation for its current executive officers, and approximately
$24,000 for lease payments on its facilities. Planned capital expenditures for
the remainder of fiscal 1996 are expected to be approximately $2,000 for
research and development equipment. The Company is also committed to repay a
promissory note which became due in June, 1995 in the amount of $47,549, plus
accrued interest, on demand by its holder. At December 31,1995, the Company had
a net operating loss carryforward for Federal income tax purposes of
approximately $4,125,000 expiring through 2010.
Part II - Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<TABLE>
The following items were submitted to a vote of the stockholders at the
Company's Annual Meeting on May 15, 1996:
1. Election of Directors. The following directors were elected:
<CAPTION>
Votes
---------------------------------------------
For Against Withheld
--------- ------- --------
<S> <C> <C> <C>
James C. Richards 5,656,490 0 0
Jack H. Kessler 5,656,490 0 0
Lowell S. Smith 5,656,490 0 0
Edward A. Mason 5,656,490 0 0
Stuart M. Paley 5,656,490 0 0
Irwin M. Rosenthal 5,656,490 0 0
</TABLE>
2. Ratification of Richard A. Eisner & Company, LLP as the independent
auditors of the Company:
Votes .
---------------------------------------
For Against Withheld
--------- ------- --------
6,868,116 365 13,825
3. Proposal to amend the Symbollon Corporation 1993 Stock Option Plan:
Votes .
---------------------------------------
For Against Withheld
--------- ------- --------
6,376,363 16,170 8,650
Each item identified above was fully described in the Company's Proxy
Statement for the Annual Meeting of Stockholders. Each item received the
necessary votes for approval.
7
<PAGE> 10
ITEM 5. OTHER INFORMATION
On May 14, 1996, the Company entered into a Collaboration and License
Agreement with Oclassen Pharmaceuticals, Inc. to develop dermatological products
based on the Company's chemistry. Under the terms of the agreement, Oclassen
obtains exclusive marketing rights in the United States and Canada for
dermatological products that are developed based on Symbollon's iodine
technology. Symbollon retains the rights to the rest of the world. So long as
the Agreement is in effect, Oclassen will make a series of milestone payments to
Symbollon based on the passage of time or the occurrence of certain events, plus
royalty payments on product sales and reimbursement of Symbollon's development
efforts under the agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index to Exhibits on Page E-1.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf of the undersigned, thereunto duly
authorized.
SYMBOLLON CORPORATION
Date: August 13, 1996 By: /S/ Paul C. Desjourdy
---------------------
Paul C. Desjourdy, Vice President/CFO
and authorized signatory
8
<PAGE> 11
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
PAGE #
10.5 Employment Agreement, effective July 1, 1996, between the Company
and Paul C. Desjourdy
10.15 Collaboration and License Agreement, dated May 14, 1996 between the
Company and Oclassen Pharmaceuticals, Inc.
11.1 Statement re: Computation of Earnings per Share.
9
<PAGE> 1
Exhibit 10.5
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made as of the 1st day of July, 1996, by and
between Symbollon Corporation, a Delaware corporation with its principal place
of business at 122 Boston Post Road, Sudbury, MA 01776 (the "Company"), and Paul
C. Desjourdy, residing at 206 North Street, Medfield, MA 02052 (the "Employee").
In consideration of the mutual promises contained in this Agreement, the
parties agree as follows:
1. TITLES AND RESPONSIBILITIES. The Company employs the Employee, and the
Employee accepts employment, as Executive Vice President and Chief Financial
Officer of the Company. The Employee shall be directly responsible for
management of all financial and administrative personnel, including hiring and
firing of the financial and administrative staff, and shall play an integral
role in the business decisions of the Company including, but not limited to,
interacting with corporate partners and participating in the establishment of
contractual business terms and overall corporate strategy. Subject to the
general direction and control of the Board of Directors of the Company (the
"Board"), the Employee agrees to devote his full time and best efforts to his
duties and responsibilities for the Company, subject only to the provisions of
Section 7 of this Agreement. The Employee shall report directly to the President
or Chief Executive Officer of the Company.
2. TERM. The term of this Agreement shall be deemed to have commenced as of
the date hereof and, subject to the provisions of Section 12 of this Agreement,
shall continue in full force and effect until December 31, 2000.
3. BASE SALARY. During the term of this Agreement, the Employee shall be
entitled to receive base salary at the rate of $130,000 per year, payable not
less than monthly in arrears. The Employee's base salary (at the rate then in
effect) shall be increased each year by a cost-of-living factor determined by
reference to the Consumers Price Index for All Urban Consumers applicable to
Boston, Massachusetts, published by the Bureau of Labor Statistics of the U.S.
Department of Labor (the "Index"). The amount of such increase shall be
effective in January of each year, commencing January, 1997, and shall be equal
to the percentage increase in the Index from the previous January. The Company
may, but shall not be obligated to, increase the Employee's base salary in any
year in an amount in excess of the cost-of-living factor provided above.
4. BONUS. In addition to the base salary described in Section 3, during the
term of this Agreement, the Employee may be entitled in each calendar year to
receive a cash bonus, stock options and/or such other bonuses, in such amounts
and on such terms as the Board or the Compensation Committee of the Board (the
"Compensation Committee") may determine. In the event of the termination of the
employment of the Employee for (i) any reason other than Cause or (ii) by reason
of Constructive Discharge, the Employee shall be entitled to
<PAGE> 2
receive an amount equal to the bonus which would otherwise have been payable to
the Employee under any established Company incentive plans, if any, in effect at
the time in respect of the year during which such termination occurs, pro rated
for the portion of the year in which such termination occurs.
5. EMPLOYEE BENEFITS. The Employee shall have the right to participate in
all benefit plans and programs generally made available to executives of the
Company, including without limitation health, dental, life, and disability
insurance, vacation programs, retirement plans, employee stock plans or benefits
and profit sharing plans.
6. REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Employee for
all reasonable and necessary expenses incurred by him in the performance of his
duties hereunder, following his appropriate substantiation thereof, in each case
in accordance with the Company's policies as in effect from time to time.
7. OUTSIDE CONSULTING. With the prior written approval of the Compensation
Committee, which shall not be unreasonably withheld, and after disclosure by the
Employee of pertinent information regarding any consulting services which the
Employee may wish to provide to third parties, the Employee may serve as a
consultant in any field which does not compete with the Company, including
without limitation, medical diagnostic products, PROVIDED, that in no event
shall such proposed consulting interfere with the operations of the Company or
the performance of the Employee's duties under this Agreement more particularly
described in Section 1 hereof. If the Compensation Committee shall determine
that any consulting activity proposed by the Employee is not permitted
hereunder, the Compensation Committee shall provide the Employee a written
statement setting forth the basis for its determination. The Employee agrees
that in no event will he devote more than two days per month in the aggregate in
his capacity as a consultant to third parties.
8. SEVERANCE AND OTHER ARRANGEMENTS.
(a) GENERALLY. In the event of the termination of the employment of the
Employee by the Company without Cause, or by the Employee as the result of a
Constructive Discharge, the Company shall pay the Employee as severance the
continuation of his base salary and benefits for a period of eighteen (18)
months, in an amount such that, together with any compensation and benefits the
Employee is entitled to receive from any employment or consulting arrangement(s)
with other entities, the Employee shall receive an aggregate amount equal to his
base salary and benefits (as in effect on the date of termination) during such
period. The end of the period during which severance is paid, rather than the
termination date of employment, will be deemed to be a "qualifying event" which
would entitle the Employee to acquire at his own expense during the minimum
election period permitted by the Consolidated Omnibus Budget Reconciliation Act
(commonly known as "COBRA") or such law as may then be in effect continuation of
coverage under the Company's health and benefit plans.
2
<PAGE> 3
(b) DISABILITY. In the event of any illness (mental or physical) or
accident which renders the Employee unable to perform his duties and
responsibilities, the Company shall, during the first 3 months of any such
illness or after such accident, as the case may be, continue to pay the
Employee's base salary hereunder; and thereafter, during any such period in
excess of 3 months the Company shall supplement any disability benefits which
the Employee is entitled to receive under the Company's disability plans then in
effect, for a period of up to 9 additional months, in an amount such that,
together with any amounts the Employee is entitled to receive under such plans,
the Employee shall receive an aggregate amount equal to his base salary during
such period.
9. NON-COMPETITION. During the term of this Agreement and thereafter the
Employee will not directly or indirectly, as a consultant to, or as an employee,
officer, director, stockholder, partner or other owner or participant of or in,
any business entity other than the Company, engage in the United States or
anywhere in the world where the Company conducts business or reasonably
anticipates conducting business, in activities or affiliations which utilize
Company proprietary information, know-how or trade secrets in any field of
activity, including specifically those fields that are competitive with the
business of the Company, nor will the Employee interfere with the contractual
relations between the Company and any of its employees. The provisions of this
Section shall not prohibit the ownership of 3% or less of the outstanding stock
of any entity whose stock is publicly traded.
10. OWNERSHIP OF DEVELOPMENTS. The Employee agrees that any work or
research, or the result thereof including without limitation, inventions,
processes, formula, data, information, programs, systems, software or know-how
(hereinafter collectively "Proprietary Information") made, conceived or
developed by Employee, alone or in connection with others, prior to or during
the term of his employment under this Agreement, whether during or out of the
usual hours of employment, which are related to the business, research and
development work within the Company's Field of Operation are the sole and
exclusive property of the Company. The Employee agrees that he will fully assign
the foregoing to Company. The Employee further agrees to disclose all
Proprietary Information completely and in writing to the Board. To the extent of
the Employee's interest therein, all papers and records of every kind, relating
to Proprietary Information included within the terms of this Agreement, which
shall at any time come into the possession of the Employee shall be the sole and
exclusive property of the Company and shall be surrendered to the Company upon
termination of the Employee's employment by the Company or upon the Company's
request at any time either during or after the termination of such employment.
11. CONFIDENTIAL INFORMATION. Employee covenants and agrees with the
Company that Employee will not during or after the term of employment disclose
to anyone (except to the extent reasonably necessary for Employee to perform his
duties hereunder) any Proprietary Information or other confidential information
concerning the business or affairs of the Company or of any of its affiliates or
subsidiaries or any of their customers which Employee may have acquired in the
course of or as incident to Employee's employment or prior dealings with the
Company or with any of its affiliates, including without limitation,
3
<PAGE> 4
customers lists, or business trade secrets of, or methods or techniques used by
Employee or any of its affiliates in or about their respective business. Nothing
contained in this paragraph shall impair or restrict the right of Employee to
use or disclose any information already in the public domain.
12. TERMINATION. Notwithstanding the provisions of Section 2 of this
Agreement, the Company shall have the right to terminate the employment of the
Employee for Cause or as a result of his death or Permanent Disability, and the
Employee shall have the right to terminate his employment as the result of a
Constructive Discharge, in each case without violation of the terms of this
Agreement.
In no event shall the Company terminate this Agreement without Cause,
unless the Employee shall have been granted a prior meeting with, and an
opportunity to be heard by, the Board, and a majority of the members of the
Board shall have determined that the Employee has (i) failed to fulfill his
duties to the Company in a satisfactory manner or (ii) engaged in conduct
detrimental to the Company.
13. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings indicated:
"Cause" means (i) the deliberate dishonesty of the Employee with
respect to the Company or any subsidiary or affiliate thereof; (ii) conviction
of the Employee of a felony punishable by imprisonment for more than one year or
a fine of $100,000 or more; or (iii) the willful failure of Employee to perform
the material lawful duties assigned to him under this Agreement as determined by
the Board, which failure the Employee shall not have substantially remedied
within 30 days after receiving written notice from the Company describing such
failure in reasonable detail.
"Company's Field of Operation" means all anti-microbial products,
including without limitation iodine-based products, and any additional products
or services developed, marketed, distributed, planned, sold or otherwise
provided by the Company from time to time prior to or during the term of this
Agreement.
"Constructive Discharge" means the termination of employment by the
Employee on the ground that (a) there has been a significant reduction in the
nature or scope of the Employee's responsibilities, authorities, powers,
functions or duties, (b) there has been a material change in the Company's
policies or management which was intended other than in good faith to and which
has resulted in the inability of the employee to exercise substantially the
responsibilities, authorities, powers, functions or duties exercised by him
immediately prior to such change, (c) there has been a material decrease in the
total annual compensation payable by the Company to the Employee, other than as
a result of a material decrease in compensation payable to the Employee and to
all other employees of similar rank and stature of the Company on the basis of
the financial performance of the Company, PROVIDED, HOWEVER, that nothing
contained herein shall be construed as giving the Company the right to
4
<PAGE> 5
decrease the Employee's base salary specified in Section 3 hereof, or (d) the
relocation of the Company's business which will cause the Employee to move his
residence.
"Permanent Disability" means illness (mental or physical) or accident
which renders the Employee unable to perform his duties and responsibilities for
a period of six consecutive months or six months in any twelve-month period, and
which is confirmed to the Board as continuing at the end of such period by
expert medical opinion. Nothing contained in this Agreement shall affect the
right of the Employee to receive long-term disability benefits under any
long-term disability insurance plan(s) of the Company then in effect.
14. MISCELLANEOUS.
(a) NOTICES. Any notice hereunder shall be effective if delivered
personally, by registered or certified mail, return receipt requested, by
overnight or special courier with a signed receipt, or by facsimile where
confirmation of receipt may be verified, at the addresses set forth in the
preamble to this Agreement or to any other properly noticed address given by the
parties to each other.
(b) GOVERNING LAW. This Agreement shall be construed and governed by the
law of the Commonwealth of Massachusetts.
(c) AMENDMENTS. This Agreement may not be modified or amended orally. All
amendments shall be in writing and signed by the Company and Employee.
(d) ASSIGNMENTS. This Agreement may not be assigned in whole or in part by
the Employee. This Agreement may be assigned by the Company to any entity
acquiring or succeeding to control of ownership of the Company or substantially
all of the assets of the Company. This Agreement shall be binding upon and inure
to the benefit of the parties and to their permitted successors and assigns.
(e) ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
of the parties with respect to its subject matter and supersedes any other
agreements between the parties with respect to such subject matter.
(f) ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provisions of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
5
<PAGE> 6
(g) WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
(h) ARBITRATION. Any controversy or claim which arises out of or relating
to this Agreement, or the breach thereof (OTHER THAN controversies or claims
with regard to Sections 9, 10 or 11 of this Agreement), shall be settled by
arbitration in accordance with the Rules of the American Arbitration Association
then in effect. The controversy or claim shall be submitted to three
arbitrators, one of whom shall be chosen by the Employee, one of whom shall be
chosen by the Company, and one of whom shall be chosen by the two so selected.
The party desiring arbitration shall give written notice to the other party of
its desire to arbitrate the particular matter in question, naming the arbitrator
selected by it. If the other party shall fail within a period of 15 days after
such notice shall have been given to reply in writing naming the arbitrator
chosen as above provided, or if the two arbitrators selected by the parties
shall fail within 15 days after their selection to agree upon the third
arbitrator, then either party may apply to the American Arbitration Association
for the appointment of an arbitrator to fill the place so remaining vacant. The
decision of any two of the arbitrators shall be final and binding upon the
parties hereto. Judgement upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
The proceedings shall be held in Boston, Massachusetts. The arbitrators
shall have no power to award punitive or exemplary damages or to ignore or vary
the terms of this Agreement, and shall be bound to apply controlling law.
Arbitration shall be binding and the remedy for the settlement of the
controversy or claims (except as set forth in the preceding paragraph of this
Section).
(i) CERTAIN REMEDIES. The restrictions contained in Sections 9, 10 and 11
of this Agreement are necessary for the protection of the business and goodwill
of the Company and are considered by the Employee to be reasonable for such
purpose. Without limiting the remedies available to the Company, the Employee
acknowledges that a breach of any of the covenants contained in any of such
Sections 9, 10 and 11 would result in irreparable injury to the Company for
which there might be no adequate remedy at law, and that, in the event of such a
breach or threat thereof, the Company shall be entitled to obtain a temporary
restraining order and/or such other equitable relief as may be required to
enforce specifically any of the covenants of such Sections 9, 10 and 11. The
provisions of such Sections 9, 10 and 11 shall survive the termination of this
Agreement and shall continue thereafter indefinitely in full force and effect in
accordance with their respective terms.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date and year first above written.
SYMBOLLON CORPORATION
By: /s/ Jack H. Kessler
---------------------------
Jack H. Kessler
Executive Vice President
/s/ Paul C. Desjourdy
-------------------------------
Paul C. Desjourdy
7
<PAGE> 1
EXHIBIT 10.15
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COLLABORATION AND LICENSE AGREEMENT
By and Between
OCLASSEN PHARMACEUTICALS, INC.
and
SYMBOLLON CORPORATION
---------------------------------
Dated as of May 14, 1996
---------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
TABLE OF CONTENTS*
------------------
<CAPTION>
Page No.
--------
<S> <C> <C>
Article 1 Definitions........................................ 1
Article 2 Joint Development Committee........................ 6
2.1 Formation ......................................... 6
2.2 Responsibilities................................... 6
2.3 Niche Product...................................... 6
2.4 Switch to OTC...................................... 7
Article 3 Research and Development Efforts................... 7
3.1 Efforts............................................ 7
3.2 Funding............................................ 7
3.3 Sharing of Information............................. 8
3.4 Material Samples................................... 8
Article 4 Oclassen License................................... 8
4.1 Basic Grant........................................ 8
4.2 Specific Limitations............................... 8
4.3 Symbollon Retained Rights.......................... 9
Article 5 Clinical Trials and Regulatory Filings............. 10
Article 6 Oclassen Milestone and Royalty Payments............ 10
6.1 Milestones......................................... 10
6.2 Certain Offsets Against Royalties.................. 11
6.3 Royalties.......................................... 11
6.4 Overall Value...................................... 12
<FN>
- ----------------
* This Table of Contents is for convenience of reference only and is not part
of this Agreement.
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
Article 7 Symbollon Sale of Products Outside Territory........ 12
Article 8 Payments............................................ 12
8.1 Timing of Royalty Payments.......................... 12
8.2 Time and Other Records.............................. 12
8.3 Records of Net Sales................................ 13
8.4 Payments............................................ 13
Article 9 Exclusivity......................................... 13
9.1 Oclassen's Exclusivity Obligations.................. 13
9.2 Avoidance of Confusingly Similar Products........... 13
9.3 Royalties for Off-Label Use......................... 15
Article 10 Confidentiality and Publications.................... 15
10.1 Propriety Information............................... 15
10.2 Joint Disclosures................................... 16
Article 11 Ownership of Intellectual Property.................. 16
11.1 General Intent...................................... 16
11.2 New Inventions...................................... 16
11.3 Symbollon's Rights in Oclassen's Joint Inventions... 16
11.4 Patent Applications................................. 17
11.5 Disputes............................................ 17
Article 12 Warranties/Indemnification/Insurance................ 17
12.1 Representations and Warranties...................... 17
12.2 Disclaimer.......................................... 17
12.3 Additional Covenants................................ 18
12.4 Indemnification..................................... 18
12.5 Insurance........................................... 18
12.6 Additional Indemnification Obligations.............. 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
Article 13 Infringement and Trademarks....................... 19
13.1 Notice of Infringement............................ 19
13.2 Control and Cooperation in Infringement Actions... 19
13.3 Recoveries Against Infringer...................... 20
13.4 Trademarks........................................ 20
Article 14 Assignability..................................... 20
Article 15 Term and Termination.............................. 21
15.1 Term.............................................. 21
15.2 Termination Events ............................... 21
15.3 Termination by Oclassen........................... 22
15.4 Effects of Termination............................ 22
15.5 Survival.......................................... 22
Article 16 Supply and Manufacture............................ 23
Article 17 Miscellaneous..................................... 23
17.1 Notices........................................... 23
17.2 Governing Law; Jurisdiction and Venue............. 24
17.3 Limited Arbitration............................... 24
17.4 Waiver............................................ 25
17.5 Enforceability.................................... 25
17.6 Entire Agreement and Amendment.................... 25
17.7 Independent Contractor............................ 25
17.8 Headings.......................................... 25
17.9 Further Instruments............................... 26
17.10 Force Majeure..................................... 26
17.11 Counterparts...................................... 26
17.12 Exhibits.......................................... 26
</TABLE>
Exhibits
- --------
A -- Patent Applications and Patents
B -- Project Plan
C -- Initial Members of the JDC
iii
<PAGE> 5
COLLABORATION AND LICENSE AGREEMENT
This Agreement is made as of this 14th day of May, 1996 by and between
Oclassen Pharmaceuticals, Inc. ("OCLASSEN") and Symbollon Corporation
("SYMBOLLON").
Symbollon is the owner of certain proprietary technology relating to
topical iodine. Oclassen has resources and expertise useful in the development
and marketing of dermatological pharmaceuticals. The parties wish to collaborate
in a designated field on research and development of novel pharmaceutical agents
which incorporate Symbollon's proprietary topical iodine technology, and
Oclassen wishes to obtain a license from Symbollon under Symbollon's proprietary
technology for the manufacture, use and sale of products in such designated
field, all on the terms and conditions set forth in this Agreement. Accordingly,
the parties hereby agree as follows:
Article 1 - Definitions
-----------------------
For purposes of this Agreement, the following capitalized terms shall have
the following definitions:
1.01 "ACTIVELY DEVELOPING" means currently working (which, for the
first seven (7) years of this Agreement, means producing
formulations and/or conducting clinical trials with humans or
appropriate animal models, and anytime thereafter means
conducting clinical trials with humans) in the Territory to
demonstrate in humans or appropriate animal models, as
applicable, a reasonable expectation that a Product will have
utility in the topical treatment of human skin disease, expressly
excluding the Excluded Applications.
1.02 "AFFILIATE" means any individual, corporation, partnership,
proprietorship or other entity controlled by, controlling, or
under common control with a party through equity ownership,
ability to elect directors or direct management and policies, or
by virtue of a majority of overlapping directors, and shall
include (a) any individual, corporation, partnership,
proprietorship or other entity directly or indirectly owning,
owned by or under common ownership with such party to the extent
of fifty percent (50%) or more of the equity or voting shares,
including shares owned beneficially by such party and (b) each
officer, director or partner of such party.
1.03 "DEVELOPMENT EXPENSES" means amounts actually spent by Oclassen
to (a) develop, prepare and validate samples of Products, which
samples are not held for sale to a third party, (b) investigate
and demonstrate the safety and efficacy of a Product as a
pharmaceutical, and (c) register a Product with appropriate
governmental agencies, all for the purpose of permitting sale of
such Product as
<PAGE> 6
a pharmaceutical. Development Expenses shall include all external
expenses, and internal costs only to the extent of direct
materials and direct labor costs for research and development
personnel and management allocated directly to the work performed
under the preceding clauses (a) through (c), and shall not in any
event include any other management costs or any overhead.
1.04 "EFFECTIVE DATE" means the date first written above.
1.05 "EXCLUDED APPLICATIONS" means (a) wound care, (b) ocular
infections, (c) vaginal infections, (d) oral applications, and
(e) all topical antiseptic infection prevention applications.
1.06 "FIELD" means (a) during the period of time from the Effective
Date until the seventh anniversary of the Effective Date, the
topical treatment of human skin diseases with iodine, expressly
excluding the Excluded Applications; PROVIDED that, on or after
the second anniversary of the Effective Date, the Field may be
permanently reduced from time to time pursuant to Section 2.3 and
(b) during the period of time from the seventh anniversary of the
Effective Date and thereafter, the topical treatment of any and
all human dermatological indication(s) in the Field (as then in
effect pursuant to the terms of clause (a) of this Section 1.06)
with respect to which Oclassen is Actively Developing,
manufacturing and/or distributing any Product(s) claiming
efficacy.
The parties acknowledge that the term "FIELD" is limited to
topical treatment, and does not include prevention, of human skin
diseases, except that, to the extent a Product when topically
applied treats a skin disease (expressly excluding the Excluded
Applications), and the use of such Product also prevents the
recurrence of such skin disease, then such preventative use is
within the "FIELD". If, at any time during the term of this
Agreement, Oclassen wishes to make, use or sell a Product for any
other preventative use, it may so notify the JDC. If the JDC
fails to reach unanimous agreement on this matter, the top
executive officer of each party will confer as soon as reasonably
practicable and each use his commercially reasonable efforts to
effect resolution. Should such conference not resolve the
disagreement, Symbollon will, in good faith, make the final
decision with respect thereto.
1.07 "FORMULATION NOTICE" has the meaning set forth in Section 9.2.
1.08 "FDA" means U.S. Food and Drug Administration.
2
<PAGE> 7
1.09 "IND" means an Investigational New Drug Application filed with
the FDA in the U.S. or a comparable application filed with the
appropriate authority in Canada.
1.10 "INVENTIONS" means all discoveries, inventions, concepts, ideas
or intangible property, whether patentable or not, made,
conceived, or reduced to practice in the course of Product
research and development performed pursuant to Article 3.
1.11 "JOINT DEVELOPMENT COMMITTEE" or "JDC" means a committee of
officers, employees or consultants of Symbollon and Oclassen as
described in Article 2 of this Agreement.
1.12 "JOINT INVENTION" has the meaning set forth in subsection
11.2(b).
1.13 "LICENSED PATENTS" means all of Symbollon's rights (but only to
the extent such rights may by their terms be further licensed to
Oclassen hereunder) in and under patents and patent applications
applicable to the Field, as follows: (a) the patents and patent
applications listed in EXHIBIT A, as well as all Canadian
equivalent patents and patent applications and all patents
issuing therefrom in which Symbollon has a property interest or
under which Symbollon acquires licensing rights (but only to the
extent such rights may by their terms be further assigned to
Oclassen hereunder), (b) any iodine-based patent or patent
application covering an Invention or Joint Invention assigned to
Symbollon pursuant to Section 11.2, (c) any other future
iodine-based patent or patent application in which Symbollon
acquires any property interest or licensing rights (but only to
the extent such rights may by their terms be further assigned to
Oclassen hereunder), and (d) any divisions, continuations or
continuations in part of the patents or patent applications set
forth above, including any reissue, re-examination,
re-registration or extension. Symbollon shall promptly notify
Oclassen from time to time as new iodine-based patent
applications are filed or iodine-based patents are issued which
fall within the definition of Licensed Patents and EXHIBIT A
shall be appropriately updated to reflect such changes.
1.14 "MANUFACTURING COSTS" means, with respect to any product
(including any product component) a party's costs of
manufacturing consisting of direct material and direct labor
costs and overhead directly allocable to such product. Direct
material costs shall include the reasonable costs incurred in
purchasing raw materials (without deduction for waste), including
sales and excise taxes imposed thereon, and all costs of
packaging components. Direct labor shall include the reasonable
cost of employees engaged in manufacturing activities
3
<PAGE> 8
who are directly employed in product manufacturing and packaging.
Overhead allocated to a product is limited to a reasonable
allocation of the cost of employees who have a direct
relationship with product manufacturing or packaging but who are
not classified as direct labor, based on each such employee's
time spent toward product manufacturing or packaging as compared
to time spent on all such employee's work. Overhead shall also
include a reasonable allocation of facilities' costs allocable to
product manufacturing and packaging, including electricity,
water, sewer, waste disposal, property taxes and straight-line
depreciation of building and machinery. The allocation and
calculation of a party's internal Manufacturing Costs shall be
made in accordance with its standard cost and reasonable cost
accounting methods, consistently applied. In the case of a
product manufactured in whole or in part by a third party on
behalf of a party, "MANUFACTURING COSTS" means the costs paid to
such third party in order to acquire the manufactured product.
1.15 "NDA" means a New Drug Application filed with the FDA in the U.S.
or a comparable application filed with the appropriate authority
in Canada.
1.16 "NET SALES" means the sum of all amounts received and all other
consideration received (when in a form other than cash or its
equivalent, the fair market value thereof when received) by a
party or its Affiliates from persons or entities who are not
Affiliates by reason of the sale, distribution or use of Product
less, without duplication: (a) trade, quantity, cash, purchasing
group or Medicaid discounts, if any, actually allowed, (b)
credits or allowances, if any, actually given or made on account
of price adjustments, returns, rejections, recalls or destruction
of such Products, (c) any insurance and prepaid freight expenses
actually incurred in connection with the shipment of such
Products if included in the billed amount and (d) any sales or
excise tax. "NET SALES" shall not be net of any amounts paid or
deductions made for (y) commissions or fees paid to any person,
whether they be with independent sales agencies, regularly
employed by a party or its Affiliates, or under a co-promotion
arrangement as contemplated under subsection 4.2(b) or (z)
discounts, if any, actually allowed, if any such discount has
been granted on any basis other than the purchase of Products.
Any overpayment of royalties due to an allowable deduction for
discounts under clause (a), above, applicable to periods for
which royalties have already been paid may be credited against
future royalty obligations. For purposes of calculating any
royalty due under Article 7, Net Sales shall apply to all
products (including Products) referenced in Article 7.
1.17 "NICHE PRODUCT" and "NICHE PRODUCT NOTICE" shall have the
meanings set forth in Section 2.3.
4
<PAGE> 9
1.18 "OTC" means the over-the-counter, as opposed to prescription,
market for pharmaceuticals.
1.19 "PRODUCT" means any pharmaceutical agent in the Field (excluding
any Niche Product) which includes iodine as an active ingredient.
1.20 "PROJECT PLAN" means the written plan (initially attached hereto
as Exhibit B, as the same may be revised in writing from time to
time pursuant to Section 2.2.) for the research and development
of prescription Products which sets forth (a) the research and
development work to be performed by the respective parties, (b)
the schedule of agreed upon milestones and completion of such
work, and (c) a budget.
1.21 "PROPRIETARY INFORMATION" means all technical information, data,
techniques, knowledge, skill, know-how, experience, trade
secrets, developments, formulae, processes, materials and other
information of a party which is disclosed or transferred from one
party to the other or developed in the course of performance
under this Agreement, including by way of illustration and not
limitation, designs, drawings, documents, models and other
similar information. "PROPRIETARY INFORMATION" shall not include
any of the foregoing that are included in a claim of any Licensed
Patent.
1.22 "REASONABLE COMMERCIAL EFFORTS" means efforts no less diligent
than Oclassen puts or would put forth in pursuing
commercialization of its own internally developed products.
1.23 "REGULATORY APPROVALS" has the meaning set forth in Article 5.
1.24 "REGULATORY FILINGS" has the meaning set forth in Article 5.
1.25 "TERRITORY" means the United States, its territories and Canada.
1.26 "VALID CLAIM" means any claim(s) pending in a patent application
or in an unexpired patent included within the Licensed Patents
which has not been held unenforceable, unpatentable or invalid by
a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed
for appeal, and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer.
5
<PAGE> 10
Article 2 - Joint Development Committee
---------------------------------------
2.1 FORMATION. The Joint Development Committee will be comprised of
four (4) members with two (2) being appointed and replaced by Oclassen and two
(2) being appointed and replaced by Symbollon. The initial members of the JDC
are set forth on EXHIBIT C. Any changes to the size of the JDC must be
unanimously agreed upon by that committee. Meetings of the JDC may be held so
long as at least one (1) representative of each party is present. The JDC will
meet at least once per fiscal quarter. Such meetings will be telephonic
meetings, or will alternate at Oclassen's or Symbollon's headquarters, or as
otherwise agreed by the parties. A chair of the JDC will be appointed
alternately by Oclassen and Symbollon to six-month terms.
2.2 RESPONSIBILITIES. Each party will report to the JDC regularly its
progress with respect to its respective work assignments under the Project Plan.
The JDC will monitor such progress, including, without limitation, adherence to
the Project Plan's schedule for work completion and budget. The JDC will review
and, as mutually agreed from time to time, revise the Project Plan. If the
members of the JDC are unable to reach unanimous agreement on a proposed
revision, the top executive officer of each party will confer as soon as
reasonably practicable to thoroughly consider such proposed revision, and each
use his commercially reasonable efforts to effect resolution. Should such
conference not resolve the disagreement, subject to the provisions of Section
2.4, Oclassen will, in good faith, make the final decision to accept or to
reject such proposed revision, PROVIDED that, in no event shall the Project Plan
be revised without the mutual agreement of Oclassen and Symbollon with respect
to (a) any matter which conflicts with a provision specifically set forth in
this Agreement (other than provisions set forth in the Project Plan attached
hereto as EXHIBIT B) and (b) the research and development work to be performed
by Symbollon.
2.3 NICHE PRODUCT. If, at any time on or after the second anniversary
of the Effective Date, Symbollon wishes to develop and market a Product in the
Territory for any indication which Oclassen is not Actively Developing,
marketing or selling, Symbollon may give notice (the "NICHE PRODUCT NOTICE") to
Oclassen identifying such Product and the indication(s) which Symbollon wishes
to develop and market. If Oclassen has no interest in such indication(s), it
shall so notify Symbollon as soon as practicable (and in any event within ninety
(90) days) after receipt of the Niche Product Notice, and Symbollon shall
thereafter have the exclusive right to develop and market, independently or in
conjunction with a third party, such Niche Product, but only for the
indication(s) specified in the Niche Product Notice. If Oclassen wishes to
develop such indication(s), it must (a) present to the JDC within ninety (90)
days after receipt of the Niche Product Notice a detailed project plan (having
substantially similar coverage of subject matter as the Project Plan attached
hereto as EXHIBIT B) for such development and (b) at all times thereafter use
Reasonable Commercial Efforts to implement and follow such plan. If Oclassen at
any time fails to perform its obligations under the preceding sentence,
Symbollon shall thereafter have the exclusive right
6
<PAGE> 11
to develop and market, independently or in conjunction with a third party, such
Niche Product, but only for the indication(s) specified in Symbollon's Niche
Product Notice. If the parties disagree about whether Symbollon may develop such
indication(s), due to a failure to follow the notice procedures set forth in
this Section 2.3 or the failure by Oclassen to properly perform its obligations
under this Section 2.3, and such disagreement cannot be resolved by the JDC,
then the top executive officer of each party will confer as soon as reasonably
practicable and each use his commercially reasonable efforts to effect
resolution. Should such conference not resolve the disagreement, the question
will be decided by arbitration under Section 17.3.
2.4 SWITCH TO OTC. If, at any time during the term of this Agreement,
Oclassen wishes to revise the marketing strategy for any Product involving a
switch to OTC sales, either exclusively or concurrently with prescription sales,
it may so notify the JDC. If the JDC fails to reach unanimous agreement on such
switch, the top executive officer of each party will confer as soon as
reasonably practicable and each use his commercially reasonable efforts to
effect resolution. Should such conference not resolve the disagreement,
Symbollon will, in good faith, make the final decision to accept or reject such
a switch. If the parties agree pursuant to this Section 2.4 that an OTC
marketing strategy is to be adopted, then upon agreement by the parties of
Symbollon's economic return with respect thereto, which return the parties agree
to negotiate in good faith, Oclassen will have the exclusive right to make, have
made, use and sell such Product in the OTC market, and the license granted under
Section 4.1 shall be deemed to be amended to reflect such right.
Article 3 - Research and Development Efforts
--------------------------------------------
3.1 EFFORTS. Each party will perform its respective research and
development efforts as initially set forth in the Project Plan. It is the
parties' intent that (a) Oclassen will be primarily responsible for taking all
steps necessary to commercialize Products in the Territory, including, without
limitation, formulating Products, conducting animal studies and clinical trials,
making all Regulatory Filings, identifying manufacturing processes, and
otherwise commercializing Products, and (b) Symbollon will actively consult with
Oclassen and be available to assist in Product formulations, as reasonably
requested by Oclassen.
3.2 FUNDING. Oclassen will (a) bear all of its own costs and expenses
incurred in connection with its performance under the Project Plan and (b) pay
Symbollon for its work under the Project Plan at the rate of one hundred and
[****]1 per hour, plus reimbursement for all materials and third party costs
incurred by Symbollon in accordance with the following: (i) on the Effective
Date (with respect to the first partial fiscal quarter during the term of this
Agreement) and, thereafter, on or before the first day of each fiscal quarter,
- -------------
1* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
7
<PAGE> 12
Oclassen shall deliver to Symbollon a purchase order setting forth Oclassen's
and Symbollon's mutually agreed estimate of the work hours and materials
required under the Project Plan for completion of Symbollon's assigned work for
such quarter, together with the payment to Symbollon therefor, (ii) as each
fiscal quarter progresses, Symbollon shall issue an invoice to Oclassen, if its
hours and/or costs exceed the purchase order amounts previously paid to it at
the beginning of such fiscal quarter, and Oclassen shall pay Symbollon the
amount of such excess within thirty (30) days of receipt from Symbollon of an
invoice therefor, and (iii) on or before the end of each fiscal quarter,
Symbollon shall notify Oclassen of any excess payment for such quarter, and any
excess shall be credited against the amounts due under the next fiscal quarter's
purchase order.
3.3 SHARING OF INFORMATION. Oclassen and Symbollon will take reasonable
efforts to make available and disclose to each other all information known by
Oclassen and Symbollon concerning the Field as of the Effective Date and at any
time during the term of this Agreement. All discoveries or Inventions made by
either party in the Field will be promptly disclosed to the other. Prior to each
meeting of the JDC, each party will deliver to the other a verbal or written
report presenting a meaningful summary of research done by that party to date
under this Agreement. Each party will make regular presentations to the other of
its research through the JDC to inform the other party of research done under
this Agreement. Each party will provide the other with raw data in original form
or a photocopy thereof for any and all work carried out in the course of the
research as reasonably requested by the other party.
3.4 MATERIAL SAMPLES. All materials believed by either party to be
useful in the design of Products and prepared by such party in the course of any
of its research will be discussed with the other party and samples of such
materials will be submitted to the other party upon request.
Article 4 - Oclassen License
----------------------------
4.1 BASIC GRANT. Subject to the terms and conditions of this Agreement,
Symbollon grants to Oclassen a sole and exclusive license under the Licensed
Patents and Symbollon's Proprietary Information relating to iodine to make, have
made, use and sell Products (including prescription and, subject to Section 2.4,
OTC Products) in the Territory, with no right to grant further sublicenses,
except solely for the purposes of (and to the extent necessary for) research and
development and/or manufacture (but not distribution) of Products.
4.2 SPECIFIC LIMITATIONS.
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<PAGE> 13
(a) OFF-LABEL USE. It is the parties' intent that the license
set forth in Section 4.1 shall be specifically limited to prescription
Products, subject to a possible revised marketing strategy switch to
OTC sales pursuant to Section 2.4, and shall not include the Excluded
Applications. Accordingly, Oclassen shall, without limitation, (i)
promote any Product only to retail distribution channels and
office-based physicians (expressly including physicians who treat
outpatients within hospital-based clinics, departments, residency
programs, physician offices, and managed care systems), (ii) not
promote any Product through distribution channels servicing only the
market(s) for the Excluded Applications and/or the medical surgical
market, and (iii) not promote, either directly or indirectly, the use
of any Product for any applications outside the Field.
(b) CO-PROMOTION. Oclassen will discuss with Symbollon any
opportunity to enter into an arrangement with a third party pursuant to
which Oclassen and such third party would co-promote any Product(s).
After such discussion and giving due consideration to any concerns of
Symbollon, Oclassen may enter a co-promotional arrangement, PROVIDED
that, any such co-promotional agreement shall include provisions
requiring (a) compliance by the third party with all of the terms and
conditions set forth in this Agreement, (b) that a copy of the true and
complete agreement and all amendments thereto be delivered to Symbollon
upon execution thereof, (c) that Symbollon be made a third party
beneficiary of the agreement and that Symbollon have the right to
enforce the terms of the agreement directly, and (d) that Symbollon
shall receive (i) royalties on sales of Product(s) by such co-promoter
which provide the same economic return to Symbollon as if such Product
had been sold directly by Oclassen to an unrelated third party, plus
(but without duplication) (ii) one-half of any and all amounts received
and all other consideration received (when in a form other than cash or
its equivalent, the fair market value thereof when received) by
Oclassen or its Affiliates directly or indirectly from such co-promoter
by reason of the sale, distribution or use of Product(s), other than
Net Sales as to which a royalty is paid to Symbollon under the
preceding clause (i). As contemplated in the definition of "NET SALES",
it is the parties' intent that any and all consideration paid to any
co-promoter hereunder shall be at the sole cost and expense of Oclassen
and shall not result in any reduction of the royalty due to Symbollon
under this Agreement.
4.3 SYMBOLLON RETAINED RIGHTS. Subject to the provisions of Section
9.2, Symbollon shall be free to pursue the research, development, manufacture
and distribution of any pharmaceutical agent which incorporates Symbollon's
proprietary iodine technology, independently or in cooperation with a third
party, in any way whatsoever outside of the exclusive license granted to
Oclassen hereunder.
9
<PAGE> 14
Article 5 - Clinical Trials and Regulatory Filings
--------------------------------------------------
Oclassen shall, at its sole cost and expense, conduct all clinical
trials for prescription (and, if applicable pursuant to Section 2.4, OTC)
Products in the Territory. Symbollon will cooperate with Oclassen in the conduct
of any such clinical trials. Oclassen shall, at its sole cost and expense,
secure any and all licenses, permits, approvals and other authorizations (the
"REGULATORY APPROVALS") needed to commercialize prescription (and, if applicable
pursuant to Section 2.4, OTC) Products in the Territory. Subject to the
provisions of Section 15.3, all submissions and regulatory filings, including,
without limitation, all documents, data and other information forming a part
thereof (the "REGULATORY FILINGS"), made by or on behalf of Oclassen in order to
gain the Regulatory Approvals, and the Regulatory Approvals themselves, shall be
owned and maintained by Oclassen at its sole cost and expense. Oclassen grants
to Symbollon the right of full access to, use of, reliance on and reference to
the Regulatory Approvals and the Regulatory Filings, subject to the provisions
of Article 7. Oclassen shall take all legally available measures, including,
without limitation, providing waivers of confidentiality to Symbollon and/or its
sublicensee(s), at the time of filing any Regulatory Filings and thereafter to
secure for Symbollon rights equal to Oclassen's rights of access, use, reliance
and reference to the Regulatory Approvals and Regulatory Filings. Copies of all
documents, data or other information filed with any regulatory agency pursuant
to the terms of this Article 5 shall be provided to Symbollon when filed with
any such agency.
Article 6 - Oclassen Milestone and Royalty Payments
---------------------------------------------------
6.1 MILESTONES. In partial consideration of the rights granted to
Oclassen hereunder, Oclassen will pay the following milestone payments to
Symbollon:
(a) [****]2 upon the execution of this Agreement; plus
(b) [****] upon the earlier of (i) the fifteen (15) month
anniversary of the Effective Date or (ii) the first filing of an IND
for any indication of a Product; plus
(c) [****] upon the earlier of (i) the twenty-four (24) month
anniversary of the Effective Date or (ii) the enrollment of a first
patient in a Phase II or Phase II/III or Phase III clinical trial of a
Product; plus
(d) [****] upon the earlier of (i) the twenty-four (24) month
anniversary of the Effective Date or (ii) the first completion of a
Phase II or Phase II/III or Phase III clinical trial of a Product
(I.E., under subsections (c) and (d), an aggregate of [****]
- -----------
2* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
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<PAGE> 15
will have been paid to Symbollon by no later than the twenty-four (24)
month anniversary of the Effective Date); plus
(e) [****]3 upon the earlier of (i) the thirty-six (36) month
anniversary of the Effective Date or (ii) the first filing of an NDA
for any indication for a Product; plus
(f) [****] upon the second filing of an NDA for any indication of
a Product; plus
(g) [****] upon the first filing of an NDA for a Product for an
acne indication; plus
(h) [****] upon the first approval to market by the FDA of a
Product which approval is for any indication(s); plus
(i) [****] upon the first approval to market by the FDA of a
Product which approval allows an indication for the treatment of acne.
It is the parties intent that multiple payments will be made by Oclassen if two
or more milestones occur simultaneously.
6.2 CERTAIN OFFSETS AGAINST ROYALTIES. The total amount paid by
Oclassen to Symbollon pursuant to subsections 6.1 (f), (g), (h) and (i) (up to a
total of [****] prior to payment for the achievement of the milestone set forth
in subsection 6.1(i) and up to an additional[****] upon payment for the
achievement of such milestone) shall be credited against earned royalties
payable to Symbollon under Section 6.3 below, PROVIDED, that such credits shall
not reduce the earned royalty payment due and payable for any calendar quarter
by more than [****] during the two (2) consecutive years immediately following
the first commercial sale of a Product in the Territory or more than [****]
during any calendar quarter thereafter.
6.3 ROYALTIES. In addition to all other amounts due hereunder, Oclassen
will pay Symbollon with respect to each calendar quarter a royalty equal to
[****] of Net Sales of Products during such quarter. Pursuant to Section 2.4, a
royalty rate to be negotiated shall apply to Products in the OTC market, if any.
6.4 OVERALL VALUE. Because Symbollon's Proprietary Information is an
integral part of the license granted to Oclassen under this Agreement, precise
apportionment of royalties and other considerations with respect to the Licensed
Patents and Symbollon's
- ------------
3* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
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<PAGE> 16
Proprietary Information is impossible. Accordingly, royalties and other
consideration have been agreed upon as set forth herein.
Article 7 - Symbollon Sale of Products Outside Territory
--------------------------------------------------------
If Symbollon sells Products and/or any other product(s) which
incorporate and/or rely on a Joint Invention and/or Oclassen's Regulatory
Filings or Regulatory Approvals outside the Territory, either directly or in
conjunction with a third party, Symbollon shall pay Oclassen with respect to
each calendar quarter a royalty equal to [****]4 of (1) the amount received by
Symbollon from the Net Sales of such Products(s) or product(s) and, without
duplication, (2) all amounts received and all other consideration received (when
in a form other than cash or its equivalent, the fair market value thereof when
received) by Symbollon by reason of the sale, license, distribution or use of
such Product(s) or product(s), in each case during such quarter and subject to
the following limitations: (a) for purposes of calculating the preceding royalty
amount no royalties shall be paid on any monies paid to Symbollon by a third
party expressly intended for the additional direct formulation and/or technical
development, nor on any Manufacturing Costs of Product(s) or product(s) and (b)
in no event shall Symbollon's royalty payments owed under this Article 7: (i)
ever exceed [****] in the aggregate, (ii) with respect to any one Product, ever
exceed Oclassen's Development Expenses for such Product and (iii) with respect
to any one product (other than a Product), ever exceed Oclassen's Development
Expenses as they relate specifically to the Joint Invention or Regulatory
Approvals or Regulatory Filings actually utilized by Symbollon in such product.
Article 8 - Payments
--------------------
8.1 TIMING OF ROYALTY PAYMENTS. Royalties payable under Section 6.3 and
Article 7 will be paid without deduction, counterclaim or set-off (except as
provided in Section 6.2) not later than forty-five (45) calendar days following
the end of each calendar quarter and each such payment shall be accompanied by a
report in writing showing the calendar quarter for which such payment applies,
the Net Sales for the calendar quarter, the calculations used to compute said
amounts, including the quantity and description of the Product(s) (and/or
products), and the royalties due on such Net Sales.
8.2 TIME AND OTHER RECORDS. Each party, as applicable, will maintain
records of its Development Expenses under this Agreement sufficient to determine
its Development Expenses with respect to each Product for at least three (3)
years from the date of origination of any such record and will permit
inspections of such records by the other party's designated representative(s)
twice per year during normal business hours.
- ----------------
4* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
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<PAGE> 17
8.3 RECORDS OF NET SALES. Each party shall keep and cause its
Affiliates and permitted sublicensees to keep, true and accurate records and
books of account containing data reasonably required for the computation and
verification of payments to be made as provided by this Agreement, which records
and books shall be open for inspection upon reasonable notice during business
hours by either the other party's auditor(s) or an independent certified
accountant selected by such party, except one to whom the party whose records
are being inspected has a reasonable objection, for the purpose of verifying the
amount of payments due and payable. Said right of inspection may be exercised
not more than once in any calendar year, but will exist for three (3) years from
the date of origination of any such record, and this requirement and right of
inspection shall survive any termination of this Agreement. The inspecting party
shall be responsible for all expenses of its auditor(s) or independent
accountants associated with such inspection. However, in the event that such
inspection reveals an underpayment of amounts due hereunder in excess of ten
percent (10%), then said inspection shall be at the expense of the party whose
records are being inspected and the amount of such underpayment shall bear
interest at the rate of ten percent (10%) annually, commencing on the date the
obligation to pay such underpayment initially accrued hereunder. If such
inspection reveals an overpayment hereunder, the parties shall credit such
overpayment against the next payment due hereunder.
8.4 PAYMENTS. Any payments to be made by one party to the other under
this Agreement will be paid in U.S. dollars at a rate of exchange as of the last
business day of the period to which such payment applies as quoted in the WALL
STREET JOURNAL or an equivalent published rate as agreed by the parties.
Article 9 - Exclusivity
-----------------------
9.1 OCLASSEN'S EXCLUSIVITY OBLIGATIONS. During the term of this
Agreement and unless this Agreement is terminated by Oclassen due to a material
breach by Symbollon, for two (2) years after termination of this Agreement,
Oclassen will not directly or indirectly research and develop iodine-based
pharmaceutical agents for the topical treatment and prevention of recurrence of
human skin diseases except with Symbollon pursuant to this Agreement.
9.2 AVOIDANCE OF CONFUSINGLY SIMILAR PRODUCTS.
(a) INTENT. Symbollon shall be free to develop and commercialize
products in the Territory outside of the exclusive license granted to
Oclassen hereunder. However, the parties acknowledge that there is a
risk that they may wish to simultaneously commercialize confusingly
similar products in the Territory. It is the parties' intent to avoid
that risk. Accordingly, the parties agree as follows. For purposes of
this Section 9.2, the term "confusingly similar" means that two or
more products have (i)
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<PAGE> 18
the same (A) consistency (i.e. cream, ointment, gel or solution), and
(B) level of active iodine and (ii) substantially similar (a) physical
properties (i.e. tackiness, odor, texture, color, drying capability,
greasiness, skin feel, ease of application, time required for skin to
absorb the composition, viscosity, flow, and opacity), and (b)
composition of matter.
(b) OCLASSEN'S REPORTS. Oclassen will report to Symbollon in
writing no less frequently than at each quarterly meeting of the JDC
all Product formulations which Oclassen is in the process of
developing, or has developed. Each such report shall (a) set forth
specifically with respect to each Product formulation the consistency,
physical properties and composition of matter and level of active
iodine, and (b) be updated as necessary to reflect the fact that at
the initial stages of development the description of a Product's
formulation will be less specific and may cover a broader range of
concentration levels of active ingredients than it will as development
progresses.
(c) SYMBOLLON'S FORMULATION NOTICE. If Symbollon wishes to
develop in the Territory any Niche Product or any product for an
Excluded Application whose formulation may be confusingly similar to a
reported Oclassen formulation, Symbollon shall give notice (the
"FORMULATION NOTICE") to Oclassen, such notice to set forth
specifically the Product formulation's consistency, physical
properties and level of active iodine. If Oclassen objects to such
development by Symbollon, it must so notify Symbollon within thirty
(30) days of its initial receipt of the Formulation Notice. If
Oclassen fails to so notify Symbollon, Symbollon shall thereafter have
the right to develop and market products using such formulation to the
exclusion of Oclassen. If Oclassen properly notifies Symbollon of its
objection to Symbollon's Formulation Notice, the matter shall be
referred to the JDC. If the JDC fails to reach unanimous agreement
with respect to any formulation, the top executive officer of each
party will confer as soon as reasonably practicable. Should such
conference not resolve the disagreement, Symbollon will, in good faith
make the final decision. In any event, Symbollon agrees to
periodically update its initial Formulation Notice to Oclassen with
respect to a product's formulation as development of its formulation
progresses and more specific information becomes available.
(d) CONFIDENTIALITY. From time to time, if Symbollon's proposed
disclosures to Oclassen with respect to a Formulation Notice include
confidential information of a third party, Oclassen agrees to execute
confidentiality agreement(s) reasonably satisfactory to Symbollon and
such third party.
9.3 ROYALTIES FOR OFF-LABEL USE. If (a) either (i) a product sold by
Symbollon or its sublicensee(s) is prescribed for off-label use in the Field in
the Territory (a "SYMBOLLON INFRINGING PRODUCT") or (ii) a Product is prescribed
for off-label use outside the Field in the Territory (an "OCLASSEN INFRINGING
PRODUCT") and (b) sales of either a Symbollon Infringing
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<PAGE> 19
Product or an Oclassen Infringing Product, as applicable, for a specific
off-label application equal or exceed ten percent (10%) of the unit sales in the
Territory of the non-infringing party's product which is being infringed (as
determined by an appropriately qualified third party such as IMS, Walsh, PMSI or
Nielson), then, (and for so long as such sales equal or exceed ten percent (10%)
of the unit sales in the Territory of the non-infringing party's product which
is being infringed) with respect to each relevant off-label application, [****]5
of the amount received by Symbollon or Oclassen and their respective Affiliates,
as applicable, on account of the sales from such off-label application(s) (i.e.
if Symbollon, Oclassen, or their respective Affiliates are selling the product
to an unrelated third party, then an amount equal to Net Sales less
Manufacturing Costs relevant to such sales, or, if Symbollon or Oclassen is
receiving a royalty from a licensee, then the amount of such royalty and all
other consideration received by reason of the manufacture, sale, or use of such
application, less Manufacturing Costs relevant to such sales) shall be paid to
the other party. Payments owed to a party under this Section 9.3 shall be paid
in addition to all other amounts otherwise owing under this Agreement, whether
in the form of royalties, milestones or otherwise.
Article 10 - Confidentiality and Publications
---------------------------------------------
10.1 PROPRIETARY INFORMATION. All Proprietary Information which is
disclosed by one party to the other during the term of this Agreement shall be
maintained in confidence by the receiving party and shall not be disclosed by
the receiving party to any other person, firm, or agency, governmental or
private, without the prior written consent of the disclosing party, except to
the extent that such Proprietary Information:
(a) is known by the receiving party at the time of its receipt as
documented in written records, or
(b) is properly (through no breach of this Agreement) in the public
domain, or
(c) is subsequently disclosed without any confidentiality obligation
to the receiving party by a third party who may lawfully do so,
or
(d) is required to be disclosed to governmental agencies in order to
gain approval to sell Products, or
(e) is necessary to be disclosed to agents, consultants and/or other
third parties for the research, development and/or marketing of
Products, which entities first agree in writing to be bound by
the confidentiality obligations contained in this Agreement.
The confidentiality obligations of the parties hereunder shall continue in full
force and effect for a period of five (5) years following the termination of
this Agreement.
- -----------
5* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
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<PAGE> 20
10.2 JOINT DISCLOSURES. Oclassen and Symbollon will jointly discuss and
agree on the release of any statement to the public regarding the execution and
the subject matter of this Agreement, the details of research to be conducted
under this Agreement, or any other material term of this Agreement, subject in
each case to disclosure otherwise required by law or regulation, including
applicable securities laws.
Article 11 - Ownership of Intellectual Property
-----------------------------------------------
11.1 GENERAL INTENT. In furtherance of the research and development
work to be conducted pursuant to the Project Plan and subject to the terms set
forth herein, the parties will exchange Proprietary Information. Except as
expressly set forth herein, no licenses or other transfers of ownership are
granted under this Agreement, and each party shall retain all right, title and
interest to its Proprietary Information.
11.2 NEW INVENTIONS. All Inventions which are made by Oclassen during
the term of this Agreement will be owned as follows:
(a) INVENTIONS BY OCLASSEN. Any Invention made by Oclassen during the
term of this Agreement shall be owned by and assigned to
Symbollon if, and only if, such Invention pertains to iodine. Any
and all such Inventions will be included within the license
granted to Oclassen pursuant to Section 4.1.
(b) JOINT INVENTIONS. Any Invention which is made by Oclassen's
personnel in conjunction with Symbollon's personnel and not
covered by subsection (a) of this Section 11.2 (a "JOINT
INVENTION") shall be owned by and assigned to (i) Symbollon, if,
and only if, such Invention pertains to iodine, and any and all
such Inventions will be included within the license granted to
Oclassen pursuant to Section 4.1 or (ii) Oclassen, if, and only
if, such Invention pertains to any Joint Invention not covered by
the preceding clause (a).
11.3 SYMBOLLON'S RIGHTS IN OCLASSEN'S JOINT INVENTIONS. Oclassen hereby
grants Symbollon a permanent, non-exclusive license (which license shall survive
any termination of this Agreement) to practice any Joint Invention owned by
Oclassen and to make, use and sell products utilizing any such Joint Invention
outside the exclusive license granted to Oclassen hereunder (a) for human skin
applications, subject to any applicable royalty under Article 7 and (b) for all
other applications on a royalty-free basis. In addition, Oclassen agrees to
disclose and hereby grants a permanent, non-exclusive, royalty-free license to
Symbollon to practice any invention (including any Invention) of Oclassen
relating to a method of dispensing iodine compositions developed or acquired by
Oclassen during the term of this Agreement.
16
<PAGE> 21
11.4 PATENT APPLICATIONS. Each party shall have the right, in its sole
discretion, and at its sole expense, to file, prosecute and maintain patent
applications and the patents relating thereto with respect to Inventions owned
by it. During the term of this Agreement, each party will notify the other
before it files any patent application that makes claims within the Field. Each
Party shall cooperate with the other to execute all lawful papers and
instruments and to make all rightful oaths and declarations as may be necessary
in the preparation and prosecution of all such patents and other applications
and protections relating to an Invention referred to in Section 11.2.
11.5 DISPUTES. Any dispute relating to the ownership of Inventions or
any other issue relating to a party's rights or obligations under this Article
11 which can not be decided by good faith negotiations between the parties,
shall be resolved by arbitration pursuant to Section 17.3.
Article 12 - Warranties/Indemnification/Insurance
-------------------------------------------------
12.1 REPRESENTATIONS AND WARRANTIES. Each party represents and warrants
to the other that (a) it has the full right, power and authority to execute,
deliver and perform this Agreement, and (b) the terms of this Agreement do not
conflict with any other agreement, order or judgment to which such party is a
party or by which it is bound. Symbollon represents and warrants to Oclassen
that, to the best of its knowledge as of the Effective Date, there are no third
parties who are infringing the Licensed Patents existing as of the Effective
Date.
12.2. DISCLAIMER. Symbollon makes no representation or warranty that
the Licensed Patents which are patent applications will be granted or, if
granted, will be valid or, that the exercise of the rights granted to Oclassen
hereunder will not infringe other patent rights or intellectual property rights
vested in any third party. No license is granted except as expressly provided
herein, and no license in addition thereto shall be deemed to have arisen or be
implied by way of estoppel or otherwise. SYMBOLLON DOES NOT WARRANT THE VALIDITY
OF THE LICENSED PATENTS AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO
THE SCOPE OF THE LICENSED PATENTS.
12.3 ADDITIONAL COVENANTS.
(a) OCLASSEN. Oclassen covenants and agrees with Symbollon
that (a) Oclassen will at all times from the Effective Date until the
seventh anniversary of the Effective Date be either selling or Actively
Developing at least three different indications for a Product (which
may involve one or more different formulations), (b) all Products
manufactured by Oclassen shall conform to pharmaceutical industry
17
<PAGE> 22
standards and Good Manufacturing Practices of the FDA, (c) Oclassen
shall exert its Reasonable Commercial Efforts to manufacture, promote,
sell and distribute each and every Product which receives Regulatory
Approval for marketing in the Territory, and (d) Oclassen shall take
all commercially reasonable efforts within its control to avoid use of
any Product for any application outside the Field.
(b) SYMBOLLON. Symbollon covenants and agrees with Oclassen
that Symbollon shall take all commercially reasonable efforts within
its control (including requiring its licensee(s) to so agree) to avoid
use of any of its products in the Territory for any application inside
the Field.
12.4 INDEMNIFICATION. Each party shall indemnify, defend and hold
harmless the other party, its directors, officers, employees and agents and
their respective successors, heirs and assigns (the "INDEMNITEES") against any
liability, damage, loss or expense (including reasonable attorneys' fees and
expenses of litigation) incurred by or imposed upon the Indemnitees, or any one
of them, in connection with any claims, suits, actions, demands or judgments
relating to, or arising out of (a) any breach of the indemnifying party's
representations, warranties, agreements or covenants in this Agreement,
including without limitation the confidentiality obligations set forth in
Sections 9.2(d) and Article 10, and (b) any other activities to be carried out
by the indemnifying party, its Affiliate(s) or agents under to this Agreement
(including, without limitation, with respect to Oclassen, the design, clinical
testing, production, manufacture, sale, use, release or promotion by Oclassen or
by any Affiliate or agent of Oclassen, of any Product or process or service
relating thereto).
12.5 INSURANCE. At all such times as any Product is being tested,
distributed or sold by Oclassen or any Affiliate or agents of Oclassen, Oclassen
shall, at its sole cost and expense, procure and maintain policies of product
liability insurance in amounts not less than five million dollars ($5,000,000)
per incident and five million dollars ($5,000,000) annual aggregate and naming
Symbollon as an additional insured. The minimum amounts of insurance coverage
required under these provisions shall not be construed to create a limit of
Oclassen's liability with respect to its indemnification obligations hereunder.
Oclassen shall provide Symbollon with written evidence of such insurance upon
request by Symbollon. Oclassen shall provide Symbollon with written notice
immediately upon receipt by Oclassen of notice of any pending cancellation,
non-renewal or material change in such insurance, and shall obtain replacement
insurance providing comparable coverage prior to any such cancellation,
non-renewal or material change. Oclassen shall maintain such product liability
insurance beyond the expiration or termination of this Agreement during (a) the
period that any Product or process or service relating thereto is being tested,
distributed or sold by Oclassen or by any Affiliate or agent of Oclassen and (b)
a reasonable period after the period referred to in the preceding clause (a),
which in no event shall be less than fifteen (15) years.
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<PAGE> 23
12.6 ADDITIONAL INDEMNIFICATION OBLIGATIONS. In the event any action is
commenced or claim made or threatened against one or more of the Indemnitees as
to which a party to this Agreement may be obligated to indemnify it or them or
hold it or them harmless, such Indemnitee(s) shall promptly notify such party of
such event. Such party shall assume the defense of, and may settle (with the
applicable Indemnitee's consent, such consent not to be unreasonably withheld),
with counsel of its own choice (reasonably acceptable to the other party to this
Agreement and the applicable Indemnitee(s)) and at its sole expense such claim
or action. Any Indemnitee may participate in the defense of any such claim or
action with counsel of its own choice at its own expense. No party shall be
liable to the other party or other Indemnitee(s) on account of any settlement of
any such claim or action effected without its prior written consent, which shall
not be unreasonably withheld. Notwithstanding any provision herein to the
contrary, Oclassen shall take no action relating to, and Symbollon may withhold
its consent in its sole discretion to, the settlement of any matter which may
affect the Licensed Patents or Symbollon's Proprietary Information.
Article 13 - Infringement and Trademarks
----------------------------------------
13.1 NOTICE OF INFRINGEMENT. Each party shall promptly notify the other
in writing of any infringement of a patent within the Licensed Patents of which
they become aware in the Field. During the term of this Agreement, Symbollon
shall have the first right at its expense to institute and control all actions
brought for infringement of the Licensed Patents when, in Symbollon's sole
judgment, such action may be reasonably necessary, proper and justified. In the
event Symbollon declines within ninety (90) days of its receipt of such notice
of infringement to either (a) cause infringement to cease or (b) initiate legal
proceedings against the infringer, Oclassen may upon notice to Symbollon
initiate legal proceedings against the infringer in the Field at Oclassen's
expense.
13.2 CONTROL AND COOPERATION IN INFRINGEMENT ACTIONS. In the event
either party shall initiate or carry on legal proceedings to enforce the
Licensed Patents against an alleged infringer, the other party shall fully
cooperate with, and supply all reasonable assistance requested by, the party
initiating or carrying on such proceedings. The party that institutes any suit
to protect or enforce the Licensed Patents shall have control of that suit,
subject to the rights of the other party to be kept informed of all material
decisions relating to such suit prior to their implementation, and shall bear
the reasonable expenses incurred by said other party in providing such
assistance and cooperation as is requested pursuant to this Section.
Notwithstanding any provision herein to the contrary, (a) legal proceedings
initiated or carried on by Oclassen shall be in Oclassen's name, provided that
Symbollon shall permit proceedings to be brought and maintained in its name or
shall permit Symbollon to be joined as a party to an action if required by law
and (b) in no event shall there be a settlement of an infringement action
relating to the Licensed Patents without the prior written consent of Symbollon,
which consent shall not be unreasonably withheld.
19
<PAGE> 24
13.3 RECOVERIES AGAINST INFRINGER. Any recovery obtained by either
party as the result of legal proceedings to enforce the Licensed Patents against
an alleged infringer, whether obtained by settlement or otherwise, shall after
payment of all otherwise unrecovered expenses attributable to such action paid
by such party, including without limitation fees paid to outside counsel or a
consultant, and reasonable travel expenses, but not including any part of any
salary of any employee of such party, be allocated 50/50 between the parties.
13.4 TRADEMARKS. During the term of this Agreement, Oclassen shall have
the right to promote and sell Products under the license granted to it pursuant
to Section 4.1 under trademarks selected by Oclassen, which trademarks shall be
and remain, subject to Section 15.4, the property of Oclassen. Symbollon shall
have the right to register and own any such trademark outside the Territory.
Article 14 - Assignability
--------------------------
Except as expressly set forth in this Article 14, this Agreement shall
not be assignable by Oclassen without the prior written consent of Symbollon and
any attempt to assign (directly or indirectly) this Agreement whether by sale of
stock or assets, merger or otherwise, without such consent shall be void from
the beginning. Oclassen may assign this Agreement without Symbollon's consent to
any purchaser of, or successor in interest to, all or substantially all of
Oclassen's business to which this Agreement relates if, and only if, the
intended successor or purchaser agrees in writing (a) to accept and be bound by
all of the terms and conditions of this Agreement (b) to devote at least the
same efforts and resources to performance hereunder as Oclassen exerted
immediately before the assignment.
Article 15 - Term and Termination
---------------------------------
15.1 TERM. This Agreement will become effective on the Effective Date
and, unless terminated under another specific provision of this Agreement, will
remain in effect until, and terminate upon the last to expire of the Licensed
Patents.
15.2 TERMINATION EVENTS . Upon the occurrence of any of the events set
forth below, either party, as applicable, shall have the right to terminate this
Agreement by giving written notice of termination, to be effective as described
herein:
(a) non-payment of any amount payable to such party hereunder
continuing ten (10) calendar days after receipt of written notice of
such non-payment;
20
<PAGE> 25
(b) failure by Oclassen to obtain replacement insurance prior to
the cancellation, non-renewal or material change of existing insurance
pursuant to Section 12.5 upon receipt of written notice of termination
by Symbollon;
(c) failure by the other party in any material respect (other
than matters which are covered by clauses (a) and (b) above) to
observe or perform any of the provisions of this Agreement on the
other party's part to be observed or performed, if, in the case of a
failure to achieve specific milestones identified in the Project Plan,
a new Project Plan addressing such failure is not submitted to the JDC
within thirty (30) calendar days after receipt of notice specifying
such failure or, in the case of any other failure (other than matters
which are covered by clauses (a) and (b) above), such failure is not
remedied within thirty (30) calendar days after receipt of notice
specifying such failure;
(d) if the other party (i) applies for or consents to the
appointment of a receiver, trustee or liquidator of it or of all or a
substantial part of its assets, (ii) admits in writing its inability
to pay its debts as they mature, (iii) makes a general assignment for
the benefit of creditors, (iv) is adjudicated a bankrupt or insolvent,
(v) files a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law or any answer admitting the material
allegations of the petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or (vi) takes corporate action
for the purpose of effecting any of the foregoing; and
(e) an order of judgment or decree shall be entered, without the
application, approval or a consent of the other party by any court of
competent jurisdiction, approving a petition seeking reorganization of
such party or appointing a receiver, trustee or liquidator of such
party, or all or a substantial part of its assets and such order,
judgment or decree shall continue unstayed and in effect for any
period of sixty (60) consecutive days.
15.3 TERMINATION BY OCLASSEN. Oclassen may terminate this Agreement by
giving Symbollon a notice of termination to be effective upon a termination date
set forth by Oclassen in such notice, which termination date shall not be sooner
than ninety (90) days after the date of the notice. Such notice shall be deemed
by the parties to be final and, immediately upon receipt of such notice of
termination, Symbollon shall have the right to begin negotiations, and enter
into agreements, with others concerning Products, the Licensed Patents and
Symbollon's Proprietary Information in the Field.
15.4 EFFECTS OF TERMINATION. If this Agreement is terminated by
Symbollon pursuant to Sections 15.2 (a), (b) or (c), such termination may, at
Symbollon's sole discretion, be on a Product-by-Product basis, and, upon any
such Product-by-Product termination, all trademarks
21
<PAGE> 26
and Regulatory Filings and Regulatory Approvals then owned by Oclassen with
respect to such terminated Product shall be assigned to Symbollon and Oclassen
agrees to execute all such further documents as may be reasonably required to
effect such assignment. No exercise by either party of any right of termination
shall constitute a waiver of any right of that party for recovery of any monies
then due to it hereunder or any other right or remedy such party may have at
law, in equity or under this Agreement.
15.5 SURVIVAL. Termination of this Agreement for whatever reason shall
be without prejudice to the settlement of the rights and obligations of the
parties arising out of this Agreement prior to the date of termination,
including, without limitation: (a) obligations to pay royalties and other sums
accruing hereunder, (b) the right to complete the manufacture and sale of
Products which qualify as "work in process" under generally accepted cost
accounting standards or which are in stock at the date of termination, and the
obligation to pay royalties on Net Sales of such Products, (c) obligations for
record keeping and accounting reports for so long as Products are sold pursuant
to the preceding clause (b), (d) the right to inspect books and records as
described in Sections 8.3 and 8.4, (e) obligations of insurance, defense and
indemnity under Article 12, (f) any cause of action or claim accrued or to
accrue because of any breach or default by the other party hereunder, (g)
obligations of confidentiality under Article 10, and (h) all of the terms,
provisions, representations, rights and obligations contained in this Agreement
that by their sense and context are intended to survive until performance
thereof by either or both parties.
Article 16 - Supply and Manufacture
-----------------------------------
Oclassen will have the exclusive right to manufacture or have
manufactured Products in the Field for sale within the Territory. Symbollon
shall be entitled to purchase Product from Oclassen, if Oclassen is the
manufacturer of such Product, at [****]6, or directly from Oclassen's
manufacturing source at the same cost per unit paid by Oclassen. Notwithstanding
any provision in this Agreement to the contrary, Symbollon shall have the right
to manufacture or have manufactured Products inside the Territory, provided,
that such Products are sold outside the Territory.
Article 17 - Miscellaneous
--------------------------
17.1 NOTICES. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered personally or deposited in the United States mail, certified or
registered with return receipt, or sent by courier requiring proof of receipt,
addressed as follows:
- --------------
6* denotes redacted confidential information for which confidential treatment
is being requested pursuant to Rule 24b-2.
22
<PAGE> 27
To Symbollon:
Symbollon Corporation
122 Boston Post Road
Sudbury, MA 01776
Telephone: 508-443-0165
Fax: 508-443-0166
Attention: President
With a copy to:
William P. Gelnaw, Jr., Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Telephone: 617-248-5000
Fax: 617-248-4000
To Oclassen:
Oclassen Pharmaceuticals, Inc.
100 Pelican Way
San Rafael, CA 94901
Telephone: (415) 258-4500
Fax: (415) 258-4550
Attention: President
With copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telephone: (415) 233-8313
Fax: (415) 854-1121
Attention: Craig Johnson
Director
or to such other address as either party shall designate by written notice,
similarly given, to the other party. If sent by telex, facsimile or other
electronic media, an original confirmation copy must be sent within thirty days
by means listed above.
23
<PAGE> 28
17.2 GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by the internal laws of The Commonwealth of Massachusetts (without
regard to conflict of law provisions), except that questions affecting the
construction and effect to any patent shall be determined by the law of the
country in which the patent has been granted. Any claim or controversy arising
out of or related to this contract or any breach thereof, except as provided
under Section 17.3, shall be submitted to United States District Court, District
of Massachusetts, if initiated by Oclassen, and to the United States District
Court, District of Northern California, if initiated by Symbollon, and the
parties hereby consent to the jurisdiction and venue of such court.
17.3 LIMITED ARBITRATION. Disagreements under Sections of this
Agreement which make specific reference to this Section 17.3 shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association by a board of arbitrators consisting of one arbitrator
appointed by Oclassen, one arbitrator appointed by Symbollon, and a third
arbitrator chosen by the mutual agreement of Oclassen and Symbollon, which third
arbitrator shall be unrelated either to Oclassen or Symbollon. Any arbitration
hereunder shall be held in Boston, Massachusetts, if initiated by Oclassen, and
in San Rafael, California, if initiated by Symbollon. In such arbitration
proceedings, this Agreement shall be governed by and construed according to
Massachusetts law as provided in Section 17.2. Arbitration may be commenced at
any time by either party hereto giving written notice to the other party to a
dispute that such dispute has been referred to arbitration. Any judgment or
decision rendered by the panel shall be binding upon the parties and shall be
enforceable by any court of competent jurisdiction. Each party shall pay its own
expenses of arbitration and the expenses of the arbitrators shall be equally
shared, PROVIDED, however, that if in the opinion of the arbitrators any claim
hereunder or any defense or objection thereto was unreasonable, the arbitrators
may assess, as part of their reward, all or any part of the arbitration expenses
of the other party (including reasonable attorneys' fees) and of the arbitrators
against the party raising such unreasonable claim, defense or objection.
17.4 WAIVER. Except as specifically provided for herein, the waiver
from time to time by either party of any of its rights or a party's failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such party's rights or remedies provided in this
Agreement.
17.5 ENFORCEABILITY. If any term, covenant or condition of this
Agreement or the application thereof to any party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (a) the remainder of this
Agreement, or the application of such term, covenant or condition to the parties
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of this Agreement shall be valid and be enforced to the fullest extent
permitted by law; and (b) the parties covenant and agree to renegotiate any such
term, covenant or application thereof in good faith in order to provide a
reasonably acceptable alternative to the term, covenant or
24
<PAGE> 29
condition of this Agreement or the application thereof that is invalid or
unenforceable, and in the event that the parties are unable to agree upon a
reasonable acceptable alternative, then the parties agree that a submission to
arbitration shall be made in accordance with Section 17.3 to establish an
alternative to such invalid or unenforceable term, covenant or condition of this
Agreement or the application thereof, it being the intent that the basic
purposes of this Agreement are to be effectuated.
17.6 ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the
entire understandings of the parties with respect to the matters contained
herein, and supersedes all prior agreements, oral or written, and all other
communication between them relating to the subject matter hereof. The parties
hereto may, from time to time during the continuance of this Agreement, modify,
vary or alter any of the provisions of this Agreement, but only by an instrument
duly executed by authorized officers of both parties hereto.
17.7 INDEPENDENT CONTRACTOR. Nothing herein shall be deemed to
establish a relationship or principal and agent between Oclassen and Symbollon,
nor any of their respective agents or employees, for any purpose whatsoever.
This Agreement shall not be construed as constituting Oclassen and Symbollon as
partners, or as creating any other form of legal association or arrangement
which would impose liability upon one party for the act or failure to act of the
other party.
17.8 HEADINGS. The headings of the several Articles and sections of
this Agreement are intended for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
17.9 FURTHER INSTRUMENTS. Each party agrees to execute, acknowledge
and deliver such further instruments and to do all such further acts as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
17.10 FORCE MAJEURE. Performance of a party's obligations hereunder
(other than the payment of money or the failure by Oclassen to provide insurance
pursuant to Section 12.5) may be delayed if (a) such performance is delayed by
causes beyond that party's reasonable control, including, but not limited to,
acts of God, war, riot, epidemics, fire, flood, insurrection, or acts of civil
or military authorities, and (b) such delaying party is at all times working
diligently to correct the matter causing the delay and otherwise performing as
required under the Agreement. Notwithstanding the foregoing, the parties shall
remain liable for all obligations incurred by them prior to any termination of
this Agreement.
17.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement. One
or more counterparts may be delivered via telecopier and any such telecopied
counterpart shall have the same force and effect as an original counterpart
hereto.
25
<PAGE> 30
17.12 EXHIBITS. The following Exhibits are attached hereto and
incorporated herein by reference:
EXHIBITS SUBJECT MATTER
-------- --------------
A Patents and Patent Applications
B Project Plan
C Initial Members of the JDC
[Signatures Appear on the Following Page.]
26
<PAGE> 31
IN WITNESS WHEREOF the parties have executed this Agreement as an
instrument under seal as of the date and year first written above.
SYMBOLLON CORPORATION OCLASSEN PHARMACEUTICALS, INC.
By: /s/ Paul C. Desjourdy By: /s/ Terry L. Johnson
-------------------------- ----------------------------
Paul C. Desjourdy, Terry L. Johnson,
Vice President and President and
Chief Financial Officer Chief Executive Officer
27
<PAGE> 32
Exhibit A
Patent Applications and Patents
-------------------------------
[Contents of Exhibit redacted as confidential information for which
confidential treatment is being requested pursuant to Rule 24b-2.]
<PAGE> 33
Exhibit B
Project Plan
------------
[Contents of Exhibit redacted as confidential information for which
confidential treatment is being requested pursuant to Rule 24b-2.]
<PAGE> 34
Exhibit C
Initial Members of the JDC
--------------------------
Symbollon: 1. Jack Kessler
2. Paul C. Desjourdy
Oclassen: 1. Frank P. Killey
2. Dennis W. Adair
<PAGE> 1
Exhibit 11.1
<TABLE>
SYMBOLLON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
The Three-Months Ended June 30, The Six-Months Ended June 30,
------------------------------ ----------------------------
1996 1995 1996 1995
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net Income (Loss) ................. $ 61,509 $ (328,526) $ (472,709) $ (763,835)
========== ========== ========== ==========
Primary loss per share (1):
Weighted average common shares
outstanding ................... 2,480,136 2,400,000 2,480,136 2,400,000
Shares subject to restriction.. (700,000) (700,000) (700,000) (700,000)
---------- ---------- ---------- ----------
1,780,136 1,700,000 1,780,136 1,700,000
========== ========== ========== ==========
Income (Loss) per share (2): ...... $ 0.03 $ (0.19) $ (0.27) $ (0.45)
========== ========== ========== ==========
<FN>
(1) The shares for the three-month and six-month periods ended June 30, 1996 and
1995 have been calculated in accordance with Accounting Principles Board Opinion
No. 15.
(2) There is no difference between primary and fully diluted income (loss) per
share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSE UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> DEC-31-1996
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,794,322
<SECURITIES> 0
<RECEIVABLES> 20,488
<ALLOWANCES> 0
<INVENTORY> 49,316
<CURRENT-ASSETS> 1,927,047
<PP&E> 254,404
<DEPRECIATION> 108,923
<TOTAL-ASSETS> 2,195,464
<CURRENT-LIABILITIES> 332,565
<BONDS> 0
<COMMON> 2,484
0
0
<OTHER-SE> 1,838,915
<TOTAL-LIABILITY-AND-EQUITY> 2,195,464
<SALES> 16,732
<TOTAL-REVENUES> 599,319
<CGS> 13,514
<TOTAL-COSTS> 13,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,660
<INCOME-PRETAX> (472,709)
<INCOME-TAX> 0
<INCOME-CONTINUING> (472,709)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472,709)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
