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, 1997
| | 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
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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.)
37 Loring Drive, Framingham, MA 01702
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(Address of principal executive offices)
508-620-7676
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(Issuer's telephone number, including area code)
122 Boston Post Road, Sudbury, MA 01776
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(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 13, 1997
-----------------
Class A Common Stock 3,181,278
Class B Common Stock 15,738
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
SYMBOLLON CORPORATION
(a development stage company)
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Balance Sheets
- June 30, 1997 and December 31, 1996 1
Unaudited Condensed Statements of Operations and Deficit
Accumulated During the Development Stage - For the
six and three months ended June 30, 1997 and June 30,
1996 2
UnauditedCondensed Statements of Cash Flows
- For the six months ended June 30, 1997
and June 30, 1996 3
Notes to the Unaudited Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
or Plan of Operation 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURE 10
INDEX TO EXHIBITS 11
<PAGE>
Part I - Financial Information
Item 1 - Financial Statements
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<CAPTION>
June 30, December 31,
1997 1996
------------- ------------
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 1,724,648 $ 1,707,099
Accounts receivable..................................................... 142,066 50,406
Inventory............................................................... 15,672 17,818
Prepaid expenses........................................................ 36,438 82,439
----------- -----------
Total current assets.............................................. $ 1,918,824 $ 1,857,762
Equipment and leasehold improvements, net of
accumulated depreciation................................................. 97,114 124,463
Other assets:
Patent and trademark cost, net of accumulated amortization............ 136,770 127,097
Deposit................................................................... 5,000 5,000
------------ -----------
TOTAL............................................................. $ 2,157,708 $ 2,114,322
============ ===========
LIABILITIES
Current liabilities:
Accounts payable........................................................ $ 21,477 $ 41,173
Notes payable........................................................... 492,500
Legal fees payable to related party..................................... 5,377 30,676
Other accrued professional fees......................................... 45,365 53,234
Deferred revenue........................................................ 17,596
Other current liabilities............................................... 8,083 14,441
------------ -----------
Total current liabilities......................................... 572,802 157,120
Accrued rent.............................................................. 4,666 14,000
------------ -----------
Total liabilities................................................. 577,468 171,120
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STOCKHOLDERS' EQUITY
Preferred stock, par value $.001 per share, 5,000,000 shares authorized
Convertible Preferred Stock, Series A, $.001 par value, 444,444 shares
issued at December 31, 1996 (liquidation preference $500,000)............ 444
Common stock, Class A, par value $.001 per share,
18,750,000 shares authorized, 1,288,253 and 2,914,611 shares issued at
December 31, 1996 and June 30, 1997, respectively........................ 2,915 1,288
Common stock, Class B, par value $.001 per share,
1,250,000 shares authorized, 1,196,275 and 15,738 shares issued at December 31,
1996 and June 30, 1997, respectively,
each convertible into one share of Class A common stock.................. 16 1,196
Additional paid-in capital................................................ 7,275,417 7,273,353
Deficit accumulated during the development stage.......................... (5,698,108) (5,333,079)
------------ -----------
Total stockholders' equity........................................... 1,580,240 1,943,202
------------ -----------
TOTAL............................................................. $ 2,157,708 $ 2,114,322
============ ===========
</TABLE>
See notes to condensed financial statements.
1
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE DEVELOPMENT STAGE
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Three Months Ended Six Months Ended (Inception) to
June 30, June 30, June 30,
1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 162,338 $ 3,447 $ 162,338 $ 16,732 $ 403,225
Contract revenue.................................. 8,250 82,587 48,587 82,587 518,578
License fee....................................... 500,000 500,000 540,000
----------- ----------- ----------- ----------- -----------
Total income.............................. 170,588 586,034 210,925 599,319 1,461,803
Operating Expenses:
Manufacturing costs........................... $ 86,021 $ 6,653 $ 86,021 $ 13,514 $ 259,727
Research and development costs................ 134,873 307,014 283,189 652,335 3,757,527
General and administrative expenses........... 114,897 209,027 239,168 450,691 3,221,877
----------- ----------- ----------- ----------- -----------
Total operating expenses.................. 335,791 522,694 608,378 1,116,540 7,239,131
----------- ----------- ----------- ----------- -----------
Income (Loss) from operations..................... (165,203) 63,340 (397,453) (517,221) (5,777,328)
Interest income................................... 21,438 22,296 40,987 46,172 427,819
Interest expense and debt issuance costs.......... (8,213) (831) (8,563) (1,660) (348,599)
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)................................. (151,978) 84,805 (365,029) (472,709) (5,698,108)
Deficit accumulated during the development stage,
beginning of period.............................. (5,546,130) (4,961,882) (5,333,079) (4,427,664)
----------- ----------- ----------- ----------- -----------
Deficit accumulated during the development stage,
end of period.................................... $(5,698,108) $(4,877,077) $(5,698,108) $(4,900,373) $(5,698,108)
=========== =========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE OF
COMMON STOCK..................................... $ (0.07) $ 0.05 $ (0.19) $ (0.27)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding............................... 2,083,253 1,780,136 1,885,203 1,780,136
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
2
<PAGE>
<TABLE>
SYMBOLLON CORPORATION
(a development stage company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Period From
July 15, 1986
Six Months Ended (Inception) to
June 30, June 30,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (365,029) $ (472,709) $(5,698,108)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization expense............... 14,835 30,004 334,360
Amortization of debt issuance costs................. 130,000
Accrued rent........................................ (9,333) (4,500) 4,667
Changes in operating assets and liabilities:
Accounts receivable............................... (91,660) 10,382 (142,066)
Inventory......................................... 2,146 (18,037) (15,672)
Prepaid expenses.................................. 46,001 17,633 (36,438)
Deferred revenue.................................. (17,596)
Accounts payable and other current liabilities.... (59,222) 179,075 137,477
----------- ----------- -----------
Net cash used in
operating activities.............................. (479,858) (258,152) (5,285,780)
----------- ----------- -----------
Cash flows from investing activities:
Equipment and leasehold improvements costs............ 15,907 (4,406) (239,413)
Patent and trademark costs............................ (13,066) (37,425) (328,831)
Deposit............................................... (5,000)
----------- ----------- -----------
Net cash used in investing activities............... 2,841 (41,831) (573,244)
----------- ----------- -----------
Cash flows from financing activities:
Notes Payable......................................... 492,500 492,500
Warrant conversion.................................... 629,204
Borrowings from stockholders.......................... 253,623
Repayment to stockholders............................. (127,683)
Sale of common stock and units........................ 2,066 6,552 7,229,430
Sale of preferred stock............................... 450,000
Sale of option to purchase units...................... 100
Public offering costs................................. (1,343,502)
----------- ----------- -----------
Net cash provided by
financing activities................................ 494,566 6,552 7,583,672
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........................... 17,549 (293,431) 1,724,648
Cash at beginning of period............................... 1,707,099 2,087,753
----------- ----------- -----------
CASH AT END OF PERIOD..................................... $ 1,724,648 $ 1,794,322 $ 1,724,648
=========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
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
iodine-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
("SBIR") program concerning the Company's technology have been funded.
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, 1996 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, 1997
are not necessarily indicative of the results to be expected for the full year.
Note C - Line of Credit:
During the first quarter of 1997 the Company established a $500,000
line of credit with Silicon Valley Bank. The line of credit is secured by the
Company's assets and contains various restrictive covenants, including a
restriction on dividends. The line of credit has an interest rate of prime plus
1 1/2% and expires in one year.
<PAGE>
Note D - Capitalization:
In May 1997, the holders of the 444,444 outstanding shares of Series A
Preferred Stock converted those shares into an equal number of shares of Class A
Common Stock.
The Company sold 266,667 shares of Class A Common Stock to Bausch &
Lomb Pharmaceuticals, Inc. in a private placement on August 4, 1997 for
$500,000, in conjunction with entering into a collaboration and sale/license
agreement with the Company (see Part II - Item 5. "Other Information" below).
The shares are subject to certain voting and transfer restrictions and may be
redeemed at cost at the option of either the Company or the purchaser.
<PAGE>
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, (iv) the continued sale of
IodoZyme, the Company's only product, and (v) the Company's ability to enter
into new arrangements with corporate partners.
Results of Operations
Symbollon's net loss for the three month period ended June 30, 1997 was
$151,978, reflecting an increase of $236,783 from a net income of $84,805 in the
comparable 1996 period. Symbollon's net loss for the six month period ended June
30, 1997 was $365,029, reflecting a decrease of $107,680 from a net loss of
$472,709 in the comparable 1996 period. The increased loss for the three-month
period resulted primarily from decreased license fees/contract revenues from a
research and development contract signed in the second quarter of 1996,
partially offset by decreased expenses and increased product revenues. The
decreased loss for the six-month period resulted primarily from decreased
expenses and increased product revenues, partially offset by decreased license
fees/contract revenues. The Company expects to continue to incur operating
losses for the foreseeable future.
Product revenues from sales of IodoZyme for the three and six-month
periods ended June 30, 1997 were $162,338, reflecting an increase of $158,891
and $145,606, respectively, from the product sales in the comparable 1996
periods. The increased sales reflect in part the Company's efforts with its
marketing partner, West Agro, Inc., to broaden the distribution of the product.
<PAGE>
At June 30, 1997, Symbollon's backlog for IodoZyme was approximately $210,000
which is expected to be satisfied during the third quarter.
The gross profit margin on product sales for the three and six-month
periods ended June 30, 1997 were 47%, compared to (93%) and 19.2%, respectively,
in the comparable 1996 periods. The increase in the gross profit margin on
product sales for the three and six-month periods ended June 30, 1997 were
primarily due to increased sales volume.
Contract revenues for the three and six-month periods ended June 30,
1997 were $8,250, and $48,587, respectively, reflecting a decrease of $74,337
and $34,000, respectively, from the contract revenues in the comparable 1996
periods. License fees for the three and six-month periods ended June 30, 1997
were none, reflecting a decrease of $500,000 from the license fees in the
comparable 1996 periods. The contract revenues and license fees generated in
both fiscal 1996 and 1997 relate to one corporate relationship entered into in
May 1996 in the field of dermatology.
Research and development expenses for the three and six-month periods
ended June 30, 1997 were $134,873 and $283,189, respectively, reflecting a
decrease of $172,141 and $369,146, respectively, from the research and
development expenses in the comparable 1996 periods. The decreases resulted from
decreases in labor costs associated with a reduction in the work force and the
discontinuation of the 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, which has been abandoned.
General and administrative expenses for the three and six-month periods
ended June 30, 1997 were $114,897 and $239,168, respectively, reflecting a
decrease of $94,130 and $211,523, respectively, from the general and
administrative expenses in the comparable 1996 periods. The decreases resulted
primarily from decreased legal fees, insurance costs and director fees. The
Company anticipates that general and administrative expenses will remain at
current levels for the remainder of 1997.
Liquidity and Capital Resources
The Company has funded its activities through proceeds from Class A
Warrant exercises, its initial public offering and private placements of equity
and debt securities and through loans from principal stockholders and its bank.
Independent research and development activities regarding the Company's
technology has been funded through SBIR grants received and administered by
Biomedical Development Corporation. As of March 31, 1997, the Company had
working capital of $1,346,022.
The Company has had no significant revenue and has incurred a
cumulative loss through June 30, 1997 of $5,698,108. 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, 1997. 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
<PAGE>
activities and curtail certain planned expenditures. In any event, the Company
anticipates that it will require additional funds after June 30, 1998.
During the remainder of 1997, the Company anticipates paying
approximately $140,000 as compensation for its current executive officers, and
approximately $20,150 for lease payments on its facilities. Planned capital
expenditures for the remainder of 1997 are expected to be approximately $20,000
for manufacturing equipment and $60,000 for leasehold improvements related to
the move to a new corporate headquarters. At December 31,1996, the Company had a
net operating loss carryforward for Federal income tax purposes of approximately
$5,010,000 expiring through 2011.
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote of the stockholders at the
Company's Annual Meeting on May 14, 1997:
1. Election of Directors. The following directors were elected:
Votes
For Against Withheld
--- ------- --------
James C. Richards 2,752,461 3,490 0
Jack H. Kessler 2,752,461 3,490 0
Paul C. Desjourdy 2,752,461 3,490 0
Edward A. Mason 2,752,461 3,490 0
Stuart M. Paley 2,752,461 3,490 0
2. Ratification of Richard A.Eisner & Company, LLP as
the independent auditors of the Company:
Votes
For Against Withheld
--- ------- --------
2,753,361 2,490 100
Each item identified above was described in the Company's Proxy
Statement for the Annual Meeting of Stockholders. Each item received the
necessary votes for approval.
Item 5. Other Information
The Company entered into a five-year lease for new corporate
headquarters located in Framingham, Massachusetts. Pursuant to the lease, the
Company has agreed to pay the landlord $50,000 for certain leasehold
improvements to the 5,400 square foot facility. The Company has an option to
extend the lease for an additional five years.
<PAGE>
On August 4, 1997, the Company entered into a collaboration and
sale/license agreement with Bausch & Lomb Pharmaceuticals, Inc. Under the
Collaboration and Sale/License Agreement, the parties intend to develop
ophthalmic products based on Symbollon's proprietary enzyme-based iodine
technology. Bausch & Lomb obtained exclusive marketing rights in the United
States and Canada for ophthalmic products that are developed based on
Symbollon's iodine technology. The agreement also provides Bausch & Lomb with
options to broaden its exclusive marketing rights to include the rest of the
world, and to include otic (ear) products. So long as the agreement is in
effect, Bausch & Lomb 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.
In conjunction with the Collaboration and Sale/License Agreement, the
parties entered into a stock purchase agreement pursuant to which Bausch & Lomb
purchased 266,667 shares of Class A Common Stock for $500,000. Bausch & Lomb has
agreed to purchase an additional $350,000 of shares of Class A Common Stock on
the first anniversary of the agreement so long as the Collaboration and
Sale/License Agreement has not been terminated prior to that date. Pursuant to
the Stock Purchase Agreement, the shares purchased by Bausch & Lomb are subject
to certain voting and transfer restrictions and may be redeemed at cost at the
option of either the Company or the purchaser. Subject to certain exceptions,
Bausch & Lomb has agreed to vote its shares of Class A Common Stock in
accordance with the recommendations of Symbollon's Board of Directors. Bausch &
Lomb may offset certain portions of the future milestone payments due to
Symbollon pursuant to the Collaboration and Sale/License Agreement by redeeming
at cost the shares purchased pursuant to the Stock Purchase Agreement. Under
certain circumstances, if the Collaboration and Sale/License Agreement is
terminated prior to Symbollon's receipt of the required milestone payments, then
Bausch & Lomb has agreed to transfer to Symbollon for no consideration up to
$500,000 worth (valued at their original purchase price) of the shares.
Additionally, if the Collaboration and Sale/License Agreement is terminated by
Bausch & Lomb prior to its fourth anniversary, Bausch & Lomb may require the
Company to repurchase up to $350,000 worth (valued at their original purchase
price) of the shares annually through the seventh anniversary of the Stock
Purchase Agreement in an amount equal to 25% of the Company's positive cash
flows from operating activities.
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.
<PAGE>
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 14, 1997 By: /s/ Paul C. Desjourdy
----------------------
Paul C. Desjourdy, Vice President/CFO
and authorized signatory
<PAGE>
SYMBOLLON CORPORATION
INDEX TO EXHIBITS
Page #
10.18 Commercial Lease, dated June 5, 1997, between the Company and
Pine Street Realty Trust.........................................
10.19 Collaboration and Sale/License Agreement, dated August 4, 1997,
between the Company and Bausch & Lomb Pharmaceuticals, Inc.*.....
10.20 Stock Purchase Agreement, dated August 4, 1997, between the Company
and Bausch & Lomb Pharmaceuticals, Inc. .........................
11.1 Statement re: Computation of Earnings per Share..................
27.1 Financial Data Schedule..........................................
- -------------
* Indicates that material has been omitted and Confidential treatment
has been requested therefor. All such omitted material has been filed
separately with the Commission pursuant to Rule 24b-2.
STANDARD FORM COMMERCIAL LEASE
Member Greater Boston Real Estate Board
1. PARTIES
Pine Street Realty Trust ("LESSOR"), which expression shall include its heirs,
successors, and assigns where the context so admits, does hereby lease to
Symbollon Corporation
2. PREMISES
("LESSEE"), which expression shall include their successors, executors,
administrators, and assigns where the context so admits, and the LESSEE hereby
leases the following described premises: 5,400 rentable SF at 37 Loring Drive,
Framingham, Massachusetts 01702, together with the right to use in common, with
others entitled thereto, the hallways, stairways, elevators, and parking,
necessary for access to said leased premises, and lavatories nearest thereto.
3. TERM
The term of this lease shall be for Five (5) years commencing on July 1, 1997
and ending on August 31, 2002.
4. RENT
The LESSEE shall pay to the LESSOR rent at the rate of (see attached addendum)
dollars per year, payable in advance in monthly installments of (See attached
addendum).
5. SECURITY DEPOSIT
Upon the execution of this lease, the LESSEE shall pay to the LESSOR $2,363.50
dollars, which shall be held as a security for the LESSEE's performance as
herein provided and refunded to the LESSEE at the end of this lease subject to
the LESSEE's satisfactory compliance with the conditions hereof.
6. RENT ADJUSTMENT
Not Applicable
<PAGE>
7. UTILITIES
The LESSEE shall pay, as they become due, all bills for electricity, gas, water
and sewer, and other utilities (whether they are used for furnishing heat or
other purposes) that are furnished to the leased premises and presently
separately metered, and all bills for fuel furnished to a separate tank
servicing the leased premises exclusively.
LESSOR shall have no obligation to provide utilities or equipment other than the
utilities and equipment within the premises as of the commencement date of this
lease. In the event LESSEE requires additional utilities or equipment, the
installation and maintenance thereof shall be the LESSEE's sole obligation,
provided that such installation shall be subject to the written consent of the
LESSOR. LESSEE is responsible for annual maintenance and repair to the rooftop
HVAC units. LESSOR shall assign to LESSEE any warranties for the HVAC equipment
located within the leased premises.
8. USE OF LEASED PREMISES
The LESSEE shall use the leased premises only for the purpose of R&D,
Manufacturing and Office use. LESSOR warrants that no matter of record title,
local zoning laws or the rules and regulations of the Loring Drive Condo Trust
interfere with use of the leased premises for the purpose set forth above.
LESSOR shall warrant and defend LESSEE in the quiet enjoyment and possession of
the leased premises.
9. COMPLIANCE WITH LAWS
The LESSEE acknowledges that no trade or occupation shall be conducted in the
leased premises or use made thereof which will be unlawful, improper, noisy or
offensive, or contrary to any law or any municipal by-law or ordinance in force
in the city or town in which the premises are situated. The LESSEE may use
hazardous chemicals on the leased premises provided that such chemicals are used
and disposed of in accordance with all applicable laws.
10. FIRE INSURANCE
The LESSEE shall not permit any use of the leased premises which will make
voidable any insurance on the property of which the leased premises are a part,
or on the contents of said property or which shall be contrary to any law or
regulation from time to time established by the New England Fire Insurance
Rating Association, or any similar body succeeding to its powers. The LESSEE
shall on demand reimburse the LESSOR, and all other tenants, all extra insurance
premiums caused by the LESSEE's use of the premises.
11. MAINTENANCE
THE LESSEE agrees to maintain the leased premises in good condition, damage by
fire and other casualty only excepted, and whenever necessary, to replace plate
glass and other glass therein, acknowledging that the leased premises are now in
good order and the glass whole.
A. LESSEE'S OBLIGATION The LESSEE shall not permit the leased premises to be
overloaded, damaged, stripped, or defaced, nor suffer any waste. LESSEE shall
obtain written consent of LESSOR before erecting any sign on the premises.
B. LESSOR'S OBLIGATION The LESSOR agrees to maintain the structure of the
building of which the leased premises are a part in the same condition as it is
at the commencement of the term or as it may be put in during the term of this
lease, reasonable wear and tear, damage by fire and other casualty only
excepted, unless such maintenance is required because of the LESSEE or those for
whose conduct the LESSEE is legally responsible.
<PAGE>
12. ALTERATIONS-ADDITIONS
The LESSEE shall not make structural alterations or additions to the leased
premises, but may make non-structural alterations provided the LESSOR consents
thereto in writing, which consent shall not be unreasonably withheld or delayed.
All such allowed alterations shall be at LESSEE's expense and shall be in
quality at least equal to the present construction. LESSEE shall not permit any
mechanics' liens, or similar liens, to remain upon the leased premises for labor
and material furnished to LESSEE or claimed to have been furnished to LESSEE in
connection with work of any character performed or claimed to have been
performed at the direction of LESSEE and shall cause any such lien to be
released of record forthwith without cost to LESSOR. Any alterations or
improvements made by the LESSEE shall become the property of the LESSOR at the
termination of occupancy as provided herein.
13. ASSIGNMENT SUBLEASING
The LESSEE shall not assign or sublet the whole or any part of the leased
premises without LESSOR's prior written consent (which consent shall not be
unreasonably withheld). Notwithstanding such consent, LESSEE shall remain liable
to LESSOR for the payment of all rent and for the full performance of the
covenants and conditions of this lease. Should Lessee assign or sublet the
premises and receive rent in excess of that due the Lessor, then Lessee shall
share such profits equally with the Lessor.
14. SUBORDINATION
This lease shall be subject and subordinate to any and all mortgages, deeds of
trust and other instruments in the nature of a mortgage, now or any time
hereafter, a lien or liens on the property of which the leased premises are a
part and the LESSEE shall, when requested, promptly execute and deliver such
written instruments as shall be necessary to show the subordination of this
lease to said mortgages, deeds of trust or other such instruments in the nature
of a mortgage.
15. LESSOR'S ACCESS
The LESSOR or agents of the LESSOR may, at reasonable times, enter to view the
leased premises and may remove placards and signs not approved and affixed as
herein provided, and make repairs and alterations as LESSOR should elect to do
and may show the leased premises to others, and at any time within six (6)
months before the expiration of the term, may affix to any suitable part of the
leased premises a notice for letting or selling the leased premises or property
of which the leased premises are a part and keep the same so affixed without
hindrance or molestation.
16. INDEMNIFICATION AND LIABILITY
The LESSEE shall save the LESSOR harmless from all loss and damage occasioned by
the use or escape of water or by the bursting of pipes, as well as from any
claim or damage resulting from neglect in not removing snow and ice from the
roof of the building or from the sidewalks bordering upon the premises so
leased, or by any nuisance made or suffered on the leased premises. The removal
of snow and ice from the sidewalks bordering on the leased premises shall be the
LESSEE's responsibility unless such loss is caused by neglect of the LESSOR.
17. LESSEE'S LIABILITY INSURANCE
The LESSEE shall maintain with respect to the leased premises and the property
of which the leased premises are a part comprehensive public liability insurance
in the amount of $1,000,000.00 with property damage insurance in limits of
$1,000,000.00 in responsible companies qualified to do business in Massachusetts
and in good standing therein insuring the LESSOR as well as LESSEE against
injury to persons or damage to property as provided. The LESSEE shall deposit
with the LESSOR certificates for such insurance at or prior to the commencement
of the term, and thereafter within thirty (30) days prior to the expiration of
any such policies. All such insurance certificates shall provide that such
polices shall not be canceled without at least ten (10) days prior written
notice to each assured named therein.
18. FIRE, CASUALTY - EMINENT DOMAIN
Should a substantial portion of the leased premises, or of the property of which
they are a part, be substantially damaged by fire or other casualty, or be taken
by eminent domain, the LESSOR may elect to terminate this lease. When such fire,
casualty, or taking renders the leased premises substantially unsuitable for
their intended use, a just and proportionate abatement of rent shall be made,
and the LESSEE may elect to terminate this lease if: (a) The LESSOR fails to
give written notice within (30) days of intention to restore leased premises, or
(b) The LESSOR fails to restore the leased premises to a condition substantially
suitable for their intended use within ninety (90) days of said fire, casualty
or taking. The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights
which the LESSEE may have for damages or injury to the leased premises for any
taking by eminent domain, except for damage to the LESSEE's fixtures, property,
or equipment including leasehold improvements.
<PAGE>
19. DEFAULT AND BANKRUPT
In the event that (a) The LESSEE shall default in the payment of any installment
of rent or other sum herein specified and such default shall continue for ten
(10) days after written notice thereof; or (b) The LESSEE shall default in the
observance or performance of any other of the LESSEE's covenants, agreements, or
obligations hereunder and such default shall not be corrected within thirty (30)
days after written notice thereof; or (c) The LESSEE shall be declared bankrupt
or insolvent according to law, or, if any assignment shall be made of LESSEE's
property for the benefit of creditors, then the LESSOR shall have the right
thereafter, while such default continues, to re-enter and take complete
possession of the leased premises, to declare the term of this lease ended, and
remove the LESSEE's effects, without prejudice to any remedies which might be
otherwise used for arrears of rent or other default. The LESSEE shall indemnify
the LESSOR against all loss of rent and other payments which the LESSOR may
incur by reason of such termination during the residue of the term. If the
LESSEE shall default, after reasonable notice thereof, in the observance or
performance of any conditions or covenants on LESSEE's part to be observed or
performed under or by virtue of any of the provisions in any article of this
lease, the LESSOR, without being under any obligation to do so and without
thereby waiving such default, may remedy such default for the account and at the
expense of the LESSEE. If the LESSOR makes any expenditures or incurs any
obligations for the payment of money in connection therewith, including but not
limited to, reasonable attorney's fees in instituting, prosecuting or defending
any action or proceeding, such sums paid or obligations insured, with interest
at the rate of 18 per annum and costs, shall be paid to the LESSOR by the LESSEE
as additional rent.
20. NOTICE
Any notice from the LESSOR to the LESSEE relating to the leased premises or to
the occupancy thereof, shall be deemed duly served, if left at the leased
premises addressed to the LESSEE, or if mailed to the leased premises,
registered or certified mail, return receipt requested, postage prepaid,
addressed to the LESSEE. Any notice from the LESSEE to the LESSOR relating to
the leased premises or to the occupancy thereof, shall be deemed duly served, if
mailed to the LESSOR by registered or certified mail, return receipt requested,
postage prepaid, addressed to the LESSOR at such address as the LESSOR may from
time to time advise in writing. All rent notices shall be paid and sent to the
LESSOR One Hollis Street, Suite 212 Wellesley, MA 02181 (617) 235-7065.
21. SURRENDER
The LESSEE shall at the expiration or other termination of this lease remove all
LESSEE's goods and effects from the leased premises, (including, without hereby
limiting the generality of the foregoing, all signs and lettering affixed or
painted by the LESSEE, either inside or outside the leased premises). LESSEE
shall deliver to the LESSOR the leased premises and all keys, locks thereto, and
other fixtures connected therewith and all alterations and additions made to or
upon the leased premises, in good condition, damage by fire or other casualty
only excepted. In the event of the LESSEE's failure to remove any of LESSEE's
property from the premises, LESSOR is hereby authorized, without liability to
LESSEE for loss or damage thereto, and at the sole risk of LESSEE, to remove and
store any of the property at LESSEE's expense, or to retain same under LESSOR's
control or to sell at public or private sale, without notice any or all of the
property not so removed and to apply the net proceeds of such sale to the
payment of any sum due hereunder, or to destroy such property.
22. BROKERAGE
The Broker(s) named herein R.W. Holmes Realty Co., Inc. warrant(s) that he
(they) is (are) duly licensed as such by the Commonwealth of Massachusetts, and
join(s) in this agreement and become(s) a party hereto, insofar as any
provisions of this agreement expressly apply to him (them), and to any
amendments or modifications of such provisions to which he (they) agree(s) in
writing.
LESSOR agrees to pay the above-named Broker upon the term commencement date a
fee for professional services of R.W. Holmes Realty Co., Inc.
23. OTHER PROVISIONS
It is also understood and agreed that SEE ATTACHED ADDENDUM
IN WITNESSWHEREOF, the said parties hereunto set their hands and seals this 5th
day of June, 1997.
SYMBOLLON CORPORATION
/s/ Paul C. Desjourdy /s/ William Foley
- --------------------- -----------------
LESSEE LESSOR
Paul C. Desjourdy, Executive V.P. William Foley, as Trustee
and not Individually
<PAGE>
ADDENDUM TO STANDARD FORM COMMERCIAL LEASE
Between
WILLIAM FOLEY and
SYMBOLLON CORPORATION
1) Rent:
During the term of the lease, Lessee shall pay rent as follows:
Original Period Rental Rate (triple net)
July 1, 1997 to Aug. 31, 1998 $5.25/SF (The payments for year
Sept. 1, 1998 to Aug. 31, 1999 $5.50/SF 1 will be spread out
Sept. 1, 1999 to Aug. 31, 2000 $5.75/SF over 14 months)
Sept. 1, 2000 to Aug. 31, 2001 $6.00/SF
Sept. 1, 2001 to Aug. 31, 2002 $6.25/SF
All base rental payments shall be due and payable in advance on the
first day of each month of the Lease term except for the first month's
rent and security deposit which is due and payable upon lease
execution.
2) NNN Expenses:
The Lessee shall pay as additional rent during the term of the Lease
its proportionate share of Real Estate Taxes, all exterior common area
maintenance and repairs, which includes landscape and snow removal,
basic building insurance, and common area utilities. The annual cost of
these NNN expenses shall be due and payable monthly, at the beginning
of each month except for the first month which shall be due and payable
upon Lease execution. Lessee will be responsible for their
proportionate share of all increases in operating expenses. Lessee
shall pay estimated monthly NNN expenses of $675.00 at the beginning of
each month. Lessor will prepare a reconciliation at the end of each
twelve month period of actual expenses and issue either an additional
invoice or credit.
3) Option to Renew:
Lessee shall have the option to renew this Lease for one (1) additional
period of Five (5) years, provided that Lessee has not been in default
under any of the terms and conditions of the Lease, by giving Lessor
six (6) months prior written notice. The terms and conditions of the
Lease shall be the same except for the rental rate which shall be as
follows:
Original Period Rental Rate (triple net)
--------------- ------------------------
Sept. 1, 2002 to Aug. 31, 2003 $6.50/SF
Sept. 1, 2003 to Aug. 31, 2004 $6.75/SF
Sept. 1, 2004 to Aug. 31, 2005 $7.00/SF
Sept. 1, 2005 to Aug. 31, 2006 $7.25/SF
Sept. 1, 2006 to Aug. 31, 2007 $7.50/SF
<PAGE>
4) Condition of Space: (See Exhibit "A")
Lessor agrees to make prior to the commencement of the Lease the
improvements to the leased premises as detailed on Exhibit "A" hereto.
Lessee agrees to pay Lessor Fifty Thousand Dollars ($50,000) for the
improvements upon the later of commencement of the lease or the
completion of the improvements. If the improvements are not completed
by July 1, 1997, then the Lease Term shall be deemed to commence on the
date of completion of the improvements, provided that if the
improvements are not completed by August 1, 1997, Lessee may terminate
the Lease and receive a full refund of all amounts paid or deposited
with Lessor hereunder. Any build-out change orders will be at the sole
expense of the Lessee. Lessor agrees to notify Lessee of the timetable
for the work to make such improvements, and Lessee shall have a right
to be present during such work. Lessee and Lessor agree to work
together so that the improvements as specified are timely completed.
COLLABORATION AND SALE/LICENSE AGREEMENT
By and Between
BAUSCH & LOMB PHARMACEUTICALS, INC.
and
SYMBOLLON CORPORATION
---------------------------------
Dated as of August 4, 1997
----------------------------------
<PAGE>
TABLE OF CONTENTS1
Page No
Article 1 Definitions........................................ 1
Article 2 Joint Development Committee........................ 6
2.1 Formation.......................................... 6
2.2 Responsibilities................................... 6
2.3 Disagreements...................................... 7
2.4 Market Opportunity Prior to First Commercial Sale.. 7
2.5 Market Opportunity After First Commercial Sale..... 7
Article 3 Research and Development Efforts................... 8
3.1 Efforts............................................ 8
3.2 Funding............................................ 8
3.3 Sharing of Information............................. 9
3.4 Material Samples................................... 9
Article 4 B&L License........................................ 9
4.1 Basic Grant........................................ 9
4.2 Specific Limitations............................... 9
4.3 Symbollon Retained Rights.......................... 10
4.4 Otic Infections.................................... 10
4.5 Rest of World...................................... 10
4.6 Recording.......................................... 10
Article 5 Clinical Trials and Regulatory Filings............. 11
Article 6 Sale of Patent..................................... 11
6.1 Transfer of Patent Rights.......................... 11
6.2 Installment Sale Payments.......................... 12
6.3 Orphan Drug Products............................... 12
6.4 Cosmetic Eye Scrub Product......................... 13
6.5 Negative Covenants................................. 13
- -----------------
1 This Table of Contents is for convenience of reference only and is not part
of this Agreement.
<PAGE>
Page No.
Article 7 Royalties.......................................... 13
7.1 Royalties.......................................... 13
7.2 Sublicense Fees.................................... 13
7.3 Overall Value...................................... 14
Article 8 Symbollon Sale of Products Outside Territory....... 14
Article 9 Payments........................................... 14
9.1 Timing of Royalty Payments......................... 14
9.2 Records of Net Sales............................... 15
9.3 Payments........................................... 15
Article 10 B&L's Exclusivity Obligations...................... 15
Article 11 Confidentiality and Publications................... 16
11.1 Proprietary Information............................ 16
11.2 Joint Disclosures.................................. 16
Article 12 Ownership of Intellectual Property................. 17
12.1 General Intent..................................... 17
12.2 New Inventions..................................... 17
12.3 Symbollon's Rights in B&L's Joint Inventions....... 17
12.4 License Upon Termination........................... 18
12.5 Patent Applications................................ 18
12.6 Disputes........................................... 18
Article 13 Warranties/Indemnification/Insurance............... 18
13.1 Representations and Warranties..................... 18
13.2 Disclaimer......................................... 19
13.3 Additional Covenants............................... 19
13.4 Indemnification.................................... 19
13.5 Insurance.......................................... 19
13.6 Additional Indemnification Obligations............. 20
<PAGE>
Page No.
Article 14 Infringement and Trademarks........................ 20
14.1 Notice of Infringement............................. 20
14.2 Control, Cost and Cooperation in Infringement Actions 21
14.3 Recoveries Against Infringer....................... 21
14.4 Trademarks......................................... 21
Article 15 Assignability...................................... 21
Article 16 Term and Termination............................... 22
16.1 Term............................................... 22
16.2 Termination Events ................................ 22
16.3 Termination by B&L................................. 23
16.4 Effects of Termination............................. 23
16.5 Survival........................................... 24
Article 17 Supply and Manufacture............................. 24
Article 18 Miscellaneous...................................... 24
18.1 Notices............................................ 24
18.2 Governing Law; Jurisdiction and Venue.............. 26
18.3 Limited Arbitration................................ 26
18.4 Waiver............................................. 26
18.5 Enforceability..................................... 26
18.6 Entire Agreement and Amendment..................... 27
18.7 Independent Contractor............................. 27
18.8 Headings........................................... 27
18.9 Further Instruments................................ 27
18.10 Force Majeure...................................... 27
18.11 Counterparts....................................... 28
18.12 Exhibits and Schedules............................. 28
Exhibits and Schedules
A -- Patent Applications and Patents
B -- Project Plan
C -- Initial Members of the JDC
D -- Form of Patent Assignment
1.16 -- Exceptions to the Licensed Patents
<PAGE>
COLLABORATION AND SALE/LICENSE AGREEMENT
This Agreement is made as of this 4th day of August, 1997 by and
between Bausch & Lomb Pharmaceuticals, Inc. ("B&L") and Symbollon Corporation
("Symbollon").
Symbollon is the owner of certain proprietary technology relating to
topical iodine. B&L has resources and expertise useful in the development and
marketing of ocular 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 B&L
wishes to purchase a patent and 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 "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.
1.02 "AADA" means an Abbreviated Antibiotic Drug Application filed with
the FDA.
1.03 "ANDA" means an Abbreviated New Drug Application filed with the
FDA.
1.04 "Collaborative Project" means the development and
commercialization of the Products pursuant to this Agreement
supervised and overseen by the JDC.
1.05 "Drug Master File" means those files maintained from time to
time by Symbollon with the FDA regarding its technology.
1.06 "Effective Date" means the date first written above.
<PAGE>
1.07 "Field" means the topical treatment of human ocular
infections, inclusive of an eye scrub product which may be
used in the periocular region to resolve conditions related to
or arising from an ocular infection; provided that, prior to
the first commercial sale of a Product, the Field may be
permanently reduced in scope from time to time by the Joint
Development Committee pursuant to Section 2.4, and after the
first commercial sale of a Product, the Field may be further
permanently reduced in scope from time to time pursuant to
Section 2.5.
1.08 "FDA" means U.S. Food and Drug Administration or any successor
entity thereto.
1.09 "FDA Compliance Costs" means the reasonable out-of-pocket
costs relating to the manufacturing facility incurred by B&L
in connection with or as a result of FDA product approvals,
inspections or compliance with FDA regulations, orders,
directives or suggestions.
1.10 "Generic" means any product in the Field approved by the FDA
pursuant to an ANDA, AADA or an NDA (including a supplemental
or amended NDA) which is a pharmaceutical equivalent,
pharmaceutical alternative or therapeutic equivalent (each as
defined by the FDA) to a Product.
1.11 "Gross Profit" means Net Sales less cost of goods sold, as
determined under generally accepted accounting principles.
1.12 "IND" means an Investigational New Drug Application filed with the
FDA.
1.13 "Inventions" means all discoveries, inventions, concepts,
ideas or intangible property, whether patentable or not, made,
conceived, or reduced to practice in the course of or related
to Product research and development performed pursuant to
Article 3.
1.14 "Joint Development Committee" or "JDC" means a committee of
officers, employees or consultants of Symbollon and B&L as
described in Article 2 of this Agreement.
1.15 "Joint Invention" has the meaning set forth in subsection
12.2(b).
1.16 "Licensed Patents" means all of Symbollon's rights in and
under patents and patent applications applicable to the Field
and one or more valid claims of which covers any Product or
method of using or manufacturing any Product, as follows: (a)
the patents and patent applications listed in Exhibit A, as
well as all patents issuing therefrom in which Symbollon has a
<PAGE>
property interest or under which Symbollon acquires license
rights (except as disclosed on Schedule 1.16 attached hereto,
Symbollon has the right and authority to license or
sublicense, as the case may be, such property interests or
license rights), (b) any patent or patent application covering
an Invention or Joint Invention assigned to Symbollon pursuant
to Section 12.2, (c) any other future iodine-based patent or
patent application in which Symbollon acquires any property
interest or license rights (but only to the extent such rights
may by their terms be further assigned to B&L hereunder;
provided that Symbollon agrees to exercise Reasonable
Commercial Efforts to obtain the right to sublicense any
license rights that may be acquired in the future), and (d)
any divisions, continuations or continuations in part of the
patents or patent applications set forth above or of the
Patent Rights, including any reissue, re-examination,
re-registration or extension. Symbollon shall promptly notify
B&L from time to time as new patent applications are filed or
patents are issued which fall within the definition of
Licensed Patents. Exhibit A shall be updated from time to time
to reflect any Licensed Patents which arise following the date
hereof, and to delete any patent rights, whether owned or
licensed, which do not include one or more valid claims
covering any Product or method of using any Product.
1.17 "Manufacturing Costs" shall mean B&L's standard cost of
manufacturing the Product, which shall include direct labor,
direct and variable materials (including scrap), freight,
variable overhead, an allocation of fixed overhead, and yield
losses, plus or minus reasonable manufacturing variances; all
determined in accordance with generally accepted accounting
principles applied consistently and in accordance with
existing and demonstrable B&L practices; but provided that, in
determining such allocation, B&L shall use the lowest and most
favorable method of allocation used by B&L for any proprietary
product manufactured by B&L at its manufacturing facility (in
volumes similar to the quantity of Product manufactured by B&L
for Symbollon) exclusively for sale to, and distribution by,
an unrelated third party.
1.18 "NDA" means a New Drug Application filed with the FDA.
1.19 "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 (and in the case of B&L, a third party
sublicensee pursuant to Section 4.2(b)) or any of their
Affiliates from persons or entities who are not Affiliates or
(in the case of B&L, sublicensees pursuant to Section 4.2(b))
by reason of the sale, distribution or use of Product less,
without duplication: (a) discounts and rebates, if any,
actually given in the ordinary course of business, (b) credits
or allowances, if any, actually given or made on account of
<PAGE>
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, value-added 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 or
rebates, if any, actually allowed, if any such discount or
rebate 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.
1.20 "Non-Orphan Drug Products" mean Product(s) developed and
commercialized pursuant to this Agreement which do not qualify
for "orphan drug" status (as defined by the FDA).
1.21 "Orphan Drug Products" mean Product(s) developed and
commercialized pursuant to this Agreement which qualify for
"orphan drug" status (as defined by the FDA).
1.22 "Other Costs" shall mean in each case set forth in a
reasonably detailed statement delivered to Symbollon by B&L
with each invoice for Product manufactured and supplied by B&L
to Symbollon: (i) a reasonable and customary allocation of FDA
Compliance Costs pertaining to the Product; (ii) a reasonable
and customary allocation as between B&L and Symbollon of any
fees or royalties incurred by B&L to a unrelated third party
related to the manufacture of the Product; and (iii) an
allocation of B&L's direct cost of research and development
and other technical services relating to the Product
reasonably, necessarily and actually rendered, following FDA
approval of the NDA for the Product.
1.23 "Patent Rights" mean a United States patent number 5,639,481
issued June 17, 1997 entitled, "Method for the Therapeutic
Treatment of a Mammalian Eye Using an Admixed Composition
Containing Free Molecular Iodine", identifying Jack H. Kessler
and James C. Richards as the inventors, but excluding all
continuations, continuation-in-parts, divisions and
extensions, and excluding all foreign counterparts thereof.
1.24 "Product" means any product in the Field which is based on the
Patent Rights, the Licensed Patents, a Joint Invention owned
by B&L or Proprietary Information of Symbollon.
<PAGE>
1.25 "Project Plan" means the written plan (initially to be
developed by the parties within sixty (60) days of the date of
this Agreement and 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 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) an
annualized budget.
1.26 "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, or during the term of, this
Agreement, including by way of illustration and not
limitation, designs, drawings, documents, models and other
similar information and shall include Inventions and Joint
Inventions. "Proprietary Information" shall not include any of
the foregoing that are (i) in the possession of the receiving
party at the time of disclosure as shown by the receiving
party's files and records immediately prior to the time of
disclosures; (ii) prior to or after the time of disclosure
becomes part of the public knowledge or literature, not as a
result of any improper inaction or action of a party under an
obligation of confidentiality; or (iii) lawfully obtained by
the receiving party from sources independent of the disclosing
party, which sources have a lawful right to disclose such
information. Nothing herein shall in any way affect the rights
of an Affiliate to claim a trade secret independently
developed by such Affiliate without in any way relying on or
having knowledge of any relevant Proprietary Information
covered by this Agreement.
1.27 "Reasonable Commercial Efforts" means efforts no less diligent
than either party customarily exercises under similar
circumstances of its own consistent with good business
judgment, or if no prior similar circumstances have occurred,
then such efforts should be commercially reasonable in light
of existing circumstances and consistent with good business
judgment.
1.28 "Regulatory Approvals" has the meaning set forth in Article 5.
1.29 "Regulatory Filings" has the meaning set forth in Article 5.
1.30 "Right of First Negotiation" shall mean B&L's exclusive option
to negotiation for rights as specified herein. Such option may
be exercised by B&L by providing written notice to Symbollon
prior to expiration of such option. If such written notice is
<PAGE>
timely provided, then the parties agree to negotiate in good
faith for a period of three months a definitive agreement for
the rights covered by such option. If the parties are not able
to execute a definitive agreement for the relevant rights
within such three-month period, then for a period of twelve
(12) months following such three-month period Symbollon agrees
not to execute an agreement covering the relevant rights with
a third party on terms more or as favorable as those last
offered thereunder without B&L's prior written consent.
1.31 "Territory" means the United States, including its
territories, possessions and military bases outside the United
States. Further, on a Product by Product basis, the Territory
shall include Canada, if within one (1) year of the first
commercial sales of any Product, B&L initiates commercial
sales of the Product in Canada.
1.32 "Warehousing Costs" shall mean B&L's direct warehousing
costs of Product purchased by Symbollon and raw materials
held by B&L to produce such Product, including labor,
freight, inventory write-offs due to such Product or raw
materials expiration and costs associated with destroying
expired Product or raw materials, plus normal and customary
allocable warehousing overhead costs; all determined in
accordance with generally accepted accounting principles
applied consistently and in accordance with existing and
demonstrable B&L practices; but provided that, in determining
such allocation, B&L shall use the lowest and most favorable
method of allocation used by B&L for any proprietary product
stored by B&L at its manufacturing facility for sale to, and
distribution by, an unrelated third party.
Article 2 - Joint Development Committee
2.1 Formation. The Joint Development Committee will be comprised of
five (5) members with three (3) being appointed and replaced by B&L 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 B&L's or Symbollon's headquarters, or as otherwise agreed by
the parties. A chair of the JDC will be appointed alternately by B&L and
Symbollon to six-month terms.
2.2 Responsibilities. Each party will report to the JDC regularly on
its progress with respect to its respective work assignments under the Project
Plan. The JDC shall supervise and oversee the development and commercialization
of the Products (the "Collaborative Project"). Without limitation, the JDC shall
<PAGE>
be responsible for (i) approving the product definitions; (ii) coordinating the
research and development activities with respect to the Collaborative Project;
(iii) approving modifications and updates to the Project Plan for the
implementation of the Collaborative Project; (iv) monitoring performance and
expenditures under the Collaborative Project in relation to the Project Plan;
(v) appointing the party or parties to conduct the clinical development and
testing of the Products and the filing of any IND therefor in the Territory; and
(vi) the determination of which party or parties shall perform any task required
under the Collaborative Project not otherwise assigned hereunder.
2.3 Disagreements. If the members of the JDC are unable to reach
unanimous agreement on a matter, the top executive officer of each party will
confer as soon as reasonably practicable to thoroughly consider such matter, and
each use his Reasonable Commercial Efforts to effect resolution. Should such
conference not resolve the disagreement, subject to the provisions of Sections
2.5 and any other contract provisions to the contrary, B&L will, in good faith,
make the final decision to accept or to reject such proposed resolution,
provided that, in no event shall the Project Plan be revised without the mutual
agreement of B&L and Symbollon with respect to (a) any matter which conflicts
with a provision specifically set forth in this Agreement and (b) the research
and development work to be performed by Symbollon.
2.4 Market Opportunity Prior to First Commercial Sale. Prior to the
first commercial sale of a Product, if Symbollon reasonably believes that the
Collaborative Project is not addressing the full market opportunity within the
Field, then Symbollon may request the JDC to address its concerns regarding
Product development and/or commercialization. Should the JDC decide that certain
Product opportunities in the Field are not being pursued, then the Field shall
thereafter be reduced in scope to exclude such Product opportunities. Section
2.3 shall govern if the JDC can not reach unanimous agreement on this matter. As
part of the determination of whether the full market opportunity within the
Field is being addressed, consideration should be given to present development
efforts, planned future development efforts, any other iodine-based products
under development or commercialization by B&L pursuant to Article 10, and a
commercially reasonable level of resource commitment by B&L to development of
Products pursuant to this Agreement.
2.5 Market Opportunity After First Commercial Sale. After the first
commercial sale of a Product, if Symbollon reasonably believes that the
Collaborative Project is not addressing the full market opportunity within the
Field, then Symbollon may request the JDC to address its concerns regarding
Product development and/or commercialization. Should the JDC decide that certain
Product opportunities in the Field are not being pursued, then the Field shall
thereafter be reduced in scope to exclude such Product opportunities. If the
members of the JDC are unable to reach unanimous agreement on a matter, the top
executive officer of each party will confer as soon as reasonably practicable to
thoroughly consider such matter, and each use his commercially reasonable
efforts to effect resolution. Should such conference not resolve the
disagreement, then the parties agree to submit this matter to arbitration
pursuant to Section 18.3. The arbitration process shall take into consideration
any valid business or economic considerations the parties may present in defense
<PAGE>
of their position, including possible encroachment by any such new Product
opportunity of an existing or planned Product developed, or being developed,
pursuant to this Agreement. As part of the determination of whether the full
market opportunity within the Field is being addressed, consideration should be
given to present development efforts, planned future development efforts, any
other iodine-based products under development or commercialization by B&L
pursuant to Article 10, and a commercially reasonable level of resource
commitment by B&L to development of Products pursuant to this Agreement.
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) B&L 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
B&L and be available to assist in Product formulations, as reasonably requested
by B&L.
3.2 Funding. B&L will (a) bear all of its own costs and expenses
incurred in connection with its performance under the Project Plan and (b)
should B&L request any assistance from Symbollon, pay Symbollon for its work
under the Project Plan at the rates of [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.],
plus reimbursement for all materials and third party costs reasonably 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, B&L shall
deliver to Symbollon a purchase order setting forth B&L'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 B&L, if its hours and/or costs
exceed the purchase order amounts previously paid to it at the beginning of such
fiscal quarter, and B&L 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 B&L 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. Symbollon shall
provide B&L with monthly summaries of its time and expenses incurred hereunder
and an estimated projection of its time and expenses for the next month.
Notwithstanding the above, Symbollon shall not charge B&L for (i) any time and
expenses associated with Symbollon's participation in the JDC, (ii) any time
incurred by Dr. Jack H. Kessler and (iii) any time associated with the initial
technical meetings between the parties' staffs after the signing of this
Agreement. Any dispute relating to Symbollon's invoices which can not be decided
<PAGE>
by good faith negotiations between the parties, shall be resolved by arbitration
pursuant to Section 18.3.
3.3 Sharing of Information. B&L and Symbollon will take reasonable
efforts to make available and disclose to each other all information known by
B&L and Symbollon concerning the Field as of the Effective Date and at any time
during the term of this Agreement which relates to Product development. Except
as otherwise provided herein, the parties agree that neither party shall share
any of the other party's Proprietary Information with any third party or any of
its Affiliates, except certain employees serving staff service functions (i.e.
chief medical officer, legal, etc.), and consultants and advisors, subject to
confidentiality obligations. All Inventions made by B&L pertaining to iodine or
by Symbollon pertaining to the Field will be promptly disclosed to the other, it
being understood that the obligation to disclose will have no bearing on the
issue of ownership of such discoveries or inventions. 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 Product
research, development and commercialization 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 under this Agreement will be discussed with the other party and
samples of such materials will be submitted to the other party upon request.
Article 4 - B&L License
4.1 Basic Grant. Subject to the terms and conditions of this Agreement,
Symbollon grants to B&L a sole and exclusive license under the Licensed Patents
and Symbollon's Proprietary Information relating to iodine to make, have made on
behalf of B&L, use, offer to sell, sell and import Products in the Territory for
use in the Field, with the right to grant sublicenses limited to co-promotion or
co-marketing arrangements pursuant to Section 4.2(b).
4.2 Specific Limitations.
(a) Off-Label Use. B&L shall, without limitation, (i) promote
any Product only to wholesale and retail distribution channels and
physicians or other medical practitioners for use within the Field
(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
<PAGE>
applications outside the Field, and (iii) not promote, either directly
or indirectly, the use of any Product for any applications outside the
Field.
(b) Co-Promotion. B&L will discuss with Symbollon any
opportunity to enter into an arrangement, be it in the form of a joint
venture, sublicense or otherwise, with a third party pursuant to which
B&L and such third party would co-promote or co-market any Product(s).
After such discussion and giving due consideration to any concerns of
Symbollon, B&L may enter a co-promotional or co-marketing arrangement,
provided that, any such co-promotional or co-marketing agreement, be it
in the form of a joint venture, sublicense or otherwise, 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, and (c) that Symbollon shall
receive one-half of (i) any and all amounts received and (ii) all other
consideration received (when in a form other than cash or its
equivalent, the fair market value thereof when received) by B&L or its
Affiliates directly or indirectly in or from such third party to such
co-promotional or co-marketing agreement, be it in the form of a joint
venture, sublicense or otherwise; provided, that amounts received as
Net Sales, or advances thereon, shall be excluded. As contemplated in
the definition of "Net Sales", it is the parties' intent that any and
all consideration paid to or incurred by any joint venture, third party
sublicensee or other form of entity which is selling Product(s)
hereunder shall be at the sole cost and expense of B&L or such
co-promoter or co-marketer, as the case may be, and shall not result in
any reduction of the royalty due to Symbollon under this Agreement. To
the extent any payment is made by B&L to Symbollon pursuant to this
Section 4.2(b) which relates to an advance of a royalty, then no
payment shall be made by B&L to Symbollon on the corresponding future
credit against royalties of such advance.
4.3 Symbollon Retained Rights. Subject to Sections 4.4 and 4.5,
Symbollon shall be free to pursue the research, development, manufacture and
distribution of any product 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 B&L.
4.4 Otic Infections. B&L shall have a Right of First Negotiation to
include within the Field the topical treatment of human otic infections in the
Territory for a period of twenty-four (24) months after the Effective Date.
4.5 Rest of World. B&L shall have a Right of First Negotiation for
rights in the Field outside the Territory for a period of thirty-six (36) months
after the Effective Date.
4.6 Recording. B&L shall have the right to index a summary of this
Agreement acceptable to both parties in the assignment records of the U.S.
Patent and Trademark office.
<PAGE>
Article 5 - Clinical Trials and Regulatory Filings
B&L shall, at its sole cost and expense, conduct all clinical trials
for Products in the Territory. Symbollon will cooperate with B&L in the conduct
of any such clinical trials. B&L shall, at its sole cost and expense, secure any
and all licenses, permits, approvals and other authorizations (the "Regulatory
Approvals") needed to commercialize Products in the Territory. Subject to
termination of this Agreement by Symbollon pursuant to Section 16.2 or by B&L
pursuant to Section 16.3, 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 B&L in order to gain
the Regulatory Approvals, and the Regulatory Approvals themselves, shall be
owned and maintained by B&L at its sole cost and expense. Upon termination of
this Agreement by Symbollon pursuant to Section 16.2 or by B&L pursuant to
Section 16.3, all Regulatory Filings and Regulatory Approvals, subject to B&L's
right to maintain the confidentiality of its manufacturing know-how that
constitutes Proprietary Information, shall be transferred to Symbollon to be
maintained thereafter at Symbollon's sole cost and expense. B&L grants to
Symbollon, and/or its sublicensee(s), at no cost (except as stated in Article 8)
the right of full access to, use of, reliance on and reference to the Regulatory
Approvals and the Regulatory Filings. B&L 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, and/or its sublicensee(s),
rights equal to B&L's rights of access, use, reliance and reference to the
Regulatory Approvals and Regulatory Filings, subject to B&L's right to maintain
the confidentiality of its manufacturing know-how. Symbollon shall be allowed to
place any data or other information contained in the Regulatory Filings in its
Drug Master File, subject to B&L's right to maintain the confidentiality of its
manufacturing know-how. Copies of all documents, data or other information
(including all minutes of meetings held or memoranda of conversations with)
filed with, or received from, any regulatory agency pursuant to the terms of
this Article 5 shall be provided to Symbollon when filed with, or received from,
any such agency. Symbollon agrees to use its Reasonable Commercial Efforts to
provide B&L with equivalent rights from any other licensee of Symbollon's
intellectual property.
Article 6 - Sale of Patent
6.1 Transfer of Patent Rights. Subject to the terms and conditions of
this Agreement, on the Effective Date Symbollon shall assign all right, title
and interest in the Patent Rights to B&L by executing and delivering to B&L the
patent assignment in the form attached hereto as Exhibit D. Symbollon agrees to
execute any and all documents necessary to effectuate such transfer of the
Patent Rights to B&L.
<PAGE>
6.2 Installment Sale Payments. In partial consideration of the transfer
of all right, title and interest in the Patent Rights to B&L hereunder, B&L will
pay the following amounts to Symbollon:
(a) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the execution of this Agreement; plus
(b) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the twelve (12) month anniversary of
the Effective Date or (ii) ten (10) days after the first filing of an
IND for any indication of a Product; plus
(c) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the twenty-four (24) month anniversary
of the Effective Date, (ii) ten (10) days after the completion of a
Phase I clinical trial of a Product signified by the submission of the
Phase I data to FDA, or (iii) ten (10) days after the enrollment of a
first patient in a Phase I/II or Phase II clinical trial of a Product;
plus
(d) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the thirty-six (36) month anniversary
of the Effective Date, (ii) ten (10) days after the completion of a
Phase II clinical trial of a Product signified by the submission of the
Phase II data to FDA, or (iii) ten (10) days after the enrollment of a
first patient in a Phase II/III or Phase III clinical trial of a
Product; plus
(e) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the forty-eight (48) month anniversary
of the Effective Date or (ii) ten (10) days after the enrollment of a
first patient in a Phase III or Phase II/III clinical trial of a
Product; plus
(f) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the seventy-two (72) month anniversary
of the Effective Date or (ii) ten (10) days after the first filing of
an NDA for any indication of a Product; plus
(g) [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.] upon the earlier of (i) the eighty-four (84) month anniversary
of the Effective Date or (ii) ten (10) days after the first approval to
market by the FDA of a Product which approval is for any indication(s).
It is the parties intent that multiple payments will be made by B&L if two or
more milestones occur simultaneously.
6.3 Orphan Drug Products. To the extent that B&L pursues the
development and commercialization of Orphan Drug Product(s) in parallel with the
development and commercialization of Non-Orphan Drug Product(s) which requires
FDA's approval to market, the parties agree that the installment sale payments
in Section 6.2 shall be governed by the development and commercialization
activities relating to the Non-Orphan Drug Product(s). Notwithstanding the
<PAGE>
above, on each anniversary of the Effective Date after the first commercial sale
of an Orphan Drug Product the then aggregate future unpaid installment sale
payments shall be paid by B&L to Symbollon in accordance with the following: the
sum of (i) the aggregate future unpaid installment sale payments less any
portion of such installment sales payments previously paid pursuant to this
Section 6.3 multiplied by (ii) the aggregate Net Sales relating to off-label
uses of the Orphan Drug Product(s) divided by [* INDICATES THAT MATERIAL HAS
BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH
OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE
24b-2.]. B&L's obligation to accelerate the payment of installment sale payments
in this Section 6.3 shall not in any way be construed to delay B&L's obligation
to make installment sale payments in accordance with any other Section of this
Agreement.
6.4 Cosmetic Eye Scrub Product. To the extent that B&L pursues the
development and commercialization of a Product which is sold as an eye scrub and
does not require FDA's approval to market the parties agree that the development
and commercialization activities relating to such a non-regulated eye scrub
Product will not accelerate B&L's obligation to make the installment sale
payments in Section 6.2, as and if required, in accordance with any other
Section of this Agreement.
6.5 Negative Covenants. Except as otherwise permitted herein, without
Symbollon's prior written consent which shall not be unreasonably withheld, B&L
shall not, directly or indirectly, sell, transfer or assign the Patent Rights or
any interest therein except in conjunction with an assignment of this Agreement
pursuant to Article 15, and B&L shall not, directly or indirectly, create,
incur, assume or suffer to exist any lien, security interest or encumbrance of
any nature on the Patent Rights other than as may be incurred (and removed) in
the ordinary course of business.
Article 7 - Royalties
7.1 Royalties. In addition to all other amounts due hereunder, B&L will
pay Symbollon with respect to each calendar quarter a royalty equal to [*
INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.] of Net Sales of Products during such
quarter. Such royalties shall be payable as prescribed in Article 9.
Notwithstanding anything in this Agreement to the contrary, if (i) a Product is
not at any time covered by a valid claim under the Patent Rights, the Licensed
Patents or a patented Joint Invention and (ii) a Generic to such Product is
being lawfully sold in the Territory by third party apart from the license
granted pursuant to this Agreement (and such Generic is not being sold in
contravention of any governmental, judicial or private regulatory rules,
regulations, laws, orders or judgments in effect in the Territory), B&L shall
have the right to sell a Generic to such Product in the Territory royalty free;
provided that the original Product sold by B&L shall remain subject the above
referenced royalty.
<PAGE>
7.2 Sublicense Fees. In addition to all other amounts due hereunder,
B&L will reimburse Symbollon with respect to each calendar quarter for [*
INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.] of any amounts that Symbollon is required to
pay to any third party due to B&L's sublicense of such third party's patent
rights during such quarter; provided that if, on a product-by-product basis, the
amount that Symbollon is required to pay (less any amounts reimbursed by B&L)
third parties due to B&L's sublicense of such third parties' patent rights
during such quarter exceeds [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.] of the
royalties that B&L is required to pay Symbollon for such quarter pursuant to
Section 7.1, then, in addition to the amount determined above that B&L will
reimburse Symbollon, B&L will also reimburse Symbollon for the amount by which
such third parties' payments exceeds [* INDICATES THAT MATERIAL HAS BEEN OMITTED
AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
of the royalties that B&L is required to pay Symbollon for such quarter pursuant
to Section 7.1. If B&L and Symbollon mutually agree, which agreement shall not
be unreasonably withheld, to license any additional third party Proprietary
Information related to a Product's composition of matter (excluding packaging),
then any and all amounts due with respect to such license (regardless of which
party is responsible for payment of such amounts) shall be governed by this
Section 7.2.
7.3 Overall Value. Because Symbollon's Proprietary Information is an
integral part of the license granted to B&L under this Agreement, precise
apportionment of royalties and other considerations with respect to the Patent
Rights, the Licensed Patents and Symbollon's Proprietary Information is
impossible. Accordingly, royalties and other consideration have been agreed upon
as set forth herein.
Article 8 - 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 B&L's Regulatory Filings or
Regulatory Approvals outside the Territory, either directly or in conjunction
with a third party, Symbollon shall pay B&L with respect to each calendar
quarter a royalty equal to [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.] of (i)
the amount received by Symbollon from the Gross Profits of such Products(s) or
product(s) and, without duplication, (ii) 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
moneys 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 8 exceed [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
in the aggregate.
<PAGE>
Article 9 - Payments
9.1 Timing of Royalty Payments. Royalties payable under Section 7.1 and
Article 8 will be paid without deduction, counterclaim or set-off 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 applicable 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.
9.2 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. Such auditor(s) or independent certified
accountant shall keep confidential (under written obligation of confidentiality
reasonably acceptable to the other party) any information obtained during such
examination and shall report to the party auditing such records only that
information required to be provided hereunder. 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.
9.3 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.
<PAGE>
Article 10 - B&L's Exclusivity Obligations
During the term of this Agreement, B&L will not directly or indirectly
research, develop and/or commercialize iodine-based products for use in the
Field except with Symbollon pursuant to this Agreement; provided, that B&L may
further develop and commercialize iodine-based products not covered by this
Agreement which are developed by an existing Affiliate of B&L, so long as prior
written notice is provided by B&L to Symbollon of such iodine-based product
development and commercialization efforts. Furthermore, nothing herein shall
prohibit existing Affiliates of B&L from developing and/or commercializing
iodine-based products not covered by this Agreement. After B&L has made the
payments required pursuant to Section 6.2(a) through (g), B&L may develop and/or
commercialize iodine-based products for use in the Field not covered by this
Agreement which are based on technology in-licensed by B&L from an unrelated
third party. If B&L decides to in-license an unrelated third party's technology
to develop and/or commercialize iodine-based products for use in the Field, B&L
will provide Symbollon will prior written notice of such action. If B&L
commercializes an iodine-based product for use in the Field not covered by this
Agreement which is based on technology in-licensed by B&L from an unrelated
third party, Symbollon will, in its sole discretion, have the right to terminate
this Agreement either in whole or in part (by reducing the scope of the Field on
a Product by Product basis), and such termination shall be deemed to be by
Symbollon pursuant to Section 16.2 for purposes of this Agreement.
Article 11 - Confidentiality and Publications
11.1 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) with regard to Inventions assigned to Symbollon pursuant to
Section 12.2(a) and Joint Inventions, is necessary to be
disclosed by Symbollon 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, or
(b) is required to be disclosed to governmental agencies in order
to gain approval to sell Products, or
(c) 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.
<PAGE>
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.
11.2 Joint Disclosures. B&L 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 12 - Ownership of Intellectual Property
12.1 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.
12.2 New Inventions. All Inventions which are made, or acquired, by B&L
during the term of this Agreement will be owned as follows:
(a) Inventions by B&L. Any Invention made by B&L during the term
of this Agreement shall be owned by and assigned to Symbollon
if, and only if, such Invention pertains to (i) any multi-part
system which forms a composition containing from 5 to in
excess of 300 ppm of diatomic iodine (I2), or (ii) the use of
excipients used in combination with such compositions that
modify the properties of said compositions including, by way
of example, decolorizers, reducing agents, sequestrants,
potentiators or viscosifiers; provided, that any Invention
related solely to technology acquired by B&L from an unrelated
third party, other than Symbollon, shall not be included. Any
and all such Inventions will be included within the license
granted to B&L pursuant to Section 4.1.
(b) Joint Inventions. Any Invention which is made by B&L's
personnel in conjunction with Symbollon's personnel and not
covered by subsection (a) of this Section 12.2 (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 B&L pursuant to Section 4.1 or (ii) B&L, if, and
only if, such Invention pertains to any Joint Invention not
covered by the preceding clause (i).
<PAGE>
12.3 Symbollon's Rights in B&L's Joint Inventions. B&L hereby grants
Symbollon a permanent, exclusive license (which license shall survive any
termination of this Agreement) to practice under the Patent Rights transferred
to B&L pursuant to Section 6.1 and to make, use and sell products utilizing such
Patent Rights outside the Field subject to Sections 4.4 and 4.5 on a
royalty-free basis. Further, B&L hereby grants Symbollon a permanent,
non-exclusive license (which license shall survive any termination of this
Agreement) to practice any Joint Invention owned by B&L and to make, use and
sell products utilizing any such Joint Invention outside the exclusive license
granted to B&L hereunder for all other applications (excluding contact lens
care) on a royalty-free basis. In addition, B&L agrees to disclose and hereby
grants a permanent, non-exclusive, license to Symbollon to practice any patented
invention (including any Invention) of B&L relating to a method of dispensing
iodine compositions developed or acquired by B&L during the term of this
Agreement outside the Field (as defined on the Effective Date), excluding
contact lens care, in the Territory and for any application outside the
Territory for a royalty of [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.] of Net
Sales of products received by Symbollon or its sublicensees incorporating such
invention.
12.4 License Upon Termination. In the event this Agreement is
terminated by B&L for cause pursuant to Section 16.2, Symbollon hereby grants
B&L a fully paid-up, permanent, non-exclusive license to practice under any
Invention covered by Section 12.2(a) or Joint Invention covered by Section
12.2(b) owned by Symbollon and to make, use and sell products utilizing any such
Invention covered by Section 12.2(a) or Joint Invention covered by Section
12.2(b) in the Field in the Territory.
12.5 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 12.2.
12.6 Disputes. Any dispute relating to the ownership of Inventions or
any other issue relating to a party's rights or obligations under this Article
12 which can not be decided by good faith negotiations between the parties,
shall be resolved by arbitration pursuant to Section 18.3.
Article 13 - Warranties/Indemnification/Insurance
13.1 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
<PAGE>
party or by which it is bound. Symbollon represents and warrants to B&L that, to
the best of its knowledge as of the Effective Date, there are no third parties
who are infringing the Patent Rights or the Licensed Patents existing as of the
Effective Date; the practice of the Patent Rights, the Licensed Patents and/or
Symbollon's Proprietary Information in the Territory does not infringe any
rights of third parties; and Symbollon has prosecuted all patent applications
within the Patent Rights in good faith and has no reason to believe that any
claims within the Patent Rights and the Licensed Patents would be invalid.
13.2. Disclaimer. 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. EXCEPT AS OTHERWISE PROVIDED HEREIN,
SYMBOLLON DOES NOT WARRANT THE VALIDITY OF THE PATENT RIGHTS OR THE LICENSED
PATENTS AND MAKES NO REPRESENTATION WHATSOEVER WITH REGARD TO THE SCOPE OF THE
PATENT RIGHTS OR THE LICENSED PATENTS.
13.3 Additional Covenants.
(a) B&L. B&L covenants and agrees with Symbollon that (a) B&L
shall take all Reasonable Commercial Efforts within its control to
develop and commercialize Products, (b) all Products manufactured by
B&L shall conform to applicable Regulatory Approvals and Good
Manufacturing Practices of the FDA, (c) B&L 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) B&L shall take all Reasonable Commercial Efforts
within its control to prohibit use of any Product for any application
outside the Field.
(b) Symbollon. Symbollon covenants and agrees with B&L that
Symbollon shall take all Reasonable Commercial Efforts within its
control (including requiring its licensee(s) to so agree) to prohibit
use of any of its products in the Territory for any application inside
the Field.
13.4 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
Article 11, and (b) any other activities to be carried out by the indemnifying
party, its Affiliate(s) or agents under this Agreement (including, without
limitation, with respect to B&L, the design, clinical testing, production,
<PAGE>
manufacture, sale, use, release or promotion by B&L or by any Affiliate or agent
of B&L, of any Product or process or service relating thereto).
13.5 Insurance. At all such times as any Product is being tested,
distributed or sold by B&L or any Affiliate, sublicensees or agents of B&L, B&L
shall, at its sole cost and expense, procure and maintain policies of product
liability insurance in such scope and coverage consistent with commercially
reasonable practices normally exercised under similar circumstances consistent
with good business judgment. B&L shall provide Symbollon with written notice of
such insurance coverage upon request by Symbollon. B&L shall provide Symbollon
with written notice immediately upon receipt by B&L 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. B&L 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 B&L or by any Affiliate, sublicensee or
agent of B&L and (b) a reasonable period after the period referred to in the
preceding clause (a).
13.6 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, B&L 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 Patent Rights, the Licensed Patents or Symbollon's Proprietary Information;
provided that if Symbollon withholds its consent, then Symbollon agrees to share
thereafter 50/50 in any subsequent expenses attributable to such claims made or
settlement paid by B&L, 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 B&L.
<PAGE>
Article 14 - Infringement and Trademarks
14.1 Notice of Infringement. Each party shall promptly notify the other
in writing of any infringement of a patent within the Patent Rights or 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 Patent Rights or 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, B&L may upon notice to Symbollon initiate legal proceedings against
the infringer in the Field in the Territory at B&L's expense.
14.2 Control, Cost and Cooperation in Infringement Actions. In the
event either party shall initiate or carry on legal proceedings to enforce the
Patent Rights or the Licensed Patents covered by this Article 14, the other
party shall be offered at the outset of such proceedings an opportunity to share
50/50 in all related expenses of such proceedings, 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. In the
event either party shall initiate or carry on legal proceedings to enforce the
Patent Rights or 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 Patent Rights or 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 B&L shall be in B&L'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 Patent Rights or the Licensed Patents
without the prior written consent of Symbollon, which consent shall not be
unreasonably withheld.
14.3 Recoveries Against Infringer. Any recovery obtained by either
party as the result of legal proceedings covered by this Article 14 to enforce
the Patent Rights or the Licensed Patents in the Field in the Territory against
an alleged infringer, whether obtained by settlement or otherwise, shall
allocated between the parties in accordance with their sharing of the expenses
of such proceedings.
<PAGE>
14.4 Trademarks. During the term of this Agreement, B&L shall have the
right to promote and sell Products under the license granted to it pursuant to
Section 4.1 under trademarks selected by B&L, which trademarks shall be and
remain, subject to Section 16.4, the property of B&L. Symbollon agrees not to
register and own any such trademarks outside the Territory.
Article 15 - Assignability
Except as expressly set forth in this Agreement, this Agreement shall
not be assignable by B&L without the prior written consent, which consent shall
not be unreasonably withheld, of Symbollon and any attempt to assign (directly
or indirectly) this Agreement, without such consent shall be void from the
beginning. B&L may assign this Agreement without Symbollon's consent to any
purchaser of, or successor in interest to, all or substantially all of B&L'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 and (b) to devote at least the same efforts and
resources to performance hereunder as B&L exerted immediately before the
assignment. Symbollon may assign this Agreement if such assignee agrees in
writing to accept and be bound by all of the terms and conditions of this
Agreement.
Article 16 - Term and Termination
16.1 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 later to occur of (i) the
expiration of the Patent Rights or the Licensed Patents (excluding any patent or
patent application covering an Invention assigned to Symbollon pursuant to
Section 12.2(a)) or (ii) the seventeenth (17th) anniversary of this Agreement
(the "Initial Term"); provided that the Initial Term of this Agreement will be
further extended if an Invention is assigned to Symbollon pursuant to Section
12.2(a) which Invention was conceived by B&L prior to the fifth anniversary of
this Agreement by the earlier to occur of (a) the expiration of any patent or
patent application covering such Invention assigned to Symbollon pursuant to
Section 12.2(a) which Invention was conceived by B&L prior to the fifth
anniversary of this Agreement or (b) the fifth (5th) anniversary of the Initial
Term of this Agreement. If, and only if, this Agreement terminates pursuant to
this Section 16.1, B&L shall be entitled to sell Products developed and
commercialized during the term of this Agreement in the Field in the Territory
royalty free of any license for Symbollon's know-how to develop such Products.
16.2 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:
<PAGE>
(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;
(b) failure by the other party in any material respect (other
than matters which are covered by clause (a) above) to observe or
perform any of the provisions of this Agreement on the other party's
part to be observed or performed, if such failure is not remedied
within thirty (30) calendar days after receipt of notice specifying
such failure;
(c) 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
(d) an order or 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.
16.3 Termination by B&L. B&L may terminate this Agreement by giving
Symbollon a notice of termination to be effective upon a termination date set
forth by B&L in such notice, which termination date shall not be sooner than
sixty (60) days after the date of the written notice if given prior to being
obligated to make the payment required in Section 6.2(b), ninety (90) days after
the date of the written notice if given after the payment required in Section
6.2(b) and prior to being obligated to make the payments required in Section
6.2(c) through (g), and anytime after being required to make all of the
foregoing payments, B&L shall not have any rights to terminate this Agreement
pursuant to this Section 16.3. 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 Patent Rights, the Licensed Patents and
Symbollon's Proprietary Information in the Field.
16.4 Effects of Termination. If this Agreement is terminated by
Symbollon pursuant to Section 16.2 or by B&L pursuant to Section 16.3, upon such
termination, the Patent Rights, and all Regulatory Filings and Regulatory
Approvals then owned by B&L with respect to any Product being developed or
<PAGE>
commercialized shall be assigned to Symbollon without charge and free of any and
all liens, claims, security interests and other encumbrances (except as may have
been incurred in the ordinary course of business and if so incurred, must be
removed by B&L, at its sole cost and expense, prior to transfer or upon notice
thereof), and B&L agrees to execute all such further documents as may be
reasonably required to effect such assignment. If this Agreement is terminated
by B&L pursuant to Section 16.2, upon such termination, the Patent Rights then
owned by B&L shall be assigned to Symbollon without charge and free of any and
all liens, claims, security interests and other encumbrances (except as may have
been incurred in the ordinary course of business and if so incurred, must be
removed by B&L, at its sole cost and expense, prior to transfer or upon notice
thereof), and B&L 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.
16.5 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 or
returned to stock after 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 Section
9.2, (e) obligations of insurance, defense and indemnity under Article 13, (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 11, (h) obligations upon termination to transfer the Patent Rights, and
all trademarks, Regulatory Filings and Regulatory Approvals then owned by B&L
under Section 16.4 and (g) 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 17 - Supply and Manufacture
B&L will have the exclusive right to manufacture or have manufactured
Products in the Field for sale within the Territory. Subject to execution of a
supply agreement mutually acceptable to both parties, Symbollon shall be
entitled to purchase Product from B&L (subject to facility capacity
constraints), if B&L is the manufacturer of such Product, at [* INDICATES THAT
MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
COMMISSION PURSUANT TO RULE 24b-2.], without duplication of any expense. If B&L
is not the manufacturer of such Product, B&L will use commercially reasonable
efforts to obtain for Symbollon the right to purchase such Product directly from
<PAGE>
B&L's manufacturing source at [* INDICATES THAT MATERIAL HAS BEEN OMITTED AND
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL
HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.].
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 18 - Miscellaneous
18.1 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:
To Symbollon:
Symbollon Corporation
37 Loring Drive
Framingham, MA 01702
Telephone: (508)-620-7676
Fax: (508)-620-7111
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 B&L:
Bausch & Lomb Pharmaceuticals, Inc.
8500 Hidden River Parkway
Tampa, FL 33637
Telephone: (800) 227-1427
Fax: (813) 975-7774
Attention: President
<PAGE>
With copy to:
Bausch & Lomb, Incorporated
One Bausch & Lomb Place
Rochester, N.Y. 14604-2701
Telephone: (716) 338-8600
Fax: (716) 338-8017
Attention: General Counsel
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.
18.2 Governing Law; Jurisdiction and Venue. With regard to any claim or
controversy initiated by B&L related to this contract or any breach thereof,
this Agreement shall be governed by the internal laws of The Commonwealth of
Massachusetts (without regard to conflict of law provisions), and with regard to
any claim or controversy initiated by Symbollon related to this contract or any
breach thereof, this Agreement shall be governed by the internal laws of the
State of New York (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 18.3, shall be submitted to United
States District Court, District of Massachusetts if such claim or controversy if
initiated by B&L and to United States District Court, District of New York if
such claim or controversy if initiated by Symbollon, and the parties hereby
consent to the jurisdiction and venue of such courts.
18.3 Limited Arbitration. Disagreements under Sections of this
Agreement which make specific reference to this Section 18.3 shall be settled by
arbitration in accordance with the licensing arbitration rules of the American
Arbitration Association by a board of arbitrators consisting of one arbitrator
appointed by B&L, one arbitrator appointed by Symbollon, and a third arbitrator
chosen by the mutual agreement of B&L and Symbollon, which third arbitrator
shall be unrelated either to B&L or Symbollon. Any arbitration hereunder shall
be held in Boston, Massachusetts if initiated by B&L and in Rochester, New York
if initiated by Symbollon. In such arbitration proceedings, this Agreement shall
be governed by and construed according to Massachusetts or New York law as
provided in Section 18.2. 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
<PAGE>
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.
18.4 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.
18.5 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 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 18.3 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.
18.6 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.
18.7 Independent Contractor. Nothing herein shall be deemed to
establish a relationship or principal and agent between B&L and Symbollon, nor
any of their respective agents or employees, for any purpose whatsoever. This
Agreement shall not be construed as constituting B&L 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.
18.8 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.
<PAGE>
18.9 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.
18.10 Force Majeure. Performance of a party's obligations hereunder
(other than the payment of money or the failure by B&L to provide insurance
pursuant to Section 13.5) 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.
18.11 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.
18.12 Exhibits and Schedules. The following Exhibits and Schedules 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
D Form of Patent Assignment
Schedules Subject Matter
--------- --------------
1.16 Exceptions to the Licensed Patents
[Signatures Appear on the Following Page.]
<PAGE>
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 BAUSCH & LOMB PHARMACEUTICALS, INC.
By:/s/ Paul C. Desjourdy By: /s/ Thomas Reidhammer
--------------------- ----------------------
Paul C. Desjourdy, Thomas Reidhammer,
Executive Vice President and President
Chief Financial Officer
<PAGE>
EXHIBIT A
Patent Applications and Patents
[* INDICATES THAT MATERIAL HAS BEEN OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED THEREFOR. ALL SUCH OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH
THE COMMISSION PURSUANT TO RULE 24b-2.]
<PAGE>
EXHIBIT B
Project Plan
[To be developed by the parties]
<PAGE>
EXHIBIT C
Initial Members of the JDC
Symbollon: 1. Jack Kessler
2. Paul C. Desjourdy
B&L: 1. David Jarosz
2. Harold Schlevin
3. Ellen Strahlman
<PAGE>
EXHIBIT D
Form of Patent Assignment
PATENT ASSIGNMENT
WHEREAS, Symbollon Corporation located and doing business at 37 Loring
Drive, Framingham, Massachusetts 01702, hereinafter referred to as the
"assignor", is the owner of United States Letters Patent No. 5,639,481 issue
date June 17, 1997 and entitled "Method for the Therapeutic Treatment of a
Mammalien Eye Using an Admixed Composition Containing Free Molecular Iodine";
and
WHEREAS, Bausch & Lomb Pharmaceuticals, Inc. located and doing business
at 8500 Hidden River Parkway, Tampa, Florida 33637, hereinafter referred to as
the "assignee", is desirous of acquiring the entire right, title and interest in
the same;
NOW THEREFORE, in consideration of the sum of ten dollars ($10.00) the
receipt of which is hereby acknowledged, and other good and valuable
consideration we, the assignor, by these present do sell, assign and transfer
unto said assignee all right, title and interest in and to said United States
Letters Patent No.
5,639,481 with the right to sue for past infringement of said patent.
SYMBOLLON CORPORATION
By________________________________
Paul C. Desjourdy, Exec. Vice President
Dated: July ___, 1997
Attest:
- ------------------------
Jack H. Kessler, Secretary
Corporate Seal
<PAGE>
SCHEDULE 1.16
Exceptions to the Licensed Patents
None.
<PAGE>
SYMBOLLON CORPORATION
STOCK PURCHASE AGREEMENT
This Agreement dated as of August 4, 1997 is entered into by and
between Symbollon Corporation, a Delaware corporation, residing at 37 Loring
Drive, Framingham, Massachusetts 01702 (the "Company"), and Bausch & Lomb
Pharmaceuticals, Inc., a Delaware corporation ("B&L"), residing at 8500 Hidden
River Parkway, Tampa, Florida 33637 (B&L and any subsequent valid and permitted
transferee, shall hereinafter be collectively referred to as the "Purchaser").
Certain other terms are defined in Section 9 below.
A. The Company and B&L have entered into a Collaboration and
Sale/License Agreement of even date herewith (the "Collaboration and
Sale/License Agreement") pursuant to which the Company and B&L have provided for
the development and commercialization of products for the treatment of various
ophthalmic conditions;
B. In connection with the execution and delivery of the Collaboration
and Sale/License Agreement, the Purchaser desires to purchase, and the Company
desires to sell, shares of the Company's Class A Common Stock, $.001 par value
per share (the "Common Stock") upon the terms and conditions hereinafter
described.
In consideration of the mutual promises and covenants contained in the
Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the Closings (as
defined in Section 2) will have, duly authorized and taken all such corporate
and other actions within its control as is necessary for the issuance, sale and
delivery, pursuant to the terms of this Agreement, of that number of shares of
the Common Stock that can be purchased for a purchase price of eight hundred
fifty thousand dollars ($850,000) as is determined by dividing $850,000 by the
applicable Market Price relevant thereto as defined in Section 2 below.
1.2 Sale of Shares. Subject to the terms and conditions of
this Agreement, at the First Closing (as defined in Section 2) the Company will
sell and issue to B&L, and B&L will purchase, for an aggregate purchase price of
$500,000 that number of shares of the Common Stock as is determined by dividing
$500,000 by the Market Price per share on the First Closing Date (the "First
Closing Shares"). Subject to the terms and conditions of this Agreement, at the
<PAGE>
Second Closing (as defined in Section 2) the Company will sell and issue to B&L,
and B&L will purchase, for an aggregate purchase price of $350,000 that number
of shares of the Common Stock as is determined by dividing $350,000 by the
Market Price per share on the Second Closing Date (the "Second Closing Shares").
The First Closing Shares and the Second Closing Shares are hereinafter referred
to collectively as the "Shares".
2. The Closings. The closing of the sale and purchase of the First
Closing Shares shall take place at the offices of the Company, or such other
mutually agreeable location as the parties may deem appropriate, on the date
hereof unless the parties shall otherwise agree in writing (the "First
Closing"). The closing of the sale to and purchase of the Second Closing Shares
shall take place at the offices of the Company, or such other mutually agreeable
location as the parties may deem appropriate, on the date the payment is due by
B&L to the Company pursuant to Section 6.2(b) of the Collaboration and
Sale/License Agreement, if and when such payment becomes due (the "Second
Closing").
The First Closing and the Second Closing are sometimes each referred to
hereinafter as a "Closing" and collectively as the "Closings". The date of the
First Closing is hereinafter referred to as the "First Closing Date" and the
date of the Second Closing is hereinafter referred to as the "Second Closing
Date".
At each of the Closings, the Company shall deliver to B&L certificates
for the number of Shares being purchased by B&L, registered in the name of B&L,
against payment to the Company of the purchase price therefor, by wire transfer.
The purchase price per share for the Shares to be purchased at the Closings
shall be the average of the closing price of the Common Stock for the
immediately preceding five trading days before the First Closing Date or the
Second Closing Date, as applicable (the "Market Price").
3. Representations of the Company. The Company hereby represents and
warrants to B&L as follows:
3.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as presently conducted and as proposed to be conducted by it and to
enter into and perform this Agreement and to carry out the transactions
contemplated hereby. The Company is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business transacted by it or the character or location of its properties
requires such qualification, except where the failure to so qualify would not
have a Material Adverse Effect.
<PAGE>
3.2 Capitalization. The authorized capital stock of the
Company as of the date hereof consists of 18,750,000 shares of the Common Stock,
1,250,000 shares of Class B Common Stock, $.001 par value per share, and
5,000,000 shares of Preferred Stock, $.001 par value per share, of which
2,913,234 shares of the Common Stock and 15,738 shares of Class B Common Stock
are outstanding as of the date hereof without taking into effect the
transactions contemplated by this Agreement. As of the date of this Agreement,
there are 1,572,080 Class A Warrants (each of which is exercisable to purchase
one share of Class A Common Stock and one Class B Warrant on the terms and
conditions thereof) and 1,227,920 Class B Warrants (each of which is exercisable
to purchase one share of Class A Common Stock on the terms and conditions
thereof) presently outstanding. As of the date of this Agreement, there are
options outstanding to purchase 100,000 Units (a Unit consists of one share of
Class A Common Stock, one Class A Warrant and one Class B Warrant), and 691,222
shares of Class A Common Stock. All shares outstanding on the date hereof are,
and any shares that will be issued under the terms and conditions of the
warrants and options referred to above, when issued in accordance with their
terms, will be, duly authorized, validly issued and fully paid and
nonassessable. There are no preemptive rights, rights of first refusal, or other
similar rights available to the existing holders of Common Stock or other
securities of the Company.
3.3 Issuance of Shares. The issuance, sale and delivery of the
Shares have been, or will be on or prior to the applicable Closing Date, duly
authorized by all necessary corporate action on the part of the Company. The
Shares, when issued, sold and delivered against payment therefor in accordance
with the provisions of this Agreement, will be duly and validly issued, fully
paid and non-assessable and free and clear of any liens or preemptive, rights of
first refusal, or other similar rights (other than Applicable Securities Laws
and the terms of this Agreement).
3.4 Authority for Agreement; No Conflicts. The execution,
delivery and performance by the Company of this Agreement, and the consummation
of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and delivered
by the Company, and is enforceable against it in accordance with its terms,
except that such enforcement may be subject to applicable bankruptcy,
receivership, fraudulent transfer, moratorium and similar laws affecting
creditors' rights, and the remedy of specific performance and injunctive relief
may be subject to equitable defenses and to the discretion of the court for
which proceeding therefor may be brought. The execution and delivery of this
Agreement and performance of the transactions contemplated by this Agreement and
compliance with its provisions by the Company will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under, its Certificate of
<PAGE>
Incorporation or By-Laws (each as amended to date) or any indenture, lease,
agreement or other instrument to which the Company is party or by which it or
any of its properties is bound, or violate any decree, judgment, order, statute,
rule, regulation or other provision of law applicable to the Company, except in
each case as would not result in a Material Adverse Effect.
3.5 Governmental Consents. No consents, approval, order or
authorization of, or regulation, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
in connection with the execution and delivery of this Agreement or the offer,
issuance, sale and delivery of the Shares or the other transactions to be
consummated at any Closing, as contemplated by this Agreement, except for
compliance with the provisions of any laws as to which the failure to be made or
obtained would not result in a Material Adverse Effect and such filings as shall
have been made prior to and shall be effective on and as of the applicable
Closing, except that any notices of sale required to be filed with the
Securities and Exchange Commission (the "Commission") under Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"), or such post-closing
filings as may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor.
3.6 Corporate Condition. The Company's condition was, in all
material respects, as described in the Disclosure Documents at the respective
dates thereof, including without limitation the reports filed pursuant to the
Exchange Act. There has been no material adverse change in the Company's
business, financial condition or prospects since March 31, 1997. The Disclosure
Documents are true and correct as of their respective dates, in all material
respects, and the financial statements contained in the Disclosure Documents
have been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial position and results of
operation and cash flows of the Company, for the periods then ended. Without
limiting the foregoing as of the date hereof, there are no material pending or
threatened litigation or other material liabilities, contingent or actual, that
are not disclosed in the Disclosure Documents except as incurred in the ordinary
course of business since March 31, 1997. This Agreement and the Disclosure
Documents do not contain any untrue statement of a material fact and do not omit
to state any material fact required to be stated therein or herein necessary to
make statements contained therein or herein not misleading in the light of the
circumstances under which they were made.
3.7 Current Public Information. During the three months prior
to the execution of this Agreement, the Company has filed all the materials
required to be filed as reports pursuant to the Exchange Act on a timely basis.
<PAGE>
4. Representations of the Purchaser. The Purchaser represents and
warrants to the Company as follows (such representations and warranties shall be
true and correct on the date hereof and on and as of the Second Closing Date):
4.1 Investment. The Purchaser is acquiring the Shares for its
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the same. The Purchaser is an "Accredited Investor" within the
meaning of Rule 501(a)(3) of Regulation D under the Securities Act. The
Purchaser understands that the Shares have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions thereof which depends upon, among other things, the bona fide nature
of its investment intent as expressed herein. The Purchaser will not transfer
the Shares except in compliance with Applicable Securities Laws and the terms of
this Agreement.
4.2 Power and Authority. The Purchaser has the full power and
authority to execute, deliver and perform this Agreement. This Agreement, when
executed and delivered by the Purchaser, will constitute a valid and legally
binding obligation of the Purchaser, enforceable in accordance with its terms.
4.3 State of Jurisdiction. The Purchaser represents and
warrants that all matters and actions relevant to its considerations,
evaluations or executions of this Agreement or the transactions contemplated
hereby by its including, without limitation, the receipt of any offer to
purchase, the receipt and review of any documents or other materials relevant
hereto, the participation in any communications with the Company or any other
party, and the consummation of the transactions contemplated hereby occurred
solely in Florida or Massachusetts.
4.4 Independent Investigation. The Purchaser has relied solely
upon an independent investigation made by it and its representatives and has,
prior to the date hereof, been given access to and the opportunity to examine
all material contracts and documents of the Company which have been filed as
exhibits to the Company's filings made under the Securities Act and the Exchange
Act through publicly available means. The Purchaser has been provided with
copies of the Company's (i) Annual Report on Form 10-KSB for the year ended
December 31, 1996; (ii) Annual Report to Stockholders for the year ended
December 31, 1996, (iii) Registration Statement on Form S-3 filed with the
Commission on May 21, 1997, (iv) Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1997; (v) Risk Factors, attached hereto as Exhibit 4.4, and (vi)
Proxy Statement dated April 9, 1997 (collectively, the "Disclosure Documents").
The Purchaser has requested, received, reviewed and considered all information
it deems relevant in making a decision to execute this Agreement and to purchase
the Shares. In making its investment decision to purchase the Shares, the
<PAGE>
Purchaser is not relying on any oral or written representations or assurances
from the Company or any other person or any representation of the Company or any
other person other than as set forth in this Agreement, or the Disclosure
Documents.
4.5 Economic Risk. The Purchaser understands and acknowledges
that an investment in the Shares involves a high degree of risk. The Purchaser
acknowledges that there are limitations on the liquidity of the Shares. The
Purchaser represents that the Purchaser is able to bear the economic risk of an
investment in the Shares, including a possible total loss of investment. The
Purchaser has such knowledge and experience in financial and business matters
that the Purchaser is capable of evaluating the merits and risks of the
investment in the Shares to be received by the Purchaser; and that the Purchaser
is sophisticated accredited investor with experience with development stage
issuers engaged in biotech and pharmaceutical businesses.
4.6 No Conflicts. The execution of and performance of the
transactions contemplated by this Agreement and compliance with its provisions
by the Purchaser will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, or require a
consent or waiver under any indenture, lease, agreement or other instrument to
which the Purchaser is a party or by which it or any of its properties are
bound, or violate any decree, judgment, order, statute, rule, regulation or
other provision of law applicable to the Purchaser, which violation would
prevent, impair, hinder or delay the consummation of the transactions
contemplated by this Agreement.
4.7 Governmental Consents. No consents, approval, order or
authorization of, or regulation, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Purchaser
in connection with the execution and delivery of this Agreement or the purchase
of the Shares or the other transactions to be consummated at any Closing, as
contemplated by this Agreement.
4.8 Brokers, Etc. The Purchaser has dealt with no broker,
finder, commission agent or person in connection with the offer or sale of the
Shares and the transactions contemplated by this Agreement and neither the
Purchaser nor the Company is under any obligation to pay any broker's fees,
finder's fees, or other fees or commissions in connection with such transactions
as a result of any action by the Purchaser.
5. Conditions to the Obligations of the Purchaser at the Closings.
Notwithstanding anything to the contrary contained herein, the obligation of the
Purchaser to purchase Shares at each of the Closings is subject to the
fulfillment, or the waiver by the Purchaser, of each of the following conditions
on or before each Closing:
<PAGE>
5.1 Accuracy of Representations and Warranties. Each
representation and warranty of the Company contained in Section 3 hereof shall
be true on and as of each Closing Date in all material respects with the same
effect as though such representation and warranty had been made on and as of
that date.
5.2 Performance. The Company shall have performed and complied
in all material respects with all agreements and conditions contained in this
Agreement and the Collaboration and Sale/License Agreement required to be
performed or complied with by the Company prior to or at each Closing.
5.3 Qualifications. There shall not be in effect any law, rule
or regulation prohibiting or restricting the sale and issuance of the Shares or
requiring any consent or approval of any person or governmental entity which
shall not have been obtained prior to the issuance of the Shares in such
Closing.
5.4 Collaboration and Sale/License Agreement. The Company and
the Purchaser shall have executed and delivered the Collaboration and
Sale/License Agreement, and that as of each Closing Date, the Collaboration and
Sale/License Agreement shall be a validly existing agreement.
5.5 Proceedings and Documents. All corporate or other
proceedings in connection with the transactions contemplated at such Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser and its counsel and the Purchaser shall have received
all such counterpart original and certified or other copies of such documents as
it may reasonably request.
5.6 Issuance of Shares. The Company shall have taken all steps
necessary to instruct its transfer agent to issue a share certificate or
certificates representing the Shares issued in such Closing.
5.7 Compliance Certificate. An authorized officer of the
Company shall have delivered to the Purchaser a certificate certifying that the
conditions specified in Sections 5.1, 5.2, and 5.3 have been fulfilled and
stating that there shall have been no adverse change in the business, affairs,
properties, assets or conditions of the Company since the Effective Date, except
as otherwise disclosed in any report or other document filed by the Company with
the Commission under the Securities Act or the Exchange Act from the date hereof
through the applicable Closing Date.
6. Conditions to the Obligations of the Company. Notwithstanding
anything to the contrary contained herein, the obligations of the Company to
<PAGE>
issue, sell and deliver at each Closing the Shares are subject to fulfillment,
on or before each Closing Date, of each of the following conditions:
6.1 Accuracy of Representations and Warranties. Each
representation and warranty of the Purchaser contained in Section 4 hereof shall
be true on and as of each Closing Date in all material respects with the same
effect as though such representation and warranty had been made on and as of
that date.
6.2 Performance. The Purchaser shall have performed and
complied in all material respects with all agreements and conditions contained
in this Agreement and the Collaboration and Sale/License Agreement required to
be performed or complied with by the Purchaser prior to or at each Closing.
6.3 Qualifications. There shall not be in effect any law, rule
or regulation prohibiting or restricting the sale and issuance of the Shares or
requiring any consent or approval of any person or governmental entity which
shall not have been obtained prior to the issuance of the Shares in such
Closing.
6.4 Collaboration and Sale/License Agreement. The Company and
the Purchaser shall have executed and delivered the Collaboration and
Sale/License Agreement, and that as of each Closing Date, the Collaboration and
Sale/License Agreement shall be a validly existing agreement.
6.5 Required Payment. The Purchaser shall have delivered in
accordance with this Agreement and the Collaboration and Sale/License Agreement
the purchase price of $500,000 (with respect to the First Closing), the purchase
price of $350,000 (with respect to the Second Closing), and all amounts as
required to be paid by the Purchaser pursuant to the terms of the Collaboration
and Sale/License Agreement.
6.6 Compliance Certificate. An authorized officer of the
Purchaser shall have delivered to the Company a certificate certifying that the
conditions specified in Sections 6.1, 6.2, and 6.3 have been fulfilled.
7. Transfer Restrictions and Registration.
7.1 Legend. Unless and until otherwise permitted, each
certificate representing the Shares shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NO
TRANSFER, SALE OR OTHER DISPOSITION OF THESE SHARES MAY BE MADE UNLESS A
<PAGE>
REGISTRATION STATEMENT WITH RESPECT TO THESE SHARES HAS BECOME EFFECTIVE UNDER
SAID ACT, OR SYMBOLLON CORPORATION IS FURNISHED WITH AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS NOT
REQUIRED."
`THE SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON THEIR TRANSFER, SALE
OR OTHER DISPOSITION AND ARE SUBJECT TO CERTAIN REDEMPTION PROVISIONS PURSUANT
TO A STOCK PURCHASE AGREEMENT DATED AUGUST 4, 1997. A COPY OF WHICH IS
AVAILABLE UPON WRITTEN REQUEST OF SYMBOLLON CORPORATION WITHOUT CHARGE."
and any legend required by any applicable state securities laws.
7.2 Required Registration. The Purchaser shall have the right,
exercisable upon written notice to the Company, to request the Company to file a
registration statement on the Form S-3 (or other applicable form, as the Company
determines appropriate) covering the Base Shares purchased hereunder after the
fourth anniversary of the date of this Agreement. Upon receipt of any such
notice, the Company shall, as expeditiously as possible, use commercially
reasonable efforts to effect such registration, obtain any governmental approval
and effect listing with any securities exchange on which the stock of the
Company is then listed, which may be required to permit the Purchaser to dispose
of the Shares. The Company shall use its commercially reasonable efforts to
maintain the effectiveness of the registration statement until the first to
occur of (i) the completion of the distribution of the Shares covered thereby,
(ii) such time as the Shares covered thereby may be sold without restrictive
legend under Rule 144 or other exemption from the registration requirements of
the Securities Act, or (iii) 90 days from the effective date of the registration
statement. The Company agrees to keep the registration statement current
during such period. The Company's obligation shall be limited to one
registration covering the Base Shares.
The Purchaser shall have the right, exercisable upon written notice to
the Company, to request the Company to file a registration statement on the Form
S-3 (or other applicable form, as the Company determines appropriate) covering
the Additional Shares purchased hereunder after the seventh anniversary of the
date of this Agreement. Upon receipt of any such notice, the Company shall, as
expeditiously as possible, use commercially reasonable efforts to effect such
registration, obtain any governmental approval and effect listing with any
securities exchange on which the stock of the Company is then listed, which may
be required to permit the Purchaser to dispose of the Shares. The Company shall
use its commercially reasonable efforts to maintain the effectiveness of the
registration statement until the first to occur of (i) the completion of the
distribution of the Shares covered thereby, (ii) such time as the Shares covered
<PAGE>
thereby may be sold without restrictive legend under Rule 144 or other exemption
from the registration requirements of the Securities Act, or (iii) 90 days from
the effective date of the registration statement. The Company agrees to keep the
registration statement current during such period. The Company's obligation
shall be limited to one registration covering the Additional Shares.
Notwithstanding anything contained in this Section 7.2 to the contrary,
the Company shall not be obligated to effect a registration covering the Shares
if at the time of request, all such Shares can be immediately sold without
restrictive legend under Rule 144 or other exemption from the registration
requirements of the Securities Act. The Company shall not be required to cause a
registration statement to become effective pursuant to this Section 7.2 prior to
120 days following the effective date of the most recent registration by the
Company under the Securities Act.
7.3 Piggy-Back Registration Rights. With regard to the Base
Shares and the Additional Shares, if the Company at any time after the fourth
and the seventh anniversary, respectively, proposes to register under the
Securities Act any of its Common Stock on any form on which the Shares may be
included, except shares to be issued in connection with any acquisition of any
entity or business, shares issuable upon the exercise of stock options or shares
issuable pursuant to employee benefit plans, it will each such time give written
notice to the Purchaser of its intention to do so. If the Purchaser desires to
have any of its Shares purchased hereunder included in such registration, it
shall, within 20 days after it receipt of such notice from the Company, notify
the Company of the number of shares which it desires to have so included and the
manner in which it proposes to dispose of such Shares. The Company will cause
all such Shares requested to be registered by the Purchaser to be registered or
qualified to the extent requisite to permit the sale or other disposition
thereof in the manner described by the Purchaser; provided, however, that if, in
connection with the offering of Common Stock pursuant to a registration under
the Securities Act, such offering includes shares of Common Stock being sold by
the Company and the managing underwriter shall impose a limitation on the number
of shares of the Common Stock which may be included in any such registration
statement because, in its judgment, such limitation is necessary to effect an
orderly public distribution and such limitation is imposed pro rata with respect
to all securities which have an incidental or "piggy back" rights to be included
in the registration statement, then the Company shall be obligated to include in
such registration statement only such limited portion of the Shares which it has
been requested hereunder to include.
In connection with any such offering, the Purchaser shall execute such
agreements as the underwriters shall reasonably request, including without
limitation "lock-up" agreements. Notwithstanding anything contained in this
<PAGE>
Section 7.3 to the contrary, the Company shall not be required to offer the
Purchaser the right to participate in more than two offerings.
7.4 Non-public Information. Notwithstanding anything to the
contrary in this Section 7, the Company shall have the right (i) to defer the
initial filing or request for acceleration of effectiveness of any registration
or (ii) after effectiveness, to suspend effectiveness of any such registration
statement, if, in the good faith judgment of the board of directors of the
Company, such delay in filing or requesting acceleration of effectiveness or
such suspension of effectiveness is necessary in light of the existence of
material non-public information (financial or otherwise) concerning the Company
disclosure of which at the time is not, in the opinion of the board of directors
of the Company, (A) otherwise required and (B) in the best interests of the
Company; provided however that the Company will use its commercially reasonable
efforts to terminate such delay or suspension as soon as practicable.
7.5 Payment of Expenses. The Company shall bear the expense
(excluding underwriting commissions, dealers' fees, brokers' fees, concessions
applicable to the Shares, legal fees and expenses of the Purchaser and any
out-of-pocket expenses of the Purchaser) of all registrations pursuant to this
Section 7.
7.6 Indemnification. The Company hereby agrees to indemnify
and hold harmless the Purchaser and any underwriter against all losses, claims,
damages, liabilities and expenses (under the Applicable Securities Laws, or
common law or otherwise) caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus or any
other document prepared and/or furnished to the Purchaser incident to such
registration statements or prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein complete or not misleading except
insofar as such losses, claims, damages, liabilities or expenses are caused by
any untrue statement or omission contained in information furnished in writing
to the Company by the Purchaser expressly for use therein. In connection with
any registration statement in which the Purchaser is participating, and as a
condition to the obligation of the Company to cause any Shares of the Purchaser
to be included in a registration statement pursuant to this Section 7, the
Purchaser will furnish to the Company in writing such information as shall
reasonably be requested by the Company for use in any such registration
statement or prospectus and will indemnify, severally and not jointly, the
Company, its directors and officers, each person, if any, who controls the
Company within the meaning of the Applicable Securities Laws, such underwriters
and each person who controls such underwriters within the meaning of the
<PAGE>
Applicable Securities Laws, against any losses, claims, damages, liabilities and
expenses resulting from any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus and necessary to make the
statements therein complete or not misleading, but only to the extent that such
untrue statement or omission is contained in information so furnished in writing
by the Purchaser expressly for use therein.
Promptly after receipt by any person entitled to indemnity hereunder
(the "Indemnified Party") of notice of the commencement of any action in respect
of which indemnity may be sought against another party hereunder (the
"Indemnifying Party") such Indemnified Party will notify the Indemnifying Party
in writing of the commencement thereof, and, subject to the provisions
hereinafter stated, the Indemnifying Party shall assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to such Indemnified Party), and the payment of expenses as incurred
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against the Indemnifying Party. Such Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Indemnifying Party unless (i) the employment
of such counsel has been specifically authorized by the Indemnifying Party or
(ii) the Indemnifying Party shall have failed to assume the defense of such
action or proceeding. The Indemnifying Party shall not be liable to indemnify
any person for any settlement of any such action effected without the
Indemnifying Party's consent, which consent shall not be unreasonably withheld
or delayed.
If the indemnification provided for in this Section is held by a court
of competent jurisdiction to be unavailable to the Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other hand in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
<PAGE>
7.7 Exchange Act Registration Requirements. The Company shall
use its commercially reasonable efforts to remain subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act. The
Company shall file with the Commission in a timely manner such information as
the Commission may require under either of said Sections, and shall take all
reasonable action as may be required to be taken under the Exchange Act to
permit sales of the Shares pursuant to Rule 144 (or any similar or successor
exemptive rule hereafter in effect) and the use of Form S-3 (or any similar form
which hereafter may be promulgated under the Securities Act) for registration of
the Shares.
7.8 Notice. The Company shall provide notice to the Purchaser
of any "stop order" or other notice affecting the Purchaser's right to sell the
Shares under any effective registration statement.
8. Covenants of the Purchaser.
8.1 Transfer Restrictions. On or before the fourth anniversary
of this Agreement, B&L shall not, directly or indirectly, transfer, sell, assign
or otherwise encumber the Base Shares except as noted below. Starting with the
payment due pursuant to Section 6.2(c) of the Collaboration and Sale/License
Agreement, and for each payment due on or before the fourth anniversary of this
Agreement, B&L shall have the right to offset a portion of the payment then due
with up to 50% of the Base Shares; provided, that for the payment due pursuant
to Section 6.2(e) of the Collaboration and Sale/License Agreement such offset
may be up to 100% of the Base Shares. The Base Shares shall be valued at their
original Market Price per share. At any time on or before the fourth anniversary
of this Agreement, Symbollon shall have a right to purchase some or all of the
Base Shares from B&L at their original Market Price per share.
On or before the seventh anniversary of this Agreement, B&L shall not,
directly or indirectly, transfer, sell, assign or otherwise encumber the
Additional Shares except as noted below. Starting with the payment due pursuant
to Section 6.2(e) of the Collaboration and Sale/License Agreement, and for each
payment due on or before the seventh anniversary of this Agreement, B&L shall
have the right to offset a portion of the payment then due with up to one
hundred seventy thousand dollars ($170,000) of the Additional Shares; provided,
that for the payment due pursuant to Section 6.2(g) of the Collaboration and
Sale/License Agreement such offset may be up to 100% of the Additional Shares;
and provided, further, that for any payment (except for the payment due pursuant
to Section 6.2(g) of the Collaboration and Sale/License Agreement) that B&L has
a right to offset a portion of such payment with both Base Shares and Additional
Shares, B&L shall only be allowed to offset such payment with an amount of
Additional Shares such that the offset does not exceed one hundred seventy
thousand ($170,000) of the Shares. The Additional Shares shall be valued at
their original Market Price per share. At any time on or before the seventh
<PAGE>
anniversary of this Agreement, Symbollon shall have a right to purchase some or
all of the Additional Shares from B&L at their original Market Price per share.
For purposes of B&L's right to offset payments with the Shares and
Symbollon's right to purchase the Shares, the Shares shall be offset and
purchased, as the case may be, in the order in which the Shares were originally
purchased from Symbollon. The Base Shares shall be deemed to have been purchased
prior to the Additional Shares.
8.2 Voting Agreement. The Purchaser agrees that it, and its
affiliates, shall vote any shares of the Common Stock, including the Shares, in
such manner as the Company's Board of Directors shall recommend and, in the
absence of any such recommendation, the same proportion as the other outstanding
voting shares of Symbollon are voted on any matter submitted to the shareholders
for consideration; provided, however, that the foregoing voting requirement
shall not apply to the Purchaser in any transaction which is not approved by the
Company's Board of Directors or in the event of a proposed merger or combination
or sale of substantially all of the assets of the Company to a competitor of the
Purchaser.
8.3 Forfeiture. If the Collaboration and Sale/License
Agreement is terminated before the payments required pursuant to Sections 6.2(a)
through (g) of the Collaboration and Sale/License Agreement are made by the
Purchaser, then the Purchaser shall transfer the Additional Shares held by the
Purchaser to Symbollon for no consideration.
8.4 Standstill. Except for the Shares, prior to the seventh
anniversary of this Agreement, B&L, and its affiliates, shall not acquire any
securities of the Company without the Company's consent.
8.4 Redemption Rights. If the Collaboration and Sale/License
Agreement is terminated by B&L pursuant to Sections 16.2 or 16.3 thereof prior
to the fourth anniversary of this Agreement, then after the completion of each
calendar year thereafter which ends prior to the seventh anniversary of this
Agreement, B&L shall have the right to require the Company to purchase at their
original Market Price per share that number of the Base Shares then outstanding
equal to twenty-five percent (25%) of the Company's positive cash flows from
operating activities, as determined under generally accepted accounting
principles, for that calendar year. B&L may exercise its right to require
redemption in accordance with this Section 8.4 for a given calendar year by
sending written notice to the Company within 30 days of its receipt of the
Company's audited financial statements for such year.
9. Definitions. When used in this Agreement, the following terms shall
have the meanings indicated.
<PAGE>
"Additional Shares" mean the remaining one hundred fifty
thousand dollars ($150,000) of the Shares purchased by the Purchaser from the
Company on the First Closing Date after subtracting the Base Shares, together
with the Shares purchased by the Purchaser from the Company on the Second
Closing, if and when purchased.
"Applicable Securities Laws" means the applicable Federal and
state securities laws.
"Base Shares" mean three hundred fifty thousand dollars
($350,000) of the Shares purchased by the Purchaser from the Company on the
First Closing Date.
"Class A Common Stock" means the Company's Class A Common
Stock, $.001 par value per share.
"Class B Common Stock" means the Company's Class B Common
Stock, $.001 par value per share.
"Closing" shall have the meaning specified in Section 2.
"Collaboration and Sale/License Agreement" shall have the
meaning specified on the first page hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class A Common Stock.
"Company" means Symbollon Corporation, a Delaware corporation.
"Disclosure Documents" shall have the meaning specified in
Section 4.4.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"First Closing" shall have the meaning specified in Section 2.
"First Closing Date" shall have the meaning specified in
Section 2.
"First Closing Shares" shall have the meaning specified in
Section 1.2.
<PAGE>
"Indemnified Party" shall have the meaning specified in
Section 7.6.
"Indemnifying Party" shall have the meaning specified in
Section 7.6.
"Market Price" shall have the meaning specified in Section 2.
"Material Adverse Effect" means a material adverse effect on
the business, prospects, condition (financial or otherwise), assets or results
of operations of the Company taken as a whole.
"Purchaser" means Bausch & Lomb Pharmaceuticals, Inc., and any
subsequent valid transferee.
"Second Closing" shall have the meaning specified in
Section 2.
"Second Closing Date" shall have the meaning specified in
Section 2.
"Second Closing Shares" shall have the meaning specified in
Section 1.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" shall have the meaning specified in Section 1.2.
"Units" means securities of the Company each of which consist
of one share of Class A Common Stock, one Class A Warrant and one Class B
Warrant.
10. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered in person with
receipt acknowledged or mailed by first class certified or registered mail,
return receipt requested, postage prepaid, by reputable overnight mail or
courier, with receipt confirmed, or by telecopy and confirmed by telecopy
answerback, addressed as follows:
If to the Company:
Symbollon Corporation
37 Loring Drive
Framingham, Massachusetts 01702
Telephone: (508) 620-7676
Telecopy: (508) 620-7111
Attn: President
<PAGE>
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 B&L:
Bausch & Lomb Pharmaceuticals, Inc.
8500 Hidden River Parkway
Tampa, FL 33637
Telephone: (800) 227-1427
Fax: (813) 975-7774
Attention: President
With copy to:
Bausch & Lomb, Incorporated
One Bausch & Lomb Place
Rochester, N.Y. 14604-2701
Telephone: (716) 338-8600
Fax: (716) 338-8017
Attention: General Counsel
or at such other address or addresses as may have been furnished in writing by
any party to the other in accordance with the provisions of this Section 10.
Notices and other communications provided in accordance with this Section 10
shall be deemed delivered upon receipt.
11. Entire Agreement. This Agreement, together with the Exhibits and
documents incorporated by reference herein, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
12. Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
<PAGE>
consent of the Company and the Purchaser. Any amendment or waiver effected in
accordance with this Section 12 shall be binding upon each party. No waivers of
or exceptions to any terms, condition or provision of this Agreement, in any one
or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
14. Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
15. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of The Commonwealth of Massachusetts.
17. Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto, provided that B&L (and any subsequent
permitted Purchaser) may not assign its rights hereunder without the prior
written consent of the Company.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SYMBOLLON CORPORATION BAUSCH & LOMB PHARMACEUTICALS, INC.
By: /s/ Paul C. Desjourdy By: /s/ Thomas Reidhammer
---------------------- ----------------------
Paul C. Desjourdy, Thomas Reidhammer.
Executive Vice President and President
Chief Financial Officer
<PAGE>
EXHIBIT 4.4
RISK FACTORS
An investment in the securities offered hereby involves a high degree
of risk. Prior to making an investment, the Purchaser should carefully consider
the following factors, as well as others described elsewhere in the Disclosure
Documents, relating to the business of the Company and the securities offered
hereby.
Development Stage Company; Early Stage of Product Development; No
Assurance of Successful Product Development. The Company is in the development
stage and has not conducted any significant operations to date or received any
operating revenues, except for revenues from the sale of the Company's bovine
teat sanitizer, marketed under the name IodoZyme(R), which the Company began
shipping in early 1995, and license fees and contract revenues. Potential
investors should be aware of the problems, delays, expenses and difficulties
encountered by an enterprise in the Company's stage of development, many of
which may be beyond the Company's control. These include, but are not limited
to, unanticipated problems relating to product development, testing, regulatory
compliance, manufacturing costs, production, the competitive and regulatory
environment in which the Company plans to operate, marketing problems and
additional costs and expenses that may exceed current estimates. Products under
development by the Company will require additional development and investment
prior to obtaining regulatory approvals and commercialization. There can be no
assurance that such products will be successfully developed, meet applicable
regulatory standards, be capable of production in commercial quantities at
reasonable costs or be successfully marketed.
Risks Associated With Uncertainties Of Clinical Trials. Most of the
Company's proposed therapeutic products are required to obtain approval from the
United States Food and Drug Administration ("FDA") prior to marketing such
products in the United States and the approval of foreign regulatory authorities
to commercialize such proposed products in other countries. To obtain such
approvals, the Company is required to prove the safety and efficacy of its
proposed products through extensive preclinical studies and clinical trials. The
Company's proposed therapeutic products are in various stages of pre-clinical
development. The completion of clinical trials regarding any of such proposed
products is dependent upon many factors including the rate of patient enrollment
and the heterogeneity of the patients and indications to be treated. Delays in
patient enrollment, as well as the heterogeneity of patients and indications to
be treated, may result in increased trial costs and delays in FDA submissions,
which could have a material adverse effect on the Company.
<PAGE>
A number of companies in the biotechnology and pharmaceutical
industries have suffered significant setbacks in clinical trials, even after
showing promising results in earlier studies or trials. Therefore, any favorable
results the Company may obtain in the future in preclinical studies and clinical
trials of its proposed products may not be predictive of results that will
ultimately be obtained in or throughout such preclinical studies and clinical
trials. There can be no assurance that the Company will not encounter problems
in its clinical trials that will cause the Company to delay or suspend its
development efforts and any proposed clinical trials for its proposed products,
that any clinical trial will be completed at all, that such testing will
ultimately demonstrate the safety or efficacy of such proposed products or that
any proposed products will receive regulatory approval on a timely basis, if at
all. If any such problems occur, the Company could be materially and adversely
affected.
No Assurance Of Regulatory Approvals; Potential Delays. The Company's
proposed products will be subject to regulation by the FDA and comparable
agencies in foreign countries. The regulatory approval process often takes a
number of years and requires the expenditure of substantial funds. In the United
States, the FDA enforces, where applicable, development, testing, labeling,
manufacturing, registration, notification, clearance or approval, marketing,
distribution, recordkeeping and reporting requirements for new drugs, medical
devices, biologics and cosmetics. In addition, there can be no assurance that
government regulations applicable to the Company's products or the
interpretation of those regulations will not change and thereby prevent the
Company from marketing some or all of its products temporarily or permanently.
There can be no assurance that any proposed products that may be developed by
the Company will be able to satisfy the current requirements and regulations of
the FDA or comparable foreign agencies. There can be no assurance that the
Company's proposed products will ever obtain the regulatory clearance or
approval required for marketing. Therapeutic products currently being developed
utilizing the Company's iodine technologies will likely be regulated as new
drugs products, each of which faces a substantially more burdensome regulatory
approval process than that applicable to most medical devices.
Whether or not FDA approval has been obtained, approval of a drug by
comparable regulatory authorities in other countries must be obtained prior to
marketing the product in those countries. The approval process varies by country
and the time required may be longer or shorter than that required for FDA
approval. Approval of a drug for sale in one country does not ensure approval in
other countries. The results of Phase I or Phase II studies are not necessarily
indicative of the efficacy or safety of a drug candidate for human therapeutic
use. There can be no assurance that clinical testing will provide evidence of
safety and efficacy in humans or that regulatory approvals will be granted for
any of the Company's products. Manufacturers of therapeutic products are
required to obtain FDA approval of their manufacturing facilities and processes,
<PAGE>
to adhere to applicable standards for manufacturing practices and to engage in
extensive recordkeeping and reporting. Failures to obtain or delays in obtaining
regulatory approvals would adversely affect the manufacturing and marketing of
the Company's products, the Company's financial position and the Company's
revenues or royalties. When and if approvals are granted, the Company, the
approved drug, the manufacture of such drug and the facilities in which such
drug is manufactured are subject to ongoing regulatory review. Subsequent
discovery of previously unknown problems may result in restriction on a
product's use or withdrawal of the product from the market. Adverse government
regulation that might arise from future legislative or administrative action,
particularly as it relates to healthcare reform and product pricing, cannot be
predicted.
Teat sanitizers, although considered animal drugs by the FDA, do not
currently require clearance by the FDA prior to marketing. The FDA, however, has
recently issued draft voluntary guidelines governing teat dips and no assurance
can be made that clearance by the FDA will not be required in the future.
Required compliance with these guidelines or other FDA requirements, the
probability of which cannot currently be ascertained by the Company, would have
a significant adverse effect on the marketing of IodoZyme and, consequently, on
the Company's results of operations. The Federal Environmental Protection Agency
("EPA") has regulations covering many of the same areas for many of the
Company's products and proposed products. In addition, the United States
Department of Agriculture ("USDA") may regulate, on either a voluntary or
mandatory basis, products which the Company may develop for sanitizing food or
food contact surfaces. Comparable state and local agencies may have similar
regulations.
Uncertain Market Acceptance of Proposed Products. The Company's future
growth and profitability will depend, in large part, on the acceptance by the
medical community of the Company's proposed products. This acceptance will be
substantially dependent on educating the medical community as to the full
capabilities, distinctive characteristics, perceived benefits and clinical
efficacy of the Company's proposed products. There can be no assurance that the
Company's efforts or those of others on its behalf will be successful or that
any of the Company's proposed products will receive the necessary market
acceptance. Failure of the Company's proposed products to gain market acceptance
would have a material adverse effect on the Company.
Risk Of Not Obtaining Manufacturing Facility And Experienced
Manufacturing Personnel And/Or Establishing Manufacturing Arrangements With
Others. The Company intends to seek out contracts to obtain sufficient
manufacturing capabilities to allow for production of its proposed therapeutic
products in quantities sufficient to support its anticipated clinical needs. To
be successful, however, the Company must be capable of manufacturing or
<PAGE>
contracting for the manufacture of its products in commercial quantities, in
compliance with regulatory requirements and at acceptable costs. While the
Company has manufacturing experience regarding IodoZyme, the Company has no
experience in large scale commercial manufacturing of therapeutic products. The
Company intends to enter into contractual arrangements to manufacture its
proposed products at such time, if ever, that such products are successfully
developed. There can be no assurance that the Company will be able to enter into
any such arrangements on acceptable terms, or at all, or that any manufacturer
will be able to meet any demand for such products on a timely basis. The
Company's dependence on third parties for manufacturing may adversely affect the
Company's ability to develop and deliver products on a timely and competitive
basis. The Company may manufacture its proposed products directly at such time,
if ever, that such products are successfully developed. The Company has no
experience with the direct manufacture of these proposed products. The
manufacture of these proposed products is complex and difficult, and will
require the Company to attract and retain experienced manufacturing personnel
and to obtain the use of a manufacturing facility in compliance with FDA and
other regulatory requirements. There can be no assurance that experienced
personnel can be attracted to or retained by the Company, or that the Company
will be able to obtain the financing necessary to manufacture these products
directly. In the event the Company continues to perform its current IodoZyme
manufacturing activities in-house, additional manufacturing space and equipment
may be necessary beyond 1997 as product volume increases.
Dependence Upon Third Parties For Clinicals Development Of Proposed
Products. The Company has entered into strategic alliances for the clinical
development of certain of its proposed products. There can be no assurance that
the Company will be successful in retaining the existing agreements, or be able
to obtain satisfactory new agreements with strategic partners in other areas. In
addition, there can be no assurance that the interests and motivations of any
strategic partner would be or remain consistent with those of the Company or
that such partner would successfully perform its obligations.
Accumulated Deficit; Expectation of Future Losses; Need for Additional
Financing. At March 31, 1997, the Company had an accumulated deficit of
$5,546,130, which deficiency has increased to date. The Company will be required
to conduct significant research, development and testing activities which,
together with manufacturing, and other general and administrative expenses, are
expected to result in operating losses for the foreseeable future. There can be
no assurance that the Company will ever have significant revenues or achieve
profitable operations. At March 31, 1997, the Company had working capital of
$1,503,808. Based on its current operating plan, the Company believes it will
have sufficient working capital to fund its operations for the next 12 months.
<PAGE>
It is not expected that revenues from operations will be sufficient to enable
the Company to complete the necessary regulatory approval process for its
products currently under development, or if any such approval were obtained, to
begin manufacturing or marketing such products on a commercial basis. Given the
Company's limited financial resources, the uncertainty of the development effort
and the necessity for regulatory approval, there can be no assurance of ultimate
success with respect to any product development program or that resulting
product, if any, will be commercially successful. Additionally, the Company's
limited resources will require substantial support from corporate partners who
would ultimately introduce the Company's products into the marketplace. In
addition to support from corporate partners, the Company may seek additional
financing to fund its operating requirements. There can be no assurance that the
Company will be able to obtain such partnering arrangements or financing, or
that such partnering arrangements or financing, if available, will be on
acceptable terms. In the event that the Company fails to raise any funds it
requires, it may be necessary for the Company to cease operations or severely
limit growth.
Lack of Marketing Experience; Dependence on Outside Parties for
Marketing and Distribution; Uncertainty of Market Acceptance of Products and
Proposed Products. The marketing and distribution of IodoZyme is conducted by
West Agro pursuant to an exclusive marketing and supply agreement with the
Company which covers IodoZyme as well as other products which may be developed
for use in dairy facilities. The Company intends to rely on similar arrangements
with others for the marketing and distribution of its products currently under
development, if and when successfully developed and approved by applicable
regulatory agencies. This results, and will result, in a lack of control by the
Company over some or all of the marketing and distribution of such products.
Although the Company has entered into development agreements with parties
experienced in the marketing of some of the Company's proposed products, which
development agreements contemplate future marketing arrangements, there can be
no assurance that the Company will be able to enter into any marketing
arrangements for such products, if and when developed, on terms acceptable to
the Company or that any marketing efforts undertaken on behalf of the Company
will be successful. Although the Company has no present plans to do so, the
Company may, in the future, determine to directly market certain of its proposed
products. The Company has no marketing experience and significant additional
capital expenditures and management resources would be required to develop a
direct sales force. In the event the Company elects to engage in direct
marketing activities, there can be no assurance that the Company would be able
to obtain the requisite funds or attract and retain the human resources
necessary to successfully market any of such products.
<PAGE>
The Company's future growth and profitability will depend, in large
part, on the success of its personnel and others conducting marketing efforts on
behalf of the Company in fostering acceptance among the various markets of the
use of the Company's products as an alternative to other available products or
otherwise. The Company's success in marketing its products will be substantially
dependent on educating its targeted markets as to the distinctive
characteristics and perceived benefits of the Company's products. In this
regard, West Agro, which acts as exclusive marketer and distributor of IodoZyme,
also markets and distributes products which are directly competitive with
IodoZyme. There can be no assurance that the Company's efforts or the efforts of
others will be successful or that any of the Company's products or proposed
products will be favorably accepted among the targeted markets.
Dependence Upon, and Need for, Key Personnel. The Company does not
currently have a President or Chief Executive Officer. The Company is dependent
on the services of Dr. Jack H. Kessler, the Chairman of the Board, Executive
Vice President, Chief Scientific Officer, Secretary and a principal stockholder
of the Company, and Paul C. Desjourdy, Executive Vice President, Chief Financial
Officer, Treasurer and a director of the Company. The loss of either of such
individuals or a reduction in the time devoted by such persons to the Company's
business could have a material adverse effect on the Company's business. The
Company has obtained key-person life insurance coverage in the face amount of
$1,000,000 for Dr. Kessler naming the Company as beneficiary under such policy.
The Company's success also will depend, in large part, on its ability to attract
and retain highly qualified scientific and business personnel, competition for
which is intense. There can be no assurance that the Company will be able to
attract and retain the necessary personnel to implement its business plan.
Intense Competition and Rapid Technological Change. The Company is
engaged in rapidly evolving and highly competitive fields. There are many
companies, including large pharmaceutical and chemical companies, which have
established a significant presence in the markets which the Company's products
and proposed products are designed to address. Most of these companies have
substantially greater capital resources, research and development staffs,
facilities and experience in obtaining regulatory approvals, as well as in the
manufacturing, marketing and distribution of products, than the Company. There
can be no assurance that the Company's competitors will not succeed in
developing technologies and products that are more effective and less costly
than any products developed or being developed by the Company or which could
render the Company's microbicide technology obsolete.
Uncertain Protection of Patents and Proprietary Rights. The Company
considers patent protection of its technology to be critical to its business
prospects. There can be no assurance that the Company's pending patent
<PAGE>
applications will issue as patents, that any issued patents will provide the
Company with significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of any patent owned by the
Company or, if instituted, that such challenges will not be successful. The cost
of litigation to uphold the validity and prevent infringement of patents can be
substantial. Furthermore, there can be no assurance that others will not
independently develop similar or more advanced technologies or design around
aspects of the Company's technology which may be patented, or duplicate the
Company's trade secrets. In some cases, the Company may rely on trade secrets to
protect its innovations. There can be no assurance that trade secrets will be
established, or that secrecy obligations will be honored, or that others will
not independently develop similar or superior technology. To the extent that
consultants, key employees or other third parties apply technological
information independently developed by them or by others to Company projects,
disputes may arise as to the proprietary rights to such information which may
not be resolved in favor of the Company.
Materials Incompatibility. An important aspect of the Company's present
and future microbicides is that they must be compatible with the surfaces on
which they come in contact. The Company has ceased efforts to develop a
microbicide for dental handpieces and renal control units as a result of
staining and corrosion caused by required microbicide formulations, and the
Company has encountered problems of staining in connection with its efforts to
develop a high level disinfectant for flexible endoscopes. The Company continues
to investigate the balance between the level of microbicidal efficacy and the
need to avoid staining and corrosion. For any proposed inanimate object product
applications, staining or corrosion from a microbicide could be sufficient to
limit or forestall regulatory approval of such microbicide or, if approved,
could adversely affect market acceptance of such microbicide. There can be no
assurance that the Company will be successful in overcoming any problems of
materials incompatibility.
Potential Product Liability and Lack or Insufficiency of Insurance. The
Company's business will expose it to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of microbicide
products for animal and human use. If available, product liability insurance
generally is expensive. The Company currently has product liability insurance in
amounts that it believes are adequate to protect it against potential
liabilities. However, there can be no assurance to such effect or that the
Company will be able to maintain such insurance on acceptable terms. In the
event of a successful suit against the Company, a lack or insufficiency of
insurance coverage could have a material adverse effect on the Company's
business and operations.
<PAGE>
Charge to Income in the Event of Release of Restrictions on Shares. In
connection with the Company's initial public offering, certain stockholders of
the Company agreed to transfer an aggregate of 700,000 shares of Common Stock to
the Company if the Company does not attain certain minimum earnings thresholds.
In the event the Company attains any of such earnings thresholds, the position
of the Securities and Exchange Commission is that the release of these
restrictions will be treated as expense to the Company which is nondeductible
for income tax purposes. (See "Note E - Capitalization" to the Company's
Financial Statements set forth in the Annual Report on Form 10-KSB for the year
ended December 31, 1996.) Accordingly, the Company will, in the event of the
release of the restrictions, recognize during the period in which the earnings
thresholds are met or probable of being met, what could be a substantial
one-time charge which would have the effect of substantially increasing the
Company's loss or reducing or eliminating earnings, if any, at such time.
Although the amount of expense recognized by the Company will not affect the
Company's total stockholders' equity, it may have a depressive effect on the
market price of the Company's securities.
Possible Adverse Effects of Authorization of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of 5,000,000
shares of preferred stock on terms which may be fixed by the Company's Board of
Directors without further stockholder action. The terms of any series of
preferred stock, which may include priority claims to assets and dividends, and
special voting rights, could adversely affect the rights of holders of the Class
A Common Stock. The issuance of such preferred stock could make the possible
takeover of the Company or the removal of management of the Company more
difficult, discourage hostile bids for control of the Company in which
stockholders may receive premiums for their shares of Class A Common Stock, or
otherwise dilute the rights of holders of Class A Common Stock and the market
price of the Class A Common Stock.
The Company has no current plans to issue any shares of preferred stock.
Possible Volatility of Stock Price. The market prices for securities of
emerging and development stage companies in general, and biopharmaceutical
companies in particular, have historically been highly volatile. Future
announcements concerning the Company or its competitors, including the results
of testing, technological innovations or new commercial products, government
regulations, developments concerning proprietary rights, litigation or public
concern as to safety of products developed by the Company or others, may have a
significant adverse impact on the market price of the Company's securities.
Shares Eligible For Future Sale; Outstanding Warrants And Options;
Registration Rights. Of the Company's 2,913,234 shares of Class A Common Stock
currently outstanding, 1,234,262 shares are "restricted securities," as defined
<PAGE>
in Rule 144 of the Securities Act, and all 1,234,262 shares of Class A Common
Stock are eligible for sale under Rule 144. The Company is unable to predict the
effect that sales made under Rule 144, or otherwise, may have on the then
prevailing market price of the Common Stock. Any substantial sale of restricted
securities pursuant to Rule 144 may have an adverse effect on the market price
of the Common Stock. 456,500 shares of Class A Common Stock issuable upon
exercise of stock options have been registered on a registration statement on
Form S-8.
The Company has outstanding (i) Class A Warrants and Class B Warrants
which could result in the issuance of 4,372,080 additional shares of Class A
Common Stock, and (ii) 456,500 shares of Class A Common Stock issuable upon
exercise of options which have been granted under the Company's Option Plans
(the "Plans"). In connection with the Company's IPO the Company issued Unit
Purchase Options ("UPO") to the underwriter of the IPO which UPO's are
convertible into 100,000 shares of Class A Common Stock, 100,000 Class A
Warrants and 100,000 Class B Warrants. The foregoing options and warrants are
likely to be exercised at a time when the Company might be able to obtain
additional equity capital on more favorable terms. In addition, to the extent
they are exercised, they will decrease the percentage of the Company owned by
the Company's stockholders. While these options and warrants are outstanding,
they may adversely affect the terms on which the Company could obtain additional
capital. The Company cannot predict the effect, if any, that market sales of
Class A Common Stock, the exercise of options or warrants or the availability of
such Class A Common Stock for sale will have on the market price prevailing from
time to time. In addition, if the exercise price of options or warrants are
adjusted downward, such options or warrants may be exercised sooner than
otherwise with a resulting increase in the number of shares of Class A Common
Stock available for sale on the market.
Possible Delisting of Securities from the NASDAQ System and Possible
Market Illiquidity. There can be no assurance that the Company will continue to
meet the criteria for continued listing of securities on NASDAQ. In order to
qualify for continued listing on the NASDAQ System, a company must, among other
things, have at least $2,000,000 in total assets, $1,000,000 in capital and
surplus, a minimum bid price of $1.00 per share of common stock, and 100,000
shares in the public float. In addition, the common stock must have at least two
registered and active market makers and must be held by at least 300 holders and
the market value of its public float must be at least $200,000. If an issuer
does not meet the $1.00 minimum bid price standard, it may, however, remain in
NASDAQ if the market value of its public float is at least $1,000,000 and the
issuer has capital and surplus of at least $2,000,000. NASDAQ has proposed
changes to the criteria for continued listing of securities. These proposed
changes are currently being considered by the SEC, and if approved, would make
it more difficult for the Company to maintain its NASDAQ listing. Under the
<PAGE>
proposed criteria, among other things, the Company would have to have net
tangible assets (total assets less total liabilities and goodwill) of at least
$2,000,000, a minimum bid price of $1.00 per share of common stock and 500,000
shares in the public float. In addition, the market value of its public float
must be at least $1,000,000. At March 31, 1997, the Company's balance sheet
reflects total assets of $2,159,279, capital and surplus of $1,730,152 and net
tangible assets of $1,610,970. If the Company should become unable to meet the
continued listing criteria of NASDAQ and is delisted therefrom, trading, if any,
in the Class A Common Stock would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or, if then available,
the "OTC Bulletin Board Service." As a result, an investor would likely find it
more difficult to dispose of, or to obtain accurate quotations as to the value
of, the Company's securities. If the Company's securities were delisted from
NASDAQ, they may become subject to penny stock restrictions. If the Company's
securities were subject to the rules on penny stocks, the market liquidity for
the Company's securities could be severely adversely affected.
Disclosure Relating to Low Priced Securities; Possible Restrictions on
Resales of Low Priced Securities and on Broker-Dealer Sales; Possible Adverse
Effect of "Penny Stock" Rules on Liquidity for the Company's Securities. If the
Company's securities were removed from NASDAQ (see "Possible Delisting of
Securities from the NASDAQ System and Possible Market Illiquidity" above), they
may become subject to rule 15g-9 under the Securities Exchange Act of 1934 (the
"1934 Act"), which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together
with their spouses). For transactions covered by this Rule, a broker-dealer must
make a special suitability determination for the purchase and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
Rule may affect the ability of broker-dealers to sell the Company's securities
and may affect the ability of purchasers in this offering to sell any of the
securities acquired hereby in the secondary market.
The SEC has adopted regulations which generally define a "penny stock"
to be any non-NASDAQ equity security that has a market price (as therein
defined) less than $5.00 per share, subject to certain exceptions. For any
transaction by broker-dealers involving a penny stock, unless exempt, the rules
require delivery of a risk disclosure document relating to the penny stock
market prior to any such transaction. Disclosure is also required to be made
about compensation payable to both the broker-dealer and the registered
representative and current quotations for the securities. Finally, monthly
statements are required to be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks.
<PAGE>
The foregoing penny stock restrictions will not apply to the Company's
securities if such securities are listed on the NASDAQ SmallCap Market System,
are otherwise listed on NASDAQ and have certain price and volume information
provided on a current and continuing basis, or if the Company meets certain
minimum net tangible assets or average revenue criteria. There can be no
assurance that the Company's securities will qualify for exemption from these
restrictions. In any event, even if the Company's securities were exempt from
any such restrictions, the SEC has the authority, pursuant to Section 15(b)(6)
of the 1934 Act, to prohibit any person that is engaged in unlawful conduct
while participating in a distribution of a penny stock from associating with a
broker-dealer or participating in a distribution of a penny stock, if the SEC
finds that such a restriction would be in the public interest.
If the Company's securities were subject to the rules on penny stocks,
the market liquidity for the Company's securities could be severely adversely
affected.
No Dividends Anticipated. The Company has never paid any cash dividends
on its common stock and does not anticipate the payment of cash dividends in the
foreseeable future.
Substantial Influence of the Market Makers. There are a limited number
of market makers which currently make a market in the Company's securities and
the securities are thinly traded. Consequently, such market makers may exert a
dominating influence on the market for such securities. Such market-making
activity may be discontinued at any time. The price and liquidity of the
Company's securities may be significantly affected by the degree of any current
market maker's participation in such market.
Exhibit 11.1
SYMBOLLON CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
The Three-Months The Six-Months
Ended June 30, Ended June 30,
---------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
Net Income (Loss)............$(151,978) $ 84,805 $(365,029) $(472,709)
========== ========= ========== ==========
Primary loss per share:
Weighted average common shares
outstanding.................2,783,253 2,480,136 2,585,203 2,480,136
Shares subject to restriction.(700,000) (700,000) (700,000) (700,000)
---------- ---------- ---------- ----------
2,083,253 1,780,136 1,885,203 1,780,136
========== ========== ========== ==========
Loss per share (1):..........$ (0.07) $ 0.05 $ (0.19) $ (0.27)
========== ========== ========== ==========
(1) There is no difference between primary and fully diluted income (loss)
per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED UNAUDITED FINANCIAL STATEMENT OF SYMBOLLON CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENT AS FILED IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,724,648
<SECURITIES> 0
<RECEIVABLES> 142,066
<ALLOWANCES> 0
<INVENTORY> 15,672
<CURRENT-ASSETS> 1,918,824
<PP&E> 239,414
<DEPRECIATION> 142,300
<TOTAL-ASSETS> 2,157,708
<CURRENT-LIABILITIES> 572,802
<BONDS> 0
0
0
<COMMON> 2,931
<OTHER-SE> 1,580,240
<TOTAL-LIABILITY-AND-EQUITY> 2,157,708
<SALES> 162,338
<TOTAL-REVENUES> 210,925
<CGS> 86,021
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 283,189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,563
<INCOME-PRETAX> (365,029)
<INCOME-TAX> 0
<INCOME-CONTINUING> (365,029)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (365,029)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
