UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITES AND EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 0-28150
NEUROCRINE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0525145
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10555 SCIENCE CENTER DRIVE
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices)
(619) 658-7600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
The number of outstanding shares of the registrant's Common Stock, par value
of $.001, was 18,161,626 as of July 31, 1998.
<PAGE>
<TABLE>
NEUROCRINE BIOSCIENCES, INC
FORM 10-Q
INDEX
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements 3
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Overview 7
Results of Operations 7
Liquidity and Capital Resources 9
PART II. OTHER INFORMATION
Item 2: Changes in Securities and Use of Proceeds 10
Item 4: Submission of Matters to a Vote of Security Holders 10
Item 6: Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1998 1997
------------------- -------------------
(Unaudited) (Note)
<S> <C> <C>
SETS
Current assets
Cash and cash equivalents $ 10,643,020 $ 15,771,099
Short-term investments, available-for-sale 54,555,970 59,321,095
Receivables under collaborative agreements 225,302 193,784
Receivables from related parties and other 695,795 940,100
Prepaid expenses 425,268 151,553
------------------- -------------------
Total current assets 66,545,355 76,377,631
Property and equipment, net 9,853,342 8,846,179
Licensed technology and patent application costs, net 1,076,079 1,185,384
Investment in Neuroscience Pharma, Inc. 3,901,288 3,343,740
Other assets 2,159,877 2,150,451
=================== ===================
Total assets $ 83,535,941 $ 91,903,385
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 614,357 $ 1,822,173
Accrued expenses, other current liabilities
and current portion of long-term debt 2,791,852 5,547,697
------------------- -------------------
Total current liabilities 3,406,209 7,369,870
Long-term liabilities 1,705,871 1,381,040
Stockholders' equity
Preferred Stock, $0.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
Common stock, $0.001 par value, 100,000,000 shares
authorized, issued and outstanding shares -
18,144,225 in 1998 and 17,686,802 in 1997 92,479,580 88,047,176
Accumulated deficit (14,055,719) (4,894,701)
------------------- -------------------
Total stockholders' equity 78,423,861 83,152,475
=================== ===================
Total liabilities and stockholders' equity $ 83,535,941 $ 91,903,385
=================== ===================
<FN>
Note: The balance sheet at December 31, 1997 was derived from the audited
financial statements at that date, but does not include all of the disclosures
required by generally accepted accounting principals.
</FN>
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sponsored research $ 1,887,500 $ 2,637,500 $ 3,775,000 $ 5,275,000
Milestones - 1,000,000 1,250,000 6,000,000
Other revenues 403,265 1,163,694 1,402,236 2,380,085
------------------- ----------------- -------------------- ------------------
Total revenues 2,290,765 4,801,194 6,427,236 13,655,085
Operating expenses
Research and development 4,866,448 4,440,251 9,907,484 9,029,329
General and administrative 1,338,838 1,343,901 2,867,318 2,488,450
Special charges 5,509,701 - 5,509,701 -
------------------- ----------------- -------------------- ------------------
Total operating expenses 11,714,987 5,784,152 18,284,503 11,517,779
Income (loss) from operations (9,424,222) (982,958) (11,857,267) 2,137,306
Other income and expenses
Interest income 1,000,038 910,037 2,119,511 1,833,268
Interest expense (30,072) (40,785) (64,205) (88,411)
Other income 478,404 239,512 640,943 439,025
------------------- ----------------- -------------------- ------------------
Income (loss) before income taxes (7,975,852) 125,806 (9,161,018) 4,321,188
Income taxes - 22,393 - 76,393
------------------- ----------------- -------------------- ------------------
Net income (loss) $(7,975,852) $ 103,413 $(9,161,018) $ 4,244,795
=================== ================= ==================== ==================
Earnings (loss) per common
Share
Basic $ (0.45) $ 0.01 $ (0.51) $ 0.25
Diluted $ (0.45) $ 0.01 $ (0.51) $ 0.22
Shares used in the calculation
of earnings (loss) per share
Basic 17,874,018 16,889,170 17,790,297 16,859,987
Diluted 17,874,018 19,190,139 17,790,297 19,219,160
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
NEUROCRINE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1998 1997
------------------ -------------------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $(9,161,018) $ 4,244,795
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Non-cash portion of special charges 4,799,984 -
Depreciation and amortization 780,837 559,185
Deferred revenues (1,750,000) 1,750,000
Deferred expenses 241,303 272,639
Change in operating assets and liabilities:
Other current assets (60,928) (6,810,888)
Other non-current assets (566,974) (3,718,032)
Accounts payable and accrued liabilities (2,066,403) (83,934)
------------------ -------------------
Net cash flows used in operating activities (7,783,199) (3,786,235)
Cash flow from investing activities:
Purchases of short-term investments (27,062,723) (38,986,324)
Sales/maturities of short-term investments 31,832,942 56,870,228
Purchases of property and equipment, net (1,678,695) (2,437,681)
------------------ -------------------
Net cash flows provided by investing activities 3,091,524 15,446,223
Cash flow from financing activities:
Issuance of Common Stock, net 109,320 365,781
Principal payments on long term (546,772) (410,898)
Notes receivable payments from stockholders 1,048 5,237
------------------ -------------------
Net cash flows used in financing activities (436,404) (39,880)
------------------ -------------------
Net (decrease) increase in cash and cash equivalents (5,128,079) 11,620,108
Cash and cash equivalents at beginning of the period 15,771,099 11,325,361
------------------ -------------------
Cash and cash equivalents at end of the period $10,643,020 $22,945,469
================== ===================
<FN>
Supplemental schedule of non-cash investing and financing activities:
During 1998, the Company recorded non-cash items of $1.4 million relating
to the conversion of a note receivable to an investment in NPI and $4.2
million for the acquisition of NNL.
</FN>
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NEUROCRINE BIOSCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein are
unaudited. These financial statements include the accounts of Neurocrine
Biosciences, Inc. and Northwest NeuroLogic, Inc., a wholly owned subsidiary
since its acquisition on May 28, 1998. All significant intercompany transactions
were eliminated in consolidation.
The condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial position, results of operations, and cash flows for the periods
presented. The results of operations for the interim periods shown in this
report are not necessarily indicative of results expected for the full year. The
financial statements should be read in conjunction with the audited financial
statements and notes for the year ended December 31, 1997, included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
2. NET INCOME PER SHARE
In accordance with Financial Accounting Standards Board Statement No. 128,
"Earnings per Share" ("SFAS 128"), basic earnings per share is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of the Company such as common stock
which may be issuable upon exercise of outstanding common stock options,
warrants and preferred stock. These shares are excluded when their effects are
antidilutive. As required by SFAS 128, the Company has restated the earnings per
share presentations for the periods ended June 30, 1997.
3. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 130, "Comprehensive Income" ("SFAS 130"),
which applies to financial statements issued for periods beginning after
December 15, 1997. SFAS 130 requires the disclosure of all components of
comprehensive income, including net income and other comprehensive income.
Comprehensive income includes changes in equity during a period from
transactions and other events and circumstances generated from non-owner
sources. For the three and six months ended June 30, 1998 and 1997,
comprehensive income is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $(7,975,852) $ 103,413 $(9,161,018) $4,244,795
Unrealized gains (losses) on investments (11,978) 3,482 5,094 (79,678)
----------------- ---------------- ----------------- ---------------
Comprehensive income (loss) $(7,987,830) $ 106,895 $(9,155,924) $4,165,117
================= ================ ================= ===============
</TABLE>
4. ACCOUNTING FOR PENSIONS AND HEDGING ACTIVITIES
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 132, "Employee's Disclosures about Pension
and Other Post-retirement Benefits", which is effective for periods beginning
after December 15, 1997 ("SFAS 132"). SFAS 132 revises disclosures about pension
and other post-retirement benefit plans. The Company believes this statement
will have no material impact on its financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999 ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company is currently evaluating the impact SFAS No. 133 will
have on its financial statements, if any.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations of Neurocrine Biosciences, Inc. ("Neurocrine" or the
"Company") contains forward-looking statements which involve risks and
uncertainties, pertaining generally to the expected continuation of the
Company's collaborative agreements, the receipt of research payments thereunder,
the future achievement of various milestones in product development and the
receipt of payments related thereto, the potential receipt of royalty payments,
pre-clinical testing and clinical trials of potential products, the period of
time the Company's existing capital resources will meet its funding
requirements, and financial results and operations. Actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those set forth below and those outlined in
the Company's 1997 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
OVERVIEW
Since the founding of the Company in January 1992, Neurocrine has been
engaged in the discovery and development of novel pharmaceutical products for
diseases and disorders of the central nervous and immune systems. To date,
Neurocrine has not generated any revenues from the sale of products, and does
not expect to generate any product revenues in the foreseeable future. The
Company's revenues are expected to come from its strategic alliances. The
Company expects to generate further net losses as its operating expenses are
anticipated to rise significantly in future periods as products are advanced
through the various stages of clinical development. Neurocrine has incurred a
cumulative deficit of approximately $14.1 million as of June 30, 1998 and
expects to incur operating losses in the future, which are potentially greater
than losses in prior years.
RESULTS OF OPERATIONS
Three months ended June 30, 1998 compared with three months ended
June 30, 1997
Revenues for the second quarter of 1998 were $2.3 million compared to $4.8
million for the comparable period in 1997. The decline of $2.5 million in
revenues resulted from the completion of sponsored research under the Janssen
collaboration and milestone payments received under the Novartis collaboration
during 1997.
The research completed under the Janssen collaboration resulted in a
clinical compound (R121919). Janssen is currently conducting Phase I trials with
R121919 for anxiety/depression and is expected to progress to Phase II trials
near the end of the third quarter of 1998. Phase II trials for multiple
sclerosis under the Novartis collaboration is currently in progress.
Research and development expenses increased to $4.9 million for the second
quarter of 1998 compared to $4.4 million for the same period in 1997. This
increase reflects higher costs associated with increased scientific personnel
and related support expenditures as the Company broadens its research and
clinical development pipeline. General and administrative expenses remained
constant at $1.3 million during the second quarter of 1998 compared to the same
period in 1997.
Special charges for the second quarter of 1998 consisted of $4.2 million
related to the acquisition of Northwest Neurologic, Inc. ("NNL"), $1.3 million
related to the in-licensing of two chemical compounds for insomnia and
glioblastoma, and additional investment in the Company's Canadian affiliate.
Interest income increased to $1.0 million during the second quarter of 1998
compared to $910,000 for the same period last year. This increase was due to
higher effective interest yields on the Company's investment portfolio during
the second quarter of 1998.
Net losses for the second quarter of 1998 were $8.0 million or $0.45 per
share ($0.14 per share excluding special charges) compared to net income of
$103,000 or approximately $0.01 per share for the same period in 1997. The
decrease in net earnings and earnings per share resulted primarily from
non-recurring collaborative revenues of $2.5 million reported in 1997 and
special charges of $5.5 million reported during the second quarter of 1998.
To date, the Company's revenues have come from funded research and
achievements of milestones under corporate collaborations. The nature and amount
of these revenues from period to period may lead to substantial fluctuations in
the results of quarterly revenues and earnings. Accordingly, results and
earnings of one period are not predictive of future periods.
Six months ended June 30, 1998 compared with six months ended
June 30, 1997
Revenues for the first half 1998 were $6.4 million compared to $13.7 million
for the comparable period in 1997. The decline in revenues of $7.3 million
resulted from the completion of sponsored research under Janssen collaboration,
milestone payments received under the Novartis collaboration and a $5.0 million
research support payment received under the Eli Lilly collaboration during 1997.
The research completed under the Janssen collaboration resulted in a
clinical compound (R121919). Janssen is currently conducting Phase I trials with
R121919 for anxiety/depression and is expected to progress to Phase II trials
near the end of the third quarter of 1998. Phase II trials for multiple
sclerosis under the Novartis collaboration is in progress.
Research and development expenses increased to $9.9 million for the first
half of 1998 compared with $9.0 million for the same period in 1997. This
increase reflects higher costs associated with increased scientific personnel
and related support expenditures as the Company broadens its research and
clinical development pipeline.
General and administrative expenses increased to $2.9 million during the
first half of 1998 compared to $2.5 million for the same period in 1997. The
increase resulted primarily from additional administrative personnel, business
development and professional service expenses to support the expanded research
and clinical development efforts.
Special charges for the first half of 1998 consisted of $4.2 million related
to the acquisition of Northwest Neurologic, Inc. ("NNL"), $1.3 million related
to the in-licensing of two chemical compounds for insomnia and glioblastoma, and
additional investment in the Company's Canadian affiliate.
Interest income increased to $2.1 million during the first half of 1998
compared to $1.8 million for the same period last year. This increase primarily
resulted from higher effective interest yields on the Company's investment
portfolio during 1998.
Net losses for the first half of 1998 were $9.2 million or $0.51 per share
($0.21 per share excluding special charges) compared to net income of $4.2
million or $0.25 per share ($0.22 per share assuming dilution) for the same
period in 1997. The decrease of $13.4 million in net earnings resulted primarily
from $7.3 million of non-recurring collaborative revenues recorded in 1997,
including a $5.0 million research support payment received from Eli Lilly, and
special charges of $5.5 million reported in 1998.
To date, the Company's revenues have come from funded research and
achievements of milestones under corporate collaborations. The nature and amount
of these revenues from period to period may lead to substantial fluctuations in
the results of year-to-date revenues and earnings. Accordingly, results and
earnings of one period are not predictive of future periods.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company's cash, cash equivalents, and short-term
investments totaled $65.2 million. Cash held by the Company excludes
approximately $5.9 million held by NPI, which is available to fund certain of
the Company's research and development activities.
Cash used in operating activities during 1998 was $7.8 million compared to
net cash provided of $2.3 million for the same period in 1997. The increase in
cash used in operating activities during 1998 was primarily the result of the
recognition of deferred revenues, decreased revenues under the Company's
collaborations and payment of current liabilities.
Cash provided by investing activities during 1998 was $3.1 million compared
to net cash used of $6.5 million during the same period in 1997. The increase in
cash provided was primarily the result of timing differences in investment
purchases and sales/maturities and fluctuations in the Company's portfolio mix
between cash equivalent and short-term investment holdings.
Cash used in financing activities during 1998 was $436,000 compared to net
cash provided of $81,000 for the same period in 1997. The increase in net cash
used was primarily due to principal payments on long-term obligations.
The Company believes that its existing capital resources, together with
interest income and future payments due under the strategic alliances, will be
sufficient to satisfy its current and projected funding requirements at least
through the year 2000. However, no assurance can be given that such capital
resources and payments will be sufficient to conduct its research and
development programs as planned. The amount and timing of expenditures will vary
depending upon a number of factors, including progress of the Company's research
and development programs.
OTHER EVENTS
The Company entered into a patent license agreement with David Fitzgerald
and Ira Pastan on April 28, 1998, and with the National Institutes of Health on
May 7, 1998 (collectively the "Patent Agreements"). Under the Patent Agreements,
the Company obtained an exclusive license covering the therapeutic application
of an anti-cancer compound referred to as IL-4(38-37)-PE38KDEL (IL-4 Fusion
Toxin). The Company is obligated to make milestone payments upon attainment of
certain clinical development and regulatory accomplishments and royalty payments
based upon sales by the Company of products developed under the Patent
Agreements. During the quarter ended June 30, 1998, the Company initiated Phase
I human clinical trials with the anti-cancer compound in patients with malignant
brain tumors.
On May 28, 1998, the Company acquired Northwest NeuroLogic, Inc., an Oregon
corporation ("NNL"). The Company purchased all of the outstanding capital stock
of NNL and assumed all of its outstanding stock options in exchange for 392,608
shares of the Company's Common Stock and options to purchase 105,414 shares of
Common Stock. The acquisition was accounted for as a purchase transaction. The
aggregate purchase price of $4.2 million was allocated to the fair value of the
net assets acquired, the majority of which was acquired in-process research and
development. There can be no assurance that the Company will be successful in
developing these compounds, that they will receive necessary FDA approvals to
proceed to the next phase of clinical testing, or that they will ultimately be
developed into commercially viable products.
The Company's results of operations include NNL's results of operations from
the date of acquisition. There can be no assurance that the Company will not
incur additional charges in subsequent quarters to reflect costs associated with
the transaction or that the Company will be successful in its efforts to
integrate the operations of NNL into those of the Company.
The Company may make further acquisitions and investments and enter into
further collaborations, joint ventures and strategic alliances, some of which
may be material, when it believes such transactions will complement its overall
business strategy. However, such transactions, and in particular the
acquisitions of research and development companies, are inherently risky and
there can be no assurance that the recently completed acquisition or any such
future transactions or joint ventures will be successful and will not adversely
affect the Company's business, operating results, or financial condition.
On June 30, 1998, the Company entered into a Sublicense and Development
Agreement (the "Sublicense Agreement") with DOV Pharmaceutical, Inc. ("DOV").
Under the Sublicense Agreement, the Company obtained an exclusive sublicense to
the patent rights and know-how relating to NBI-34060, a compound in clinical
development, for the treatment of insomnia and all therapeutic indications.
Under the Sublicense Agreement, the Company will be responsible for worldwide
development and commercialization of this compound. In conjunction with the
Sublicense Agreement, the Company made an equity investment in DOV and will make
milestone payments based upon the attainment of certain clinical development and
regulatory accomplishments. DOV will also receive royalties on the worldwide
sales by the Company of approved products resulting from the collaboration. In
addition, the Company issued warrants (the "Warrants") exercisable for an
aggregate of 75,000 shares of Common Stock at an exercise price of approximately
$8.04 per share upon the occurrence of certain events.
YEAR 2000 COMPLIANCE
Although the Company believes its key financial, information and operational
systems are Year 2000 compliant, there can be no assurances that other defects
will not be discovered in the future. The Company is unable to control whether
the firms and vendors it does business with currently, and in the future, will
have systems which are Year 2000 compliant. The Company has not yet verified
that the parties it conducts business with are Year 2000 Compliant. The
Company's operations could be affected to the extent that firms and vendors
would be unable to provide services or ship products. However, management does
not believe the Year 2000 changes will have a material impact on its business,
financial condition or results of operations.
CAUTION ON FORWARD-LOOKING STATEMENTS
The Company's business is subject to significant risks, including but not
limited to, the risks inherent in its research and development activities,
including the successful continuation of the Company's strategic collaborations,
the successful completion of clinical trials, the lengthy, expensive and
uncertain process of seeking regulatory approvals, uncertainties associated both
with obtaining and enforcing its patents and patent rights of others,
uncertainties regarding government reforms and of product pricing and
reimbursement levels, technological change and competition, manufacturing
uncertainties and dependence on third parties. Even if the Company's product
candidates appear promising at an early stage of development, they may not reach
the market for numerous reasons. Such reasons include the possibilities that the
product will be ineffective or unsafe during clinical trials, will fail to
receive necessary regulatory approvals, will be difficult to manufacture on a
large scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.
Neurocrine will require additional funding for the continuation of its
research and product development programs, for progress with preclinical testing
and clinical trials, for operating expenses, for the pursuit of regulatory
approvals for its product candidates, for the costs involved in filing and
prosecuting patent applications and enforcing patent claims, if any, the cost of
product in-licensing and any possible acquisitions, and may require additional
funding for establishing manufacturing and marketing capabilities in the future.
The Company may seek to access the public or private equity markets whenever
conditions are favorable. The Company may also seek additional funding through
strategic alliances and other financing mechanisms, potentially including
off-balance sheet financing. There can be no assurance that adequate funding
will be available on terms acceptable to the Company, if at all. If adequate
funds are not available, the Company may be required to curtail significantly
one or more of its research or development programs or obtain funds through
arrangements with collaborative partners or others. This may require the Company
to relinquish rights to certain of its technologies or product candidates.
Continued profitability is not expected as the Company's operating expenses
are anticipated to rise significantly in future periods as products are advanced
through the various development and clinical stages. Neurocrine expects to incur
additional operating expenses over the next several years as its research,
development, preclinical testing and clinical trial activities increase. To the
extent that the Company is unable to obtain third party funding for such
expenses, the Company expects that increased expenses will result in increased
losses from operations. There can be no assurance that the Company's products
under development will be successfully developed or that its products, if
successfully developed, will generate revenues sufficient to enable the Company
to earn a profit.
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On May 28, 1998, the Company acquired Northwest NeuroLogic, Inc. ("NNL"),
pursuant to the Agreement and Plan of Reorganization dated May 1, 1998 (the
"Agreement"). In connection with the acquisition of NNL, the Company issued an
aggregate of 392,608 shares of the Company's Common Stock (the "Merger Shares")
to the existing stockholders of NNL in exchange for all of the outstanding
shares of capital stock of NNL. The Merger Shares were issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), afforded by Section 4 (2) thereof. The
stockholders of NNL had access to all relevant information regarding the Company
necessary to evaluate the investment and represented that the shares were being
acquired for investment intent. Additionally, the stockholders of NNL were
provided with information statements prior to the vote to approve the
transaction. There was no general solicitation or advertising involved in the
acquisition, and the Company used reasonable care to assure that the
stockholders of NNL were not underwriters. At the closing of the acquisition,
the Company assumed the outstanding stock options held by NNL optionees based on
an exchange ratio as set forth in the Agreement. The 105,414 shares of Common
Stock underlying the options were registered on a Registration Statement on Form
S-8 filed with the Commission on June 26, 1998.
On June 30, 1998, the Company issued to certain investors warrants (the
"Warrants") to purchase shares of Common Stock of the Company in connection with
the Sub-License and Development Agreement between the Company and DOV
Pharmaceutical, Inc. dated June 30, 1998. The Warrants are exercisable for an
aggregate of 75,000 shares of Common Stock at an exercise price of approximately
$8.04 per share.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's Annual Meeting of Stockholders was held on May 27, 1998
(the "Annual Meeting").
(b) The following Class II Directors were elected at the Annual Meeting:
Name Position Term Expires
---- -------- ------------
Richard Pops Class II Director 2001
David Robinson Class II Director 2001
The following Class I and III Directors continue to serve their respective
terms which expire on the Company's Annual Meeting of Stockholders in the year
as noted:
Name Position Term Expires
---- -------- ------------
Joseph Mollica Class I Director 2000
Wylie Vale Class I Director 2000
Errol DeSouza Class I Director 2000
Gary Lyons Class III Director 1999
Harry Hixson Class III Director 1999
(c) At the Annual Meeting, stockholders voted on four matters: (i) the
election of two Class II directors for a term of three years expiring in 2001,
(ii) the amendment of the 1992 Incentive Stock Plan (the "1992 Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
from 4,100,000 to 4,700,000 shares, (iii) the amendment of the 1996 Director
Option Plan (the "Director Plan") to increase the number of shares of Common
Stock reserved for issuance thereunder from 100,000 to 200,000 shares, and (iv)
the ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors. The matters voted upon at the meeting and the voting
results were as follows:
(i) The election of Richard Pops and David Robinson as Class II Directors
for a term of three years: For 12,404,075, Withhold 51,324.
(ii)Approval of amendment to the Company's 1992 Incentive Stock Plan,
increasing the number of shares of Common Stock reserved for issuance
from 4,100,000 to 4,700,000 Shares: For 11,845,420, Against 581,914,
Abstain 28,065.
(iii) Approval of amendment to the Company's 1996 Director Option Plan,
increasing the number of shares of Common Stock reserved for issuance
from 100,000 to 200,000 Shares: For 11,941,921, Against 479,139,
Abstain 34,339.
(iv)Ratification of the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1997: For
12,423,485, Against 17,754, Abstain 14,160.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits to this report are listed in the table below.
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
<S> <C>
2.1* Agreement and Plan of Reorganization dated May 1, 1998, between
Northwest NeuroLogic, Inc., NBI Acquisition Corp. and the
Registrant.
2.2* Registration Rights Agreement dated May 28, 1998, between certain investors
and the Registrant.
2.3 Form of Warrant pursuant to the Agreement and Plan of Reorganization dated
May 1, 1998.
10.1* Patent License Agreement dated May 7, 1998 between the U.S. Public Health
Service and the Registrant.
10.2* Patent License Agreement dated April 28, 1998, between and among Ira Pastan,
David Fitzgerald and the Registrant.
10.3* Sub-License and Development Agreement dated June 30, 1998, by and between
DOV Pharmaceutical, Inc. and the Registrant.
10.4* Warrant Agreement dated June 30, 1998, between DOV Pharmaceutical, Inc. and the
Registrant.
10.5* Warrant Agreement dated June 30, 1998, between Jeff Margolis and the
Registrant.
10.6* Warrant Agreement dated June 30, 1998, between Stephen Ross and the
Registrant.
27.1 Financial Data Schedule
<FN>
* Portions of this Exhibit have been omitted pursuant to a confidentiality
request filed with the Securities and Exchange Commission.
</FN>
</TABLE>
(b) Reports on Form 8-K. During the quarter ended June 30, 1998, the Company
filed no current Reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROCRINE BIOSCIENCES, INC.
Dated: 08/14/98 /s/ Paul W. Hawran
PAUL W. HAWRAN
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NEUROCRINE BIOSCIENCES, INC.,
NBI ACQUISITION CORP.
AND
NORTHWEST NEUROLOGIC, INC.
Dated as of May 1, 1998
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
ARTICLE I THE MERGER.................................................................................................1
1.1 The Merger..........................................................................................1
1.2 Effective Time......................................................................................2
1.3 Effect of the Merger................................................................................2
1.4 Articles of Incorporation; Bylaws...................................................................2
1.5 Directors and Officers..............................................................................2
1.6 Maximum Shares to Be Issued; Effect on Capital Stock................................................3
1.7 Dissenting Shares...................................................................................5
1.8 Surrender of Certificates...........................................................................6
1.9 Forfeiture and Repurchase of Parent Common Stock....................................................8
1.10 Lockup Period and Restrictions on Future Transfers..................................................9
1.11 No Further Ownership Rights in Company Capital Stock................................................9
1.12 Lost, Stolen or Destroyed Certificates.............................................................10
1.13 Tax Consequences...................................................................................10
1.14 Taking of Necessary Action; Further Action.........................................................10
1.15 Restrictive Legends and Stop-Transfer Orders.......................................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY ...........................................................11
2.1 Organization of the Company........................................................................11
2.2 Company Capital Structure..........................................................................12
2.3 Subsidiaries.......................................................................................12
2.4 Authority..........................................................................................13
2.5 Company Financial Statements.......................................................................13
2.6 No Undisclosed Liabilities.........................................................................14
2.7 No Changes.........................................................................................14
2.8 Tax and Other Returns and Reports..................................................................15
2.9 Restrictions on Business Activities................................................................17
2.10 Title to Properties; Absence of Liens and Encumbrances.............................................17
2.11 Intellectual Property..............................................................................18
2.12 Agreements, Contracts and Commitments..............................................................19
2.13 Interested Party Transactions......................................................................21
2.14 Compliance with Laws...............................................................................21
2.15 Litigation.........................................................................................21
2.16 Insurance..........................................................................................21
2.17 Minute Books.......................................................................................22
2.18 Environmental Matters..............................................................................22
2.19 Brokers' and Finders' Fees; Third Party Expenses...................................................23
2.20 Employee Matters and Benefit Plans.................................................................23
2.21 Tax Treatment......................................................................................26
2.22 No Existing Discussions............................................................................26
2.23 Vote Required......................................................................................26
2.24 Representations Complete...........................................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................................................27
3.1 Organization, Standing and Power...................................................................27
3.2 Authority..........................................................................................27
3.3 Capital Structure..................................................................................27
3.4 SEC Documents; Parent Financial Statements.........................................................28
3.5 Litigation.........................................................................................28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................................................................28
4.1 Conduct of Business of the Company.................................................................28
4.2 No Solicitation....................................................................................31
ARTICLE V ADDITIONAL AGREEMENTS.....................................................................................32
5.1 Company Stockholder Approval.......................................................................32
5.2 Access to Information..............................................................................32
5.3 Confidentiality....................................................................................32
5.4 Expenses...........................................................................................33
5.5 Public Disclosure..................................................................................33
5.6 Consents...........................................................................................33
5.7 FIRPTA Compliance..................................................................................33
5.8 Reasonable Efforts.................................................................................33
5.9 Notification of Certain Matters....................................................................34
5.10 Affiliate Agreements...............................................................................34
5.11 Additional Documents and Further Assurances........................................................34
5.12 Nasdaq National Market Listing.....................................................................34
5.13 Company's Financial Statements.....................................................................34
5.14 Milestone Warrants.................................................................................34
5.15 Oregon Health Sciences University Laboratory Funding...............................................35
5.16 Name and Physical Location of the Surviving Corporation............................................36
5.17 [***]..............................................................................................36
5.18 Employment and Consulting Arrangements.............................................................36
5.19 Appointment to Parent Scientific Advisory Board....................................................37
5.20 [***]..............................................................................................37
5.21 Registration on Form S-8...........................................................................37
ARTICLE VI CONDITIONS TO THE MERGER.................................................................................37
6.1 Conditions to Obligations of Each Party to Effect the Merger.......................................37
6.2 Additional Conditions to Obligations of the Company................................................38
6.3 Additional Conditions to the Obligations of Parent and Merger Sub..................................38
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW......................................................40
7.1 Survival of Representations and Warranties.........................................................40
7.2 Escrow Arrangements................................................................................40
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER......................................................................40
8.1 Termination........................................................................................40
8.2 Effect of Termination..............................................................................41
8.3 Termination Fee....................................................................................41
8.4 Amendment..........................................................................................41
8.5 Extension; Waiver..................................................................................42
ARTICLE IX GENERAL PROVISIONS.......................................................................................42
9.1 Notices............................................................................................42
9.2 Interpretation.....................................................................................43
9.3 Counterparts.......................................................................................43
9.4 Entire Agreement; Assignment.......................................................................43
9.5 Severability.......................................................................................43
9.6 Other Remedies.....................................................................................44
9.7 Governing Law......................................................................................44
9.8 Rules of Construction..............................................................................44
9.9 Specific Performance...............................................................................44
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of May 1, 1998 among Neurocrine Biosciences, Inc., a
Delaware corporation ("Parent"), NBI Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"), and Northwest
NeuroLogic, an Oregon corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger
Sub believe it is in the best interests of each Company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
have adopted this Agreement and approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the issued and outstanding shares
of capital stock of the Company ("Company Capital Stock") shall be converted
into the right to receive shares of voting Common Stock of Parent ("Parent
Common Stock") and (ii) all outstanding options ("Company Options") to acquire
or receive shares of Company Capital Stock shall be converted into the right to
receive options ("Parent Options") to acquire Common Stock of Parent.
C. A portion of the shares of Parent Common Stock and Parent Options
otherwise issuable by Parent in connection with the Merger shall be placed in
escrow by Parent, the release of which amount shall be contingent upon certain
events and conditions, all as set forth in the Escrow Agreement referred to in
Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
E. Certain stockholders of the Company have executed Voting and
Non-Disposition Agreements.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
<PAGE>
I.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law")
and the Oregon Business Corporation Act ("Oregon Law"), Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation and as
a wholly owned subsidiary of Parent. The Company as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation." At the election of Parent, any direct wholly owned subsidiary of
Parent may be substituted for Merger Sub as a constituent corporation in the
Merger. In such event, the parties hereto agree to execute the appropriate
amendment of this Agreement to reflect such substitution.
I.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than five (5) business days,
following satisfaction or waiver of the conditions set forth in Article VI, at
the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
California, unless another place or time is agreed to by Parent and the Company.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement of Merger (or like instrument) with the
Secretaries of State of the States of Delaware and Oregon (the "Certificate of
Merger"), in accordance with the relevant provisions of applicable law (the time
of acceptance by the Secretary of State of Delaware of such filing being
referred to herein as the "Effective Time").
I.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law and
Oregon Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
I.4 Articles of Incorporation; Bylaws
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time, the Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving Corporation
until thereafter amended as provided by law and such Articles of Incorporation.
(b) Unless otherwise determined by Parent, the Bylaws of the
Company, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter amended.
I.5 Directors and OfficersI.5 Directors and OfficersI.5 Directors and
Officers. The director(s) of Merger Sub immediately prior to the Effective Time
shall be the initial director(s) of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Bylaws of the Surviving Corporation.
<PAGE>
I.6 Maximum Shares to Be Issued; Effect on CapitalI.6 Maximum Shares to
Be Issued; Effect on Capital StockI.6 Maximum Shares to Be Issued; Effect on
Capital Stock. The maximum number of shares of Parent Common Stock to be issued
(including Parent Common Stock to be reserved for issuance upon exercise of any
of the Company Options to be assumed by Parent) in exchange for the acquisition
by Parent of all outstanding Company Capital Stock and Company Options shall be
the Aggregate Share Number (as defined in Section 1.6(g)(iii)). No adjustment
shall be made in the number of shares of Parent Common Stock issued in the
Merger as a result of any cash proceeds received by the Company from the date
hereof to the Effective Time pursuant to the exercise of options, warrants or
other rights to acquire Company Capital Stock. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holder of
any shares of the Company Capital Stock, the following shall occur:
(a) Conversion of Company Capital Stock. Each share of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Stock to be canceled pursuant to Section
1.6(b) and any Dissenting Shares as defined and to the extent provided in
Section 1.7(a)) will be canceled and extinguished and be converted automatically
into the right to receive (subject to Section 1.8 with regard to the Escrow
Amount) that number of shares of Parent Common Stock equal to the Exchange Ratio
(as defined in Section 1.6(g)(v) below), upon surrender of the certificate
representing such share of Company Capital Stock in the manner provided in
Section 1.8.
(b) Cancellation of Parent-Owned and Company-Owned Stock. Each
share of Company Capital Stock owned by Merger Sub, Parent, the Company or any
direct or indirect wholly owned subsidiary of Parent or the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options. At the Effective Time, all options to
purchase Company Capital Stock then outstanding under the Company's 1997 Stock
Incentive Plan (the "Option Plan") or otherwise shall be assumed by Parent in
accordance with provisions described below.
<PAGE>
(i) At the Effective Time, each outstanding
Company Option under the Option Plan or otherwise, whether vested or unvested,
shall be, in connection with the Merger, assumed by Parent. Each Company Option
so assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plan and/or as
provided in the respective option agreements governing such Company Option
immediately prior to the Effective Time, except that: (A) such Company Option
shall be exercisable for that number of whole shares of Parent Common Stock
equal to the product of the number of shares of Company Capital Stock that were
issuable upon exercise of such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounded down (in the case of Company
Options granted under the Option Plan) to the nearest whole number of shares of
Parent Common Stock (subject to Section 1.8 with regard to the Escrow Amount),
(B) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Capital Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent, (C) with
regard to Company Options held by persons listed on Schedule 1.9(a) attached
hereto, such Company Option shall be subject to forfeiture in accordance with
the vesting schedules set forth in Section 1.9 hereof, and (D) such Company
Option shall be exercisable for a term equal to the lesser of (i) the remaining
term of the Company Option and (ii) five (5) years from the Effective Time.
(ii) It is the intention of the parties that the
Company Options assumed by Parent qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent the
Company Options qualified as incentive stock options immediately prior to the
Effective Time.
(d) Capital Stock of Merger Sub. Each share of Common Stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. After the
Effective Time, each stock certificate of Merger Sub evidencing ownership of any
such shares shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) $8.43333 (calculated as set forth in Section
1.6(g)(vi).
(g) Definitions.
(i) Aggregate Common Number. The "Aggregate
Common Number" shall mean 591,250 (or the aggregate number of shares of Company
Capital Stock outstanding immediately prior to the Effective Time).
(ii) Aggregate Option Number. The "Aggregate
Option Number" shall mean 158,750 (or the aggregate number of shares of Company
Capital Stock issuable upon the exercise of all outstanding Company Options,
warrants and other rights to acquire shares of Company Capital Stock immediately
prior to the Effective Time).
<PAGE>
(iii) Aggregate Share Number. The "Aggregate
Share Number" shall be 498,022 shares of Common Stock of Parent (which is equal
to $4,200,000 divided by the Market Price), as appropriately adjusted to reflect
the effect of any stock split, stock dividend, reorganization, recapitalization
or the like with respect to the Parent Common Stock occurring after the date
hereof and prior to the Effective Time (a "Recapitalization of the Parent Common
Stock").
(iv) Escrow Amount. The "Escrow Amount" shall be
[***] shares of Parent Common Stock (which is equal to the product obtained by
multiplying (x) the sum of the Aggregate Common Number and the Aggregate Option
Number by (y) the Exchange Ratio by (z) [***]. The Escrow Amount shall be
composed of [***] Vested Securities and [***]. Unvested Securities as of the
Effective Time, as set forth on Schedule 1.6 attached hereto.
(v) Exchange Ratio. The "Exchange Ratio" shall
be 0.66403 (which is equal to the quotient obtained by dividing (x) the
Aggregate Share Number by (y) the sum of (A) the Aggregate Common Number plus
(B) the Aggregate Option Number).
(vi) Market Price. The Market Price of the
Parent Common Stock shall mean $8.43333 per share of Parent Common Stock (which
is equal to the average closing price of a share of Parent Common Stock, as
reported on the Nasdaq National Market, over the fifteen (15) consecutive
trading days ending on the date preceding the date of public disclosure of the
Letter Agreement between Parent and the Company dated February 27, 1998, which
disclosure date was March 3, 1998).
(vii) Vested Securities. "Vested Securities"
means shares of Parent Common Stock, Parent Options or Milestone Warrants which
are vested pursuant to the vesting schedule set forth in Section 1.9 as of the
relevant time.
(viii) Unvested Securities. "Unvested Securities"
means shares of Parent Common Stock, Parent Options or Milestone Warrants which
are unvested pursuant to the vesting schedule set forth in Section 1.9 as of the
relevant time.
I.7 Dissenting Shares
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
Oregon Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("Dissenting Shares") shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by applicable law.
<PAGE>
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Oregon Law shall effectively withdraw or lose (through failure to perfect
or otherwise) the right to appraisal, then, as of the later of the Effective
Time and the occurrence of such event, such holder's shares shall automatically
be converted into and represent only the right to receive Parent Common Stock
and cash in lieu of fractional shares as provided in Section 1.6, without
interest thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to Oregon
Law and received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under Oregon
Law. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal of
capital stock of the Company or offer to settle or settle any such demands.
I.8 Surrender of Certificates
(a) Exchange Agent. American Stock Transfer & Trust
Company shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for exchange
in accordance with this Article I and as set forth on Schedule 1.6, the
aggregate number of shares of Parent Common Stock issuable in exchange for
outstanding shares of Company Capital Stock or upon exercise of Parent Options;
provided, however, that on behalf of the holders of Company Capital Stock and
Company Options, Parent shall deposit into an escrow account a number of shares
of Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable pursuant to sections 1.6(a) and
1.6(c), provided, further, that shares of Parent Common Stock issuable upon
exercise of the Parent Options shall not be deposited in the escrow account
until exercise of the relevant Parent Option. Parent shall deposit into the
escrow account shares of Parent Common Stock issued pursuant to Section 1.6(a)
promptly after the Effective Time and shares of Parent Common Stock issued
pursuant to the exercise of Parent Options promptly after exercise thereof. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock and Company Options shall be in proportion to the aggregate number
of shares of Parent Common Stock and Parent Options which such holder would
otherwise be entitled to receive under sections 1.6(a) and 1.6(c) by virtue of
ownership of outstanding shares of Company Capital Stock and Company Options.
<PAGE>
(c) Exchange Procedures. Promptly after the Effective Time,
the Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock and which
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock,
if any, (a) to be deposited in the Escrow Fund on such holder's behalf pursuant
to the Escrow Agreement referred to in Article VII hereof, and (b) subject to
transfer restrictions in connection with the Company's right to repurchase),
plus cash in lieu of fractional shares in accordance with Section 1.6, to which
such holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of the
Escrow Agreement referred to in Article VII hereof, Parent shall cause to be
distributed to the Escrow Agent (as defined in the Escrow Agreement referred to
in Article VII) a certificate or certificates representing that number of shares
of Parent Common Stock and Parent Options equal to the Escrow Amount, which
certificate shall be registered in the names of the stockholders to whom such
shares would otherwise be issued. Such shares shall be beneficially owned by the
holders on whose behalf such shares were deposited in the Escrow Fund and shall
be available to compensate Parent as provided in the Escrow Agreement referred
to in Article VII. Until so surrendered, each outstanding Certificate that,
prior to the Effective Time, represented shares of Company Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence the ownership of the number of full shares
of Parent Common Stock into which such shares of Company Capital Stock shall
have been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock declared or
made after the Effective Time and with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock.
<PAGE>
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Capital Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
I.9 Forfeiture and Repurchase of Parent Common StockI.9 Forfeiture and
Repurchase of Parent Common StockI.9 Forfeiture and Repurchase of Parent Common
Stock.
(a) Vesting Schedule. The shares of Parent Common Stock issued
pursuant to Section 1.6(a) and/or issuable upon exercise of the Milestone
Warrants shall be subject to the right of Parent to repurchase, and the Parent
Options held by those employees and consultants of the Company listed on
Schedule 1.9(a) attached hereto shall be subject to the risk of forfeiture,
according to the following schedule: [***] of such shares and Parent Options
shall vest at the Effective Time; the remainder of such shares and Parent
Options shall be subject to forfeiture or repurchase, as applicable, by Parent
as set forth below, with such risk of forfeiture or repurchase right lapsing as
to an additional [***] of each such person's shares and Parent Options on each
anniversary of the Effective Time, provided that:
(i) Dr. Roger Cone and Dr. Susan Amara. With
respect to Dr. Roger Cone and Dr. Susan Amara, all of such person's Parent
Common Stock issued pursuant to Section 1.6(a) above or shares of Parent Common
Stock issued upon exercise of Milestone Warrants not vested pursuant to this
section as of the date of termination shall be subject to repurchase by Parent
at a price per share equal to: (x) the quotient obtained by dividing [***] paid
by such person for the [***] by the Exchange Ratio, in the case of Parent Common
Stock obtained pursuant to [***], or (y) the [***] by such person in the case of
[***], in the event of: (A) the holder's voluntary termination of employment
with or services to Parent, or (B) the involuntary termination of the holder's
employment with or services to Parent for Cause (as defined below and not as
defined in their Consulting Agreements). Parent Options owned by Dr. Susan Amara
after the Effective Time not vested pursuant to this Section as of the date of
termination shall be subject to forfeiture and shall not be exercisable in event
of: (i) Dr. Amara's voluntary termination of employment with or services to
Parent, or (ii) the involuntary termination of the Dr. Amara's employment with
or services to Parent for Cause (as defined below and not as defined in her
Consulting Agreement). In the event of the holder's termination by reason of
[***], the Unvested Securities shall continue to vest and not be subject to
repurchase on the schedule specified in Section 1.9(a). With regard to Dr.
Amara, the vesting schedule set forth in Section 1.9(a) above shall be deemed to
apply first to shares of Parent Common Stock and second to Parent Options, such
that the Vested Securities held by Dr. Amara on the relevant date shall be
composed of the maximum possible number of shares of Parent Common Stock and the
minimum possible number of shares of Parent Common Stock subject to Parent
Options.
<PAGE>
(ii) Other Current Employees/Consultants. With
respect to each other employee and consultant of the Company listed on Schedule
1.9(a), all of such person's Parent Common Stock issued upon exercise Milestone
Warrants not vested pursuant to this section as of the date of termination shall
be subject to repurchase by Parent at a price per share equal to the purchase
price paid by such person upon exercise of such Milestone Warrants, in the event
of: (A) the holder's voluntary termination of employment with or services to the
Surviving Corporation, or (B) the involuntary termination of the holder's
employment with or services to the Surviving Corporation for Cause (but not in
the event that he or she is required by Parent to relocate outside the Portland,
Oregon area). In addition, for each such person, all of such person's Parent
Options, to the extent not vested pursuant to this Section as of the date of
termination, shall be subject to forfeiture and shall not be exercisable in the
event of: (i) the holder's voluntary termination of employment with or services
to the Surviving Corporation, or (ii) the involuntary termination of the
holder's employment with or services to Surviving Corporation for Cause (but not
in the event that he or she is required by Parent to relocate outside the
Portland, Oregon area). In the event of the holder's termination by reason of
death or permanent disability, the Unvested Securities shall continue to vest on
the schedule specified in Section 1.9(a).
(b) Definition of "Cause". For purposes of this Section 1.9,
"Cause" shall mean the discharge of the employee or consultant resulting from a
determination by the Board of Directors of Parent that the employee or
consultant: (i) has been convicted of any felony or a misdemeanor involving
dishonesty, fraud, theft or embezzlement, or has committed any other crime or
offense involving money or property of the Company; (ii) has failed or refused
in any material respect, to follow reasonable policies or directives established
by the Board of Directors of Parent; (iii) has inadequately performed the duties
and responsibilities of his or her position; or (iv) has failed or refused to
attend to duties or obligations of his or her position. With respect to
subsections 1.9(b)(ii), (iii) and (iv), "Cause" shall require that the employee
or consultant shall be given notice of the defect and shall have failed to cure
the defect within a thirty (30) day period thereafter, unless the defect is by
nature incapable of being cured within a reasonable period of time, in which
case no notice and cure period shall apply.
I.10 Lockup Period and Restrictions on Future TransfersI.10 Lockup
Period and Restrictions on Future TransfersI.10 Lockup Period and Restrictions
on Future Transfers. All shares of Parent Common Stock issued to the persons
listed on Schedule 1.9(a) shall be subject to a [***] lockup provision from the
Effective Time as set forth substantially in the form of Lockup Agreement
attached hereto as Exhibit C-2. [***] of the shares of Parent Common Stock
issued to persons other than those listed on Schedule 1.9(a) shall be subject to
a [***] lockup provision from the Effective Time and all of the shares of Parent
Common Stock issuable to such persons other than those listed on Schedule 1.9(a)
shall be subject to the stock restrictions set forth in substantially the form
of Lockup Agreement attached hereto as Exhibit C-1. All future transfers of
Parent Common Stock shall be made in accordance with Parent's Insider Trading
Policy attached hereto as Exhibit H.
<PAGE>
I.11 No Further Ownership Rights in Company Capital Stock
No Further Ownership Rights in Company Capital Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of shares of Company Capital
Stock in accordance with the terms hereof (including any cash paid in respect
thereof) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
I.12 Lost, Stolen or Destroyed Certificates. In the event
any Certificates evidencing shares of Company Capital Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
I.13 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a tax-free reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
I.14 Taking of Necessary Action; Further Action. If, at any
time after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
I.15 Restrictive Legends and Stop-Transfer Orders
(a) Legends. Parent shall cause the legend set forth below or
legends substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Parent Common Stock issued pursuant to Section
1.6(a) above to the persons listed on Schedule 5.10, together with any other
legends that may be required by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE
TRANSFERRED IN CONFORMITY WITH RULE 145(D) OR IN ACCORDANCE
WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO
THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933.
<PAGE>
In addition, Parent shall cause the legend set forth below or legends
substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Parent Common Stock issued to those persons listed
on Schedule 1.9(a):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RIGHTS OF REPURCHASE HELD BY THE ISSUER OR ITS
ASSIGNEE(S), AS SET FORTH IN THE AGREEMENT AND PLAN OF
REORGANIZATION (THE "AGREEMENT") BETWEEN THE ISSUER AND
NORTHWEST NEUROLOGIC, INC., A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL NOT BE TRANSFERRED, SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE EXCHANGED PRIOR TO THE EXPIRATION OF
THE ISSUER'S RIGHT OF REPURCHASE SET FORTH IN SECTION 1.9 OF
THE AGREEMENT.
(b) Stop-Transfer Notices. In order to ensure compliance with
the restrictions referred to herein, Parent may issue appropriate "stop
transfer" instructions to its transfer agent.
(c) Refusal to Transfer. Parent and its transfer agent shall
not be required (i) to transfer on its books any shares of Parent Common Stock
that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (ii) to treat as owner of such shares of Parent
Common Stock or to accord the right to vote or pay dividends to any purchaser or
other transferee to whom such shares shall have been so transferred.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate section number) supplied by the Company to
Parent prior to execution of this Agreement (the "Company Schedules") and dated
as of the date hereof, as follows:
<PAGE>
II.1 Organization of the Company. The Company is a corporation duly
organized and validly existing under the laws of the State of Oregon. The
Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on the business,
assets (including intangible assets), financial condition or results of
operations of the Company (hereinafter referred to as a "Material Adverse
Effect"). The Company has delivered a true and correct copy of its Articles of
Incorporation and Bylaws, each as amended to date, to Parent.
II.2 Company Capital Structure
(a) As of the Closing Date, the authorized capital stock of
the Company shall consist of 10,000,000 shares of authorized Common Stock, of
which 591,250 shares are issued and outstanding, 10,000,000 shares of authorized
Preferred Stock, of which no shares are issued and outstanding, and no other
shares of Capital Stock. As of the Closing Date, the Company Capital Stock shall
be held of record by the persons, with the addresses of record and in the
amounts set forth on Schedule 2.2(a). All outstanding shares of Company Capital
Stock are duly authorized, validly issued, fully paid and non assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of the Company or any agreement to which the Company is a party or by
which it is bound.
(b) The Company has reserved 158,750 shares of Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which,
as of the date hereof and the Closing Date, 158,750 shares are subject to
outstanding, unexercised options and no shares remain available for future
grant. The Company has reserved 158,750 shares of Common Stock for issuance upon
exercise of outstanding Company Options granted outside the Option Plan.
Schedule 2.2(b) sets forth for each outstanding Company Option the name of the
holder of such option, the domicile address of such holder, the number of shares
of Common Stock subject to such option, the exercise price of such option and
the vesting schedule for such option, including the extent vested to date and
whether the exercisability of such option will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement. Except
as described in Schedule 2.2(b), all Company Options have been issued and
granted in all material respects in compliance with all applicable securities
laws and all other applicable legal requirements. Except as described in
Schedules 2.2(a) and 2.2(b), there are no outstanding shares of Company Capital
Stock or options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Company is a party or by which it is
bound obligating the Company to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. The holders of
Company Options have been or will be given, or shall have properly waived, any
required notice prior to the Merger. As a result of the Merger, Parent will be
the record and sole beneficial owner of all capital stock of the Surviving
Corporation and rights to acquire or receive such capital stock.
II.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
<PAGE>
II.4 Authority. Subject only to the requisite approval of the
Merger and this Agreement by the Company's stockholders, the Company has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The vote required of the
Company's stockholders to duly approve the Merger and this Agreement is a
majority of all shares of Company Capital Stock entitled to vote thereon. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger by the Company's stockholders. The Company's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms. Except as
set forth on Schedule 2.4, subject only to the approval of the Merger and this
Agreement by the Company's stockholders, the execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (any such event, a
"Conflict") (i) any provision of the Articles of Incorporation or Bylaws of the
Company or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or its
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict) is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the Delaware and Oregon Secretaries of
State, (ii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.4.
II.5 Company Financial Statements
(a) Schedule 2.5 sets forth the Company's unaudited balance
sheets as of December 31, 1997 (the "Balance Sheet") and the related unaudited
statement of operations for the 12-month period then ended (collectively, the
"Company Financials"). Except as disclosed in Schedule 2.5, the Company
Financials are correct in all material respects and have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
basis consistent throughout the periods indicated and consistent with each
other, except that the Company Financials do not include footnotes. As adjusted
by the disclosures in Schedule 2.5, the Company Financials present fairly the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein.
<PAGE>
II.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6,
the Company does not have any liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required to be
reflected in financial statements in accordance with GAAP), which individually
or in the aggregate, (i) has not been reflected in the Balance Sheet, or (ii)
has not arisen in the ordinary course of the Company's business since the date
of the Balance Sheet, consistent with past practices, and is not material.
II.7 No Changes. Except as set forth in Schedule 2.7, since the date
of the Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course
of business as conducted on the date of the Balance Sheet and consistent with
past practices;
(b) amendments or changes to the Articles of
Incorporation or Bylaws of the Company;
(c) capital expenditure or commitment by the Company, either
individually or in the aggregate, exceeding $10,000;
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or
other distribution with respect to the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition by the Company of
any of its capital stock;
(i) increase in the salary or other compensation payable or to
become payable to any of its officers, directors, employees, consultants or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment of a bonus or other additional salary or compensation to any
such person except as otherwise contemplated by this Agreement;
(j) sale, lease, license or other disposition of any of the
assets or properties of the Company, except in the ordinary course of business
as conducted on that date and consistent with past practices;
<PAGE>
(k) amendment or termination of any material contract,
agreement or license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or threat of commencement of any
lawsuit or proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities;
(q) change in pricing, royalties or reimbursement rates set or
charged by the Company to its customers or licensees or in pricing, royalties or
reimbursement rates set or charged by persons who have licensed Intellectual
Property to the Company;
(r) event or condition of any character that has or could be
reasonably expected to have a Material Adverse Effect on the Company; or
(s) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (r) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
II.8 Tax and Other Returns and Reports
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes", means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
<PAGE>
(b) Tax Returns and Audits. Except as set forth in
Schedule 2.8:
(i) The Company as of the Effective Time will
have prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) The Company as of the Effective Time: (A) will
have paid or accrued all Taxes
it is required to pay or accrue and (B) will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) The Company has not been delinquent in the
payment of any Tax nor is there any
Tax deficiency outstanding, proposed or assessed against the Company, nor has
the Company executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return
of the Company is currently in progress, nor has the Company been notified
of any request for such an audit or other examination.
(v) The Company does not have any liabilities for
unpaid federal, state, local and foreign Taxes which have not been accrued or
reserved against in accordance with GAAP on the Balance Sheet, whether asserted
or unasserted, contingent or otherwise, and the Company has no knowledge of any
basis for the assertion of any such liability attributable to the Company, its
assets or operations.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Effective Time there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes.
(viii) The Company has no knowledge of any basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
<PAGE>
(x) As of the Effective Time, there will not be
any contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
(xi) The Company has not filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for
purposes of determining its future amortization, depreciation and other federal
income tax deductions is accurately reflected on the Company's tax books and
records.
II.9 Restrictions on Business ActivitiesII.9 Restrictions on Business
ActivitiesII.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
II.10 Title to Properties; Absence of Liens and EncumbrancesII.10
Title to Properties; Absence of Liens and EncumbrancesII.10
Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned
any real property. Schedule 2.10(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor, the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default).
<PAGE>
(b) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens (as defined in Section
2.8(b)(vii)), except as reflected in the Company Financials or in Schedule
2.10(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
II.11 Intellectual Property
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material that are used in the business of the Company as
currently conducted or as proposed to be conducted by the Company (the "Company
Intellectual Property Rights").
(b) Schedule 2.11(a) sets forth a complete list of all
patents, registered and material unregistered trademarks, registered copyrights,
trade names and service marks, and any applications therefor, included in the
Company Intellectual Property Rights, and specifies, where applicable, the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Schedule 2.11(b)
sets forth a complete list of all licenses, sublicenses and other agreements as
to which the Company is a party and pursuant to which the Company or any other
person is authorized to use any Company Intellectual Property Right or trade
secret of the Company, and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty or
other fees and the term thereof. The execution and delivery of this Agreement by
the Company, and the consummation of the transactions contemplated hereby, will
neither cause the Company to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth in Schedules 2.11(a) or 2.11(b), the Company is
the sole and exclusive owner or licensee of, with all right, title and interest
in and to (free and clear of any liens or encumbrances), the Company
Intellectual Property Rights, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company Intellectual Property
Rights are being used.
<PAGE>
(c) No claims with respect to the Company Intellectual
Property Rights have been asserted or are, to the Company's knowledge,
threatened by any person, nor are there any valid grounds for any such claims,
(i) to the effect that the manufacture, sale, licensing or use of any of the
products of the Company infringes on any copyright, patent, trade mark, service
mark, trade secret or other proprietary right, (ii) against the use by the
Company of any trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in the Company's business as currently conducted
or as proposed to be conducted by the Company, or (iii) challenging the
ownership by the Company, validity or effectiveness of any of the Company
Intellectual Property Rights. All registered trademarks, service marks and
copyrights held by the Company are valid and subsisting. The Company has not
infringed, and the business of the Company as currently conducted or as proposed
to be conducted does not infringe, any copyright, patent, trademark, service
mark, trade secret or other proprietary right of any third party. There is no
material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any employee
or former employee of the Company. No Company Intellectual Property Right or
product of the Company or any of its subsidiaries is subject to any outstanding
decree, order, judgment, or stipulation restricting in any manner the licensing
thereof by the Company. The Company has taken all reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
the Company Intellectual Property Rights. Except as set forth on Schedule
2.11(c), each current and former employee, consultant or contractor of the
Company has executed a proprietary information and confidentiality agreement
substantially in the Company's standard forms and in any event restricting the
use and disclosure of the Company Intellectual Property and providing for the
assignment to the Company of Company Intellectual Property developed by such
employees, consultants and contractors. All software included in the Company
Intellectual Property Rights is original with the Company and has been either
created by employees of the Company on a work-for-hire basis or by consultants
or contractors who have created such software themselves and have assigned all
rights they may have had in such software to the Company.
II.12 Agreements, Contracts and CommitmentsII.12 Agreements, Contracts
and CommitmentsII.12 Agreements, Contracts and Commitments. Except as set forth
on Schedule 2.12(a), the Company does not have, is not a party to nor is it
bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain
any severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension,
profit sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement,
contract or commitment with an employee or individual consultant or salesperson
or any consulting or sales agreement, contract or commitment under which any
firm or other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion
bond,
<PAGE>
(vii) any lease of personal property having a value
individually in excess of $10,000,
(viii) any agreement of indemnification or
guaranty,
(ix) any agreement, contract or commitment
containing any covenant limiting the freedom of the Company to engage in any
line of business or to compete with any person,
(x) any agreement, contract or commitment
relating to capital expenditures and involving future payments in excess of
$10,000,
(xi) any agreement, contract or commitment
relating to the disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of the Company's business,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the
purchase of raw materials involving $10,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing or
development agreement,
(xvi) any contract requiring that the Company give
any notice, obtain any consent, or provide any information to any person prior
to consummating the Merger,
(xvii) any contract involving a governmental body, to
which any governmental body is a party, under which any governmental body has
any rights or obligations, or indirectly or directly benefitting any
governmental body,
(xviii) any agreement pursuant to which the Company
has granted or may grant in the future, to any party, a license or option or
other right to use or acquire any technology or Company Intellectual Property
Right, or
(xix) any other agreement, contract or commitment
that involves $10,000 or more or is not cancelable without penalty within thirty
(30) days, or that could reasonably be expected to have a material adverse
effect on the business condition, assets, liabilities or financial performance
of the Company or any of the transactions contemplated by this Agreement.
<PAGE>
Except for such alleged breaches, violations and defaults, and events that would
constitute a breach, violation or default with the lapse of time, giving of
notice, or both, as are all noted in Schedule 2.12(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.12(a) or Schedule
2.11(b) (any such agreement, contract or commitment, a "Contract"). Each
Contract is in full force and effect and is enforceable in accordance with its
terms and, except as otherwise disclosed in Schedule 2.12(b), is not subject to
any default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto. The Contracts collectively constitute all of
the contracts necessary to enable the Company to conduct its business in the
manner in which it is currently being conducted and in the manner in which it is
proposed to be conducted.
II.13 Interested Party Transactions. Except as set forth on
Schedule 2.13, no officer, director or stockholder of the Company (nor any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
interest), has or has had, directly or indirectly, (i) an economic interest in
any entity which furnished or sold, or furnishes or sells, services or products
that the Company furnishes or sells, or proposes to furnish or sell, (ii) an
economic interest in any entity that purchases from or sells or furnishes to,
the Company, any goods or services or (iii) a beneficial interest in any
contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11(b);
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
II.14 Compliance with Laws. The Company has complied in all material
respects with, is not in violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation.
II.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, to the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors by or before any governmental entity. Schedule 2.15 sets forth, with
respect to any pending or threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. No governmental entity has at any
time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
<PAGE>
II.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
II.17 Minute Books. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and stockholders or actions by written consent since the time of incorporation
of the Company.
II.18 Environmental Matters
(a) "Environmental Claim" means any notice, claim, act, cause
of action or investigation by any person alleging potential liability (including
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence, or
release into the environment, of any Hazardous Materials (as hereinafter
defined) or (ii) any violation, or alleged violation, of any Environmental Laws.
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) or the
protection of human health, including laws and regulations relating to
emissions, discharges, releases or threatened releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"Hazardous Materials" means chemicals, pollutants, contaminants, wastes, toxic
substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof.
(b) The Company has been and is in compliance (which
compliance includes, but is not limited to, the possession of all permits and
other governmental authorizations required under applicable Environmental Laws
and compliance with the terms and conditions thereof) in all material respects
with all Environmental Laws and the Company has not received any notice of any
alleged claim, violation of or liability under any Environmental Laws which has
not heretofore been cured or for which there is any remaining liability;
(c) The Company has not received notice of any Environmental
Claim filed or threatened against it, or against any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law and there are no past or present actions,
activities, circumstances, conditions, events or incidents, that could
reasonably be expected to form the basis of any Environmental Claim against the
Company, the business thereof, or against any person or entity whose liability
for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law;
<PAGE>
(d) The Company has not disposed of, emitted, discharged,
handled, stored, transported, used or released any Hazardous Materials, arranged
for the disposal, discharge, storage or release of any Hazardous Materials, or
exposed any employee or other individual to any Hazardous Materials or condition
so as to give rise to any liability or corrective or remedial obligation under
any Environmental Laws; and
(e) To the actual knowledge of the Company, no Hazardous
Materials are present in or on any premises leased or used at any time by the
Company or for its business, and no reasonable likelihood exists that any
Hazardous Materials will come to be present in or on any such premises leased or
used at any time by the Company for its business, so as to give rise to any
material liability or corrective or remedial obligation under any Environmental
Laws.
II.19 Brokers' and Finders' Fees; Third Party ExpensesII.19 Brokers'
and Finders' Fees; Third Party ExpensesII.19 Brokers' and Finders' Fees; Third
Party Expenses. Except as set forth on Schedule 2.19, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby. Schedule 2.19 sets
forth the principal terms and conditions of any agreement, written or oral, with
respect to such fees. Schedule 2.19 also sets forth the Company's current
reasonable estimate of all Third Party Expenses (as defined in Section 5.4)
expected to be incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby.
II.20 Employee Matters and Benefit Plans
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 2.20(a)(i) below (which definition shall apply
only to this Section 2.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or
entity under common control with the Company within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any
plan, program, policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay, performance awards,
stock or stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded and
whether or not legally binding, including without limitation, each "employee
benefit plan", within the meaning of Section 3(3) of ERISA which is or has been
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any "Employee" (as defined below), and pursuant
to which the Company or any Affiliate has or may have any material liability
contingent or otherwise;
<PAGE>
(iv) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between the
Company or any Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue
Service;
(vii) "Multiemployer Plan" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan", as defined in Section
3(37) of ERISA; and
(viii) "Pension Plan" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the meaning of
Section 3(2) of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement,
together with a schedule of all liabilities, whether or not accrued, under each
such Company Employee Plan or Employee Agreement. The Company does not have any
plan or commitment, whether legally binding or not, to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement, nor does it have any intention or commitment to do any of
the foregoing.
(c) Documents. The Company has provided to Parent (i) correct
and complete copies of all documents embodying or relating to each Company
Employee Plan and each Employee Agreement including all amendments thereto and
written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) the three
most recent annual reports (Series 5500 and all schedules thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan
or related trust; (iv) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (v) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Company Employee Plan; (vi) all IRS determination letters and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the Department of Labor ("DOL") with respect to any Company
Employee Plan; (vii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to the
Company; and (viii) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
<PAGE>
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all material
respects in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code; (ii) no "prohibited transaction", within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to
any Company Employee Plan; (iii) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan; and (iv) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to the Company, Parent or any of
its Affiliates (other than ordinary administration expenses typically incurred
in a termination event); (v) there are no inquiries or proceedings pending or,
to the knowledge of the Company or any affiliates, threatened by the IRS or DOL
with respect to any Company Employee Plan; and (vi) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or has any liability to
provide, life insurance, medical or other employee benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as may
be required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(h)(i),
the execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
<PAGE>
(ii) Except as set forth on Schedule 2.20(h)(ii),
no payment or benefit which will or may be made by the Company or Parent or any
of their respective affiliates with respect to any Employee will be
characterized as an "excess parachute payment", within the meaning of Section
280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the
Company is pending or, to the best knowledge of the Company, threatened. Except
as set forth in Schedule 2.20(j), the Company is not involved in or, to the
knowledge of the Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters involving any
Employee, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a liability to the Company. Except
as set forth in Schedule 2.20(j), the Company is not presently, nor has it been
in the past, a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
II.21 Tax Treatment. To the Company's knowledge, neither the Company
nor any of its directors, officers or stockholders has taken any action which
the Company is aware would interfere with the tax-free status of the Merger as a
reorganization under Section 368 of the Code.
II.22 No Existing Discussions. Neither the Company nor any of its
representatives, agents, or employees are engaged, directly or indirectly, in
any discussions or negotiations with any other person relating to any action or
activity proscribed by Section 4.2 hereof.
II.23 Vote Required. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding is the only vote of
the holders of any class or series of the Company's Capital Stock necessary to
approve this Agreement, the Merger and the other transactions contemplated by
this Agreement.
<PAGE>
II.24 Representations CompleteII.24 Representations CompleteII.24
Representations Complete. None of the representations or warranties made by the
Company (as modified by the Company Schedules), nor any statement made in any
schedule or certificate furnished by the Company pursuant to this Agreement, or
furnished in or in connection with documents mailed or delivered to the
stockholders of the Company in connection with soliciting their consent to this
Agreement and the Merger, contains or will contain at the Effective Time, any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
III.1 Organization, Standing and Power Organization, Standing and
Power. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Parent and Merger Sub has the corporate power to own
its properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on Parent
and Merger Sub as a whole.
III.2 Authority. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent and Merger
Sub and constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms.
III.3 Capital Structure
(a The authorized stock of Parent consists of 50,000,000
shares of Common Stock, of which approximately 17,707,815 shares were issued and
outstanding as of February 28, 1998, and 5,000,000 shares of Preferred Stock,
none of which is issued or outstanding. The authorized capital stock of Merger
Sub consists of 1,000 shares of Common Stock, 1,000 shares of which, as of the
date hereof, are issued and outstanding and are held by Parent. All such shares
have been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. The outstanding stock of Merger Sub is free of liens and
encumbrances.
<PAGE>
(b The shares of Parent Common Stock to be issued pursuant to
the Merger, when issued, will be duly authorized, validly issued, fully paid,
nonassessable and issued in compliance with applicable federal, Oregon and
Delaware securities laws.
III.4 SEC Documents; Parent Financial Statements. Parent has
furnished or made available to the Company true and complete copies of all
reports or registration statements filed by it with the Securities and Exchange
Commission (the "SEC") since December 31, 1996, all in the form so filed (all of
the foregoing being collectively referred to as the "SEC Documents"). As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933 (the "Securities
Act") or the Securities Exchange Act of 1934 (the "Exchange Act") as the case
may be, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
document subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and present
fairly the consolidated financial position of Parent at the dates thereof and
the consolidated results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal audit
adjustments). There has been no change in Parent accounting policies except as
described in the notes to the Parent Financial Statements; provided, however,
the Parent may have restated or may restate one or more of the Parent Financial
Statements to reflect acquisitions entered into subsequent to the respective
dates thereof.
III.5 Litigation There is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement. Parent is not subject to any material litigation except as
disclosed in the SEC Documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
IV.1 Conduct of Business of the Company.
<PAGE>
(a Company Conduct. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company agrees (except to the extent that Parent
shall otherwise consent in writing) to carry on its business in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, to pay its debts and Taxes when due, to pay or perform other
obligations when due, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practice and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve their relationships with
customers, suppliers, corporate partners, collaborators, licensors, licensees,
and others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. The
Company shall promptly notify Parent of any event or occurrence or emergency not
in the ordinary course of its business, and any material event involving or
adversely affecting the Company or its business. Except as expressly
contemplated by this Agreement, the Company shall not, without the prior written
consent of Parent:
(i Enter into any commitment, activity or
transaction not in the ordinary course of business;
(ii Transfer to any person or entity any rights
to any Company IntellectualProperty Rights;
(iii Enter into or amend any material agreements
pursuant to which any other party is granted manufacturing, marketing,
distribution, licensing or similar rights of any type or scope;
(iv Amend or otherwise modify (or agree to do
so), except in the ordinary course of business, or violate the terms of, any of
the material agreements to which the Company is a party, or enter into material
capital commitments or material long term obligations;
(v Commence or settle any litigation;
(vi Declare, set aside or pay any dividends on
or make any other distributions (whether in cash, stock or property) in respect
of any of its capital stock, or split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights exercisable therefor);
(vii Except for the issuance of shares of Company
Capital Stock upon exercise or conversion of presently outstanding Company
Options, issue, grant, deliver or sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any shares
of its capital stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(viii Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
<PAGE>
(ix Acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of the Company;
(x Purchase, sell, lease, license or otherwise
dispose of any properties or assets, except in the ordinary course of business
and consistent with past practice;
(xi Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of the
Company or guarantee any debt securities of others;
(xii Grant any severance or termination pay to
any director, officer employee or consultant, except payments made pursuant to
standard written agreements outstanding on the date hereof (which such
agreements are disclosed on Schedule 2.12(a);
(xiii Adopt or amend any employee benefit, bonus, or
severance plan, program, policy or arrangement, or enter into any employment
contract, extend any employment offer, pay or agree to pay any special bonus or
special remuneration to any director, officer, employee or consultant, or
increase the salaries or wage rates of its directors, officers, employees or
consultants;
(xiv Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and consistent with
past practice;
(xv Take any action which would, to the
knowledge of the Company, jeopardize the tax-free reorganization hereunder;
(xvi Pay, discharge or satisfy, in an amount in
excess of $5,000, in any one case, or $10,000 in the aggregate (of like cases or
similar items), any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the Company Financial Statements;
(xvii Make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(xviii Enter into any strategic alliance, research
collaboration, joint development or joint marketing arrangement or agreement;
<PAGE>
(xix Fail to pay or otherwise satisfy its
monetary obligations as they become due, except such as are being contested in
good faith;
(xx Waive or commit to waive any rights with a value
in excess of $5,000, in any one case, or $10,000, in the aggregate;
(xxi Cancel, materially amend or renew any insurance
policy other than in the ordinary course of business;
(xxii Alter, or enter into any commitment to alter,
its interest in any corporation, association, joint venture, partnership or
business entity in which the Company directly or indirectly holds any interest
on the date hereof; or
(xxiii Take, or agree in writing or otherwise to
take, any of the actions described in Sections 4.1(i) through (xxii) above, or
any other action that would prevent the Company from performing or cause the
Company not to perform its covenants hereunder.
(b Parent Conduct. Parent shall promptly notify the Company of
any event or occurrence which is not in the ordinary course of business of
Parent and which is material and adverse to the business of Parent. Parent
agrees to disclose to the Company prior to the Effective Time any material
change in its capitalization as set forth in Section 3.3 hereto.
<PAGE>
IV.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, stockholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any person relating to any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise), any material portion of its capital stock or assets or any equity
interest in the Company, (b) provide information with respect to it to any
person, other than Parent, relating to, or otherwise cooperate with, facilitate
or encourage any effort or attempt by any such person with regard to, any
possible acquisition of the Company (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any material portion of its
capital stock or assets or any equity interest in the Company, (c) enter into an
agreement with any person, other than Parent, providing for the acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its capital stock or assets or any
equity interest in the Company, or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise), any material portion of its capital stock or assets or any equity
interest in the Company by any person, other than by Parent. The Company shall
immediately cease and cause to be terminated any such contacts or negotiations
with third parties relating to any such transaction or proposed transaction. In
addition to the foregoing, if the Company receives prior to the Effective Time
or the termination of this Agreement any offer or proposal relating to any of
the above, the Company shall immediately notify Parent thereof, including
information as to the identity of the offeror or the party making any such offer
or proposal and the specific terms of such offer or proposal, as the case may
be, and such other information related thereto as Parent may reasonably request.
Except as contemplated by this Agreement, disclosure by the Company of the terms
hereof (other than the prohibition of this section) shall be deemed to be a
violation of this Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
V.1 Company Stockholder Approva. As promptly as practicable after the
execution of this Agreement and at such time as is permitted by applicable law,
the Company shall submit this Agreement and the transactions contemplated hereby
to its stockholders for approval and adoption as provided by Oregon Law and its
Articles of Incorporation and Bylaws. The Company shall use its best efforts to
solicit and obtain the consent of its stockholders sufficient to approve the
Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. The materials submitted to the Company's stockholders shall be
subject to review and approval by Parent and include information regarding the
Company, the terms of the Merger and this Agreement and the unanimous
recommendation of the Board of Directors of the Company in favor of the Merger
and this Agreement.
V.2 Access to Information. Access to Information. The Company
shall afford Parent and its accountants, counsel and other representatives,
reasonable access during normal business hours during the period prior to the
Effective Time to: (a) all of its properties, books, contracts, commitments and
records, and (b) all other information concerning the business, properties and
personnel (subject to restrictions imposed by applicable law) of it as Parent
may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
<PAGE>
V.3 Confidentiality. Subject to Section 5.5 hereof, the parties agree
that neither they nor their agents shall disclose to any person who is not a
direct participant in the negotiations or due diligence regarding the proposed
transactions any of the terms or conditions of the proposed transactions. In
addition, each party will maintain in strict confidence all confidential
information ("Confidential Information") obtained from any other party or its
agents during the course of the due diligence and negotiation. Confidential
Information means nonpublic information concerning the disclosing party's
business, business plans, products or technology, whether disclosed before or
after the date of this Agreement, which is clearly marked "confidential or
"proprietary" and orally disclosed information which is communicated with
indicia of confidentiality and promptly thereafter confirmed in writing to be
confidential. Confidential Information shall not include any information in
writing which is or becomes publicly known or available not through improper
action of the receiving party, is already known by the receiving party prior to
disclosure, is independently developed by the receiving party without using
Confidential Information of the other party, or is obtained by the receiving
party from a third party without breach of a confidentiality obligation. In the
event that the transaction is not consummated, or any time upon the request of
any party, all material furnished by such party or its agents to any other party
or its agents, and all copies or extracts thereof in notes and analyses prepared
therefrom, shall be returned to the disclosing party or destroyed and certified
as destroyed.
V.4 Expenses. Whether or not the Merger is consummated, all fees
and expenses incurred in connection with the Merger including, without
limitation, all legal, accounting, financial advisory, consulting and all other
fees and expenses of third parties ("Third Party Expenses") incurred by a party
in connection with the negotiation and effectuation of the terms and conditions
of this Agreement and the transactions contemplated hereby, shall be the
obligation of the respective party incurring such fees and expenses; provided,
however, that expenses payable to legal counsel to the Company in connection
with the Merger shall not be paid by the Company or Parent but instead shall be
borne pro rata among the holders of the Company's Common Stock and Company's
Options on an as-converted basis to the extent that such legal fees and expenses
exceed [***].
V.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of the National Association of Securities Dealers, Inc.,
prior to the Effective Time, no further disclosure (whether or not in response
to an inquiry) of the terms of this Agreement shall be made by any party hereto
except as contemplated herein, unless approved by Parent and the Company prior
to release, provided that such approval shall not be unreasonably withheld.
V.6 Consents. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of and benefits to the
Company thereunder.
V.7 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
<PAGE>
V.8 Reasonable Efforts. Subject to the terms and conditions provided
in this Agreement, each of the parties hereto shall use its reasonable efforts
to ensure that its representations and warranties remain true and correct in all
material respects, and to take promptly, or cause to be taken, all actions, and
to do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or the Company or its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
V.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.9 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
V.10 Affiliate Agreements. Schedule 5.10 sets forth those
persons who, in the Company's reasonable judgment, are or may be "affiliates" of
the Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the Securities Act ("Rule 145"). The Company shall provide
Parent such information and documents as Parent shall reasonably request for
purposes of reviewing such list. The Company shall deliver or cause to be
delivered to Parent, concurrently with the execution of this Agreement (and in
any case prior to the Closing) from each of the Affiliates of the Company, an
executed Affiliate Agreement in substantially the form attached hereto as
Exhibit A. Parent shall be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
V.11 Additional Documents and Further Assurances.
Each party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
V.12 Nasdaq National Market Listing. Parent shall authorize for
listing on the Nasdaq National Market the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, upon official notice of issuance.
V.13 Company's Financial Statements. The Company will use best
reasonable efforts to facilitate on a timely basis the preparation of financial
statements as required by Parent to comply with applicable SEC regulations.
<PAGE>
V.14 Milestone Warrants. Upon completion of the following milestones
(the "Milestones"), Parent shall issue to the persons and in the proportions
listed on Schedule 5.14 attached hereto warrants (the "Milestone Warrants") in
substantially the form attached hereto as Exhibit E, provided, however, that
with respect to any such person who becomes an employee or consultant of Parent
or the Surviving Corporation at or after the Effective Time, such person must
still be then employed by or providing services to Parent or the Surviving
Corporation to be issued any portion of such Milestone Warrant. In the event
that any such person is no longer employed by or providing services to Parent or
the Surviving Corporation, such person's allocation of the Milestone Warrants
shall be allocated to the other persons listed on Schedule 5.14 on a pro rata
basis. The Milestone Warrants shall entitle the holders thereof to purchase an
aggregate of the number of shares of Common Stock of Parent set forth below at a
per share exercise price equal to the average of the closing prices of Parent's
Common Stock on the principal securities exchange on which Parent's Common Stock
is then traded, or if not so traded, the National Market System of the National
Association of Securities Dealers Automated Quotation System, in either case as
reported in The Wall Street Journal, for the fifteen (15) trading days ending on
the last trading day prior to the date which such Milestone is completed. The
Milestone Warrants shall have a term of ten (10) years from the date of Closing,
provided, however, that: (1) in event of the closing of an acquisition of all of
the outstanding capital stock or all or substantially all of the assets of
Parent or any other event set forth in Section 10 of the Milestone Warrant,
Parent's right to repurchase shares issued upon exercise of Milestone Warrants
shall lapse, and (2) in event of the closing of an acquisition of all the
outstanding capital stock or all or substantially all of the assets of Parent,
the acquiring party shall be required to assume any obligations of Parent under
this Section 5.14 with respect to unissued Milestone Warrants. The holders of
the Milestone Warrants shall be included in Parent's existing piggyback
registration rights, provided that the requisite consent of the other holders of
registrable securities of Parent can be obtained. Parent agrees to use its
reasonable efforts to obtain such consent.
(a Milestone Warrant One. An aggregate of 50,000 shares
(as adjusted for stock splits, stock dividends, recapitalizations, and the like)
for [***].
(b Milestone Warrant Two. An aggregate of 50,000 shares
(as adjusted for stock splits, stock dividends, recapitalizations, and the like)
if within [***].
<PAGE>
V.15 Oregon Health Sciences University Laboratory Funding.
Parent shall provide funding to Dr. Roger Cone's research laboratory at the
Oregon Health Sciences University in the amount [***] commencing on the Closing
Date; provided, however, that Parent's obligation to make or continue making
funding payments shall be expressly contingent upon: (1) the continuous use of
such funding in accordance with the Research Plan agreed upon by Parent and Dr.
Roger Cone substantially in the form attached hereto as Exhibit F (as Parent and
Dr. Cone may mutually agree to modify such Research Plan), and (2) the grant by
the Oregon Health Sciences University of rights reasonably acceptable to Parent
with regard to the intellectual property resulting from such research. Funding
shall be due and payable in equal quarterly installments within fifteen (15)
days after the end of each of Parent's fiscal quarters.
V.16 Name and Physical Location of the Surviving Corporation.
[***] Dr. Roger Cone (who shall be referred to as "Company Management") shall
mutually agree to do so.
V.17 [***].
V.18 Employment and Consulting Arrangements.
(a All Company employees who continue as employees of the
Surviving Corporation after the Closing shall be entitled to benefits comparable
to the benefits Parent provides its employees at the same level as such
employees of the Surviving Corporation will be after the Closing.
(b Steve Kurtz. The Company shall enter into an
employment agreement (the "Employment Agreement") with Stephen Kurtz
substantially in the form attached hereto as Exhibit B.
(c Paul Woloshin. As soon as practicable after the
execution of this Agreement, the Company and Paul Woloshin will enter into a
consulting agreement with a [***] term, whereby: (i) the Company shall pay Mr.
Woloshin an annual fee of [***]. The parties shall negotiate in good faith to
reach a definitive agreement with regard to the aforementioned arrangement.
<PAGE>
V.19 Appointment to Parent Scientific Advisory BoardV.19 Appointment to
Parent Scientific Advisory BoardV.19 Appointment to Parent Scientific Advisory
Board. Parent shall appoint Dr. Roger Cone and Dr. Susan Amara to Parent's
Scientific Advisory Board substantially in accordance with the Consulting
Agreements attached hereto as Exhibit G-1 and G-2, respectively.
V.20 [***].
V.21 Registration on Form S-8V.21 Registration on Form S-8V.21
Registration on Form S-8. Parent shall, as soon as practicable following the
Effective Time, register the shares of Parent Common Stock issuable upon
exercise of the Parent Options on a registration statement on Form S-8.
VI.1 Conditions to Obligations of Each Party to Effect the MergerVI.1
Conditions to Obligations of Each Party to Effect the MergerVI.1 Conditions to
Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
(a Stockholder Approval. This Agreement and the Merger
shall have been approved and adopted by the stockholders of the Company by the
requisite vote under applicable law and the Company's Articles of Incorporation.
(b Securities Law Compliance. The issuance of the Parent
Common Stock in the Merger shall be exempt from the registration requirement of
the federal securities laws and shall have been qualified or shall be exempt
under all applicable state securities laws.
(c No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(d Consulting and Noncompetition Agreements. Dr. Susan
Amara and Dr. Roger Cone shall each have executed and delivered to Parent a
Consulting Agreement in substantially the form of Exhibit G-1 and G-2,
respectively, and such agreements shall be in full force and effect.
(e Registration Rights Agreement. Parent and certain of
the Company's stockholders shall have executed a Registration Rights Agreement
in substantially the form of Exhibit J and such agreement shall be in full force
and effect.
<PAGE>
VI.2 Additional Conditions to Obligations of the Company.
The obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date and the Company shall have received a
certificate to such effect signed by duly authorized officers of Parent and
Merger Sub.
(b Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by duly authorized officers of Parent and Merger Sub.
VI.3 Additional Conditions to the Obligations of Parent and Merger
SubVI.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all respects on and as of the Closing Date, except for changes contemplated
by this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Closing Date; and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by a duly authorized executive
officer of the Company;
(b Agreements and Covenants. The Company shall have performed
or complied in all respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and Parent and Merger Sub shall have received a certificate to such effect
signed by a duly authorized officer of the Company;
(c Third Party Consents. Parent shall have been
furnished with evidence satisfactory to it that the Company has obtained all
necessary consents, approvals and waivers in order to consummate the
transactions contemplated herein.
(d Legal Opinion. Parent shall have received a legal
opinion from Tonkon Torp LLP, legal counsel to the Company, in substantially the
form attached hereto as Exhibit D.
<PAGE>
(e Affiliate Agreements. All directors, officers and persons
identified by the Company as being an Affiliate of the Company shall have
delivered to Parent an executed Affiliate Agreement, in substantially the form
attached hereto as Exhibit A, which shall be in full force and effect.
(f No Material Adverse Change. There shall not have
occurred any material adverse change in the business, assets (including
intangible assets) financial condition or results of operations of the Company
since January 1, 1998.
(g Vote of Company Stockholders. Holders of at least
95% of the outstanding Company Capital Stock shall have voted in favor of the
Merger and the consummation of the transactions contemplated hereby.
(h Lockup Agreements. The persons listed on Schedule 1.9(a)
shall each have executed a Lockup Agreement substantially in the form set forth
on Exhibit C-2 and all other persons who receive Parent Common Stock pursuant to
Section 1.6(a) hereof shall each have executed a Lockup Agreement substantially
in the form set forth on Exhibit C-1.
(i Valid Existence Certificate. The Company shall have
delivered to counsel for Parent a certificate evidencing the Company's valid
existence under Oregon Law.
(j Financial Statements Certificate. The Company shall
have delivered to Parent a certificate signed by Paul Woloshin attesting to the
best of his knowledge as to the accuracy of the Company's Financials delivered
pursuant to Section 2.5 hereof.
(k Escrow Agreement. Parent, the Escrow Agent and the
stockholders of the Company shall have executed the Escrow Agreement
substantially in the form attached hereto as Exhibit I.
(l Stock Restriction Agreements. Each of the employees and
consultants listed on Schedule 1.9(a) shall have executed Stock Restriction
Agreements with respect to the shares of Parent Common Stock issued to such
persons hereunder or issuable to such persons upon exercise of Milestone
Warrants substantially in the form attached hereto as Exhibit K and such
agreements shall be in full force and effect.
(m Option Amendments. Each of the holders of Company Options
shall have executed an Amendment to Stock Option Agreement (providing for the
application of the vesting schedule set forth in Section 1.9 hereof to the
Parent Options) substantially in the form attached hereto as Exhibit L.
<PAGE>
(n Resignations of Company Officers/Directors. The Company's
officers and directors shall have delivered to Parent's counsel resignations
effective as of the Effective Time and taken all steps reasonably necessary to
ensure that the officers and directors referred to in Section 1.5 hereof shall
be the officers and directors of the Surviving Corporation.
(o Non-Competition Agreement. The Company and Paul Woloshin
shall have executed a non-competition agreement whereby Mr. Woloshin shall not
compete with the Company in the fields of neurotransporters and melanocortin
receptors for a period of [***] after the Effective Time, substantially in the
form attached hereto as Exhibit M.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
VII.1 Survival of Representations and WarrantiesVII.1 Survival of
Representations and Warranties. All of the Company's representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement (each as modified by the Company Schedules) shall survive the Merger
and continue until 5:00 p.m., Pacific Time, on the date which is one year
following the date of Closing of this Agreement (the "Expiration Date").
VII.2 Escrow ArrangementsVII.2 Escrow Arrangements. The parties will
enter into an Escrow Agreement in substantially the form attached hereto as
Exhibit I.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
VIII.1 Termination. Except as provided in Section 8.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a by mutual consent of the Company and Parent;
(b by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on June 30, 1998 (provided that the
right to terminate this Agreement under this clause 8.1(b)(i) shall not be
available to any party whose willful failure to fulfill any obligation hereunder
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date); (ii) there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation or order enacted, promulgated
or issued or deemed applicable to the Merger by any governmental entity that
would make consummation of the Merger illegal;
<PAGE>
(c by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a portion of the business or assets of the Company or
Parent as a result of the Merger;
(d by Parent if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and (i) such breach has not been cured within ten (10)
business days after written notice to the Company (provided that, no cure period
shall be required for a breach which by its nature cannot be cured), and (ii) as
a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b), as
the case may be, would not then be satisfied;
(e by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and (i) such breach has not been cured within
ten (10) business days after written notice to Parent (provided that, no cure
period shall be required for a breach which by its nature cannot be cured), and
(ii) as a result of such breach the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, would not then be satisfied; or
(f by Parent if more than five percent (5%) of the outstanding
shares of Company Common Stock shall be qualified to be Dissenting Shares after
the first meeting of or action by the Company's stockholders to approve this
Agreement and the Merger.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
VIII.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub
or the Company, or their respective officers, directors or stockholders,
provided that each party shall remain liable for any breaches of this Agreement
prior to its termination; and provided further that the provisions of Sections
5.3 and 5.4 and Article VIII of this Agreement shall remain in full force and
effect and survive any termination of this Agreement.
VIII.3 Termination Fee. If the Board of Directors of the Company does
not unanimously recommend approval by the Company's stockholders of the Merger
and this Agreement and this Agreement is terminated by the Parent pursuant to
Section 8.1(f), then the Company shall pay to Parent, in cash, within three (3)
business days after such termination, a nonrefundable fee in the amount of
$100,000.
<PAGE>
VIII.4 Amendment. This Agreement may not be amended at any time, except
by an instrument in writing signed on behalf of each party hereto, provided that
after this Agreement has been adopted by the stockholders of the Company, no
such amendment shall reduce the amount or change the form of consideration to be
paid to the stockholders of the Company pursuant to this Agreement or alter or
change any of the terms or conditions of this Agreement if such alteration or
change would adversely affect the stockholders of the Company.
VIII.5 Extension; Waiver. At any time prior to the Effective Time,
Parent and Merger Sub, on the one hand, and the Company, on the other, may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
IX.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Parent or Merger Sub, to:
Neurocrine Biosciences, Inc.
3050 Science Park Road
San Diego, CA 92121
Attention: President and Chief Executive Officer
Telephone No.: (619) 658-7650
Facsimile No.: (619) 658-7602
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael J. O'Donnell, Esq.
Telephone No.: (415) 493-9300
Facsimile No.: (415) 493-6811
<PAGE>
(ii) if to the Company, to:
Northwest NeuroLogic, Inc.
2611 S.W. 3rd Avenue, Suite 200
Portland, OR 97201
Attention: President
Telephone No.: (503) 243-6422
Facsimile No.: (503) 228-3290
with a copy to:
Tonkon Torp LLP
1600 Pioneer Tower
888 SW Fifth Avenue
Portland, OR 97204
Attention: Carol Dey Hibbs
Telephone No.: (503) 802-2016
Facsimile No.: (503) 972-3716
IX.2 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IX.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
IX.4 Entire Agreement; Assignment. This Agreement, the Schedules
and Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer upon
any other person any rights or remedies hereunder; and (c) shall not be assigned
by operation of law or otherwise except as otherwise specifically provided,
except that Parent and Merger Sub may assign their respective rights and
delegate their respective obligations hereunder to their respective affiliates.
<PAGE>
IX.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
IX.6 Other Remedies. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
IX.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
IX.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
IX.9 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
NORTHWEST NEUROLOGIC, INC. NEUROCRINE BIOSCIENCES, INC.
By: /s/ Roger D. Cone By: /s/ Paul W. Hawran
President Senior Vice President and
Chief Financial Officer
NBI ACQUISITION CORP.
By: /s/ Paul W. Hawran
Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
INDEX OF EXHIBITS
<CAPTION>
Exhibit Description
<S> <C>
Exhibit A Form of Company Affiliate Agreement
Exhibit B Employment Agreement (Steve Kurtz)
Exhibit C-1 Form of Lockup Agreement (180-day)
Exhibit C-2 Form of Lockup Agreement (90-day)
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Milestone Warrant
Exhibit F Research Plan for Oregon Health Sciences University
Exhibit G-1 Form of Consulting Agreement (Dr. Roger Cone)
Exhibit G-2 Form of Consulting Agreement (Dr. Susan Amara)
Exhibit H Parent's Insider Trading Policy
Exhibit I Escrow Agreement
Exhibit J Registration Rights Agreement
Exhibit K Form of Stock Restriction Agreement
Exhibit L Form of Amendment to Stock Option Agreement
Exhibit M Form of Non-Competition Agreement (Paul Woloshin)
</TABLE>
<PAGE>
<TABLE>
INDEX OF SCHEDULES
<CAPTION>
Schedule Description
<S> <C>
1.6 Escrow Amount
1.9(a) Employees and Consultants of the Company
Subject to Vesting Schedules and
Lockup Periods
2.2(a) Company Stockholder List
2.2(b) Option List
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(a) Intellectual Property
2.11(b) Intellectual Property Licenses
2.11(c) Confidentiality Agreements
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.19 Brokers/Finders Fees; Third Party Expenses
2.20(b) Employee Benefit Plans and Employee
Agreements
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(h)(i) Effect of Transaction
2.20(h)(ii) Excess Parachute Payments
2.20(j) Labor
5.10 Company Affiliate List
5.14 Milestone Warrant Holder List
</TABLE>
<PAGE>
Schedule 1.6
Escrow Account
The following shares of Parent Common Stock will be placed in the escrow account
or, in the case of options, will be subject to the escrow account and will be
placed in the escrow account upon exercise of the applicable option:
<TABLE>
- ------------------------- ------------------ ----------------- ----------------------- -----------------
<CAPTION>
[***] Shares in [***] Shares in [***] Options in [***] Options
Name Escrow Escrow Escrow in Escrow
- ------------------------- ------------------ ----------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
- ------------------------- ------------------ ----------------- ----------------------- -----------------
Total 53,088 29,665 6,839 10,011
</TABLE>
<PAGE>
Schedule 1.9(a)
Continuing Employees and Consultants of the Company
Subject to Vesting Schedule and Lockup Periods
1. The following people are the persons (besides Roger Cone and Susan
Amara) who are expected to be employees or consultants of the Company
holding Company stock or stock options at the time the Merger is
closed:
[***]
2. If any of the foregoing persons is not employed by or serving as a
consultant to the Company at the date of Closing, we will so advise
you, and any such persons will not be subject to the vesting schedule
of Section 1.9 and shall not be deemed to be a person listed on this
Schedule 1.9(a).
<PAGE>
<TABLE>
Schedule 2.2(a)
Company Stockholder List
- ---------------------------------------------------------------------------- -----------------------
<CAPTION>
Stockholder Number of Shares of
Common Stock
- ---------------------------------------------------------------------------- -----------------------
<S> <C>
Roger Cone [***]
c/o Vollum Institute
3181 S.W. Sam Jackson Park Road
Portland, OR 97201-3098
[***]
Richard Sessions
c/o Vollum Institute
3181 S.W. Sam Jackson Park Road
Portland, OR 97201-3098
[***]
Oregon Health Sciences University
3181 S.W. Sam Jackson Park Road
Portland, OR 97201-3098
[***]
Susan Amara
c/o Vollum Institute
3181 S.W. Sam Jackson Park Road
Portland, OR 97201-3098
[***]
Cascadia Pacific Management
4370 NE Halsey
Portland, OR 97213
(assignee of shares originally to be issued to
Oregon Research and Technology
Development Fund)
- ---------------------------------------------------------------------------- -----------------------
TOTAL SHARES 591,250
- ---------------------------------------------------------------------------- -----------------------
</TABLE>
<PAGE>
Schedule 2.2(b)
Option List
1. The Stock Option Ledger attached hereto as Appendix A is correct as of the
date of this Agreement.
2. When NNL granted the option to Jeffery Arriza, a Pennsylvania resident,
as specified on the Stock Option Ledger, the filing to qualify the
option grant for an exemption under Pennsylvania securities law was
filed late.
<PAGE>
Schedule 2.4
Governmental and Third Party Consents
1. The license agreement between Oregon Health Sciences University and the
Company, dated February 1, 1997, may arguably require notice of the
Merger. That notice has been given.
2. The Leases between the Company and Oregon Biotechnology Innovation
Center ("OBIC") require OBIC's consent to the assignment of the Leases
in the context of the Merger. That consent will be obtained prior to
Closing.
<PAGE>
Schedule 2.5
Company Financials
1. Attached hereto as Appendix B is the Company's unaudited balance sheet
as of December 31, 1997 and the related unaudited statement of
operations for the 12-month period then ended.
2. In order to be correct in all material respects, the attached Financial
Statements need to be adjusted to reflect the following:
a. The Company needs to deduct from its earnings the spread
between the exercise price of all discounted options that
vested during 1997 and the fair market value of the underlying
option shares at the time of vesting.
b. Accrued vacation is not reflected in the Financial Statements.
<PAGE>
Schedule 2.6
Undisclosed Liabilities
1. Paragraph 2 of Schedule 2.5 is incorporated herein by reference.
2. In 1998, the Company will need to deduct from its 1998 earnings the
spread between the exercise price of all discounted options that vest
during 1998 and the fair market value of the underlying option shares
at the time of vesting.
3. Contractual obligations (rather than liabilities stemming from
breaches) under contracts listed on Schedules 2.10(a), 2.11(b) and
2.12(a).
4. The Company has been awarded an NIH grant which will require specified
projects be undertaken. The Company has not received the documentation
on the grant yet.
<PAGE>
Schedule 2.7
No Changes
1. [***].
2. Options have been granted since December 31, 1997, as reflected in the
Stock Option Ledger attached to Schedule 2.2(b).
3. The vesting of certain options has been accelerated in connection with
this transaction, as shown on the Stock Option ledger attached to
Schedule 2.2(b).
4. Kimberlee Stafford and Elizabeth Fiddler received salary increases of
$5,000 per year, effective January 1, 1998.
5. [***].
<PAGE>
Schedule 2.8
Tax Returns and Audits
None
<PAGE>
Schedule 2.10(a)
Leased Real Property
1. Leases, between the Company and Oregon Biotechnology Innovation Center,
dated October 1, 1995, April 1, 1997, August 27, 1997 and January 1,
1998. The aggregate annual rental payable with respect to each lease is
[***], respectively, with increases of [***] to go into effect on July
1, 1998.
<PAGE>
Schedule 2.10(b)
Liens on Property
None
<PAGE>
Schedule 2.11(a)
Intellectual Property
1. Attached as Appendix C hereto is a listing of all patents issued and
applied for as part of the Company's license with Oregon Health
Sciences University. (The patent on MC-1 (MSH receptor) issued in 1996,
a second patent on MC-2(ACTH) issued in 1996, and a patent on EAAT-2
issued in 1997.)
2. The registered owners of each of the patent applications and patents
specified in Appendix A are the inventors of the respective patents.
All such patents and patent applications have been assigned to Oregon
Health Sciences University.
<PAGE>
Schedule 2.11(b)
Intellectual Property Licenses
1. License agreement between Oregon Health Sciences University and the Company,
dated February 1, 1997.
2. Collaboration Agreement between American Home Products Corporation (referred
to in the Agreement as Wyeth-Ayerst) and the Company, dated August 15, 1996.
3. License Agreement between the Company and American Home Products Corporation
(Wyeth-Ayerst), dated August 15, 1996.
4. Research and License Agreement between the Company and Trega Biosciences,
Inc., dated May 30, 1997, as amended by a letter dated January 27, 1998.
5. License Agreement between the Company and The Proctor & Gamble Pharmaceutical
Company, dated May 7, 1997.
6. Sponsored Research and Cooperation Agreement between the Company and
Millennium Pharmaceuticals, Inc., dated February 22, 1996, as modified by letter
dated March 13, 1997 [expired].
7. License Agreement between the Company and ABS Global, Inc., dated March 29,
1996 [expired].
8. Research and License Agreement between the Company and Houghten (Trega),
dated April 27, 1994 [expired].
9. Sponsored Research between the Company and Proctor & Gamble, dated October
15, 1996 [expired].
<PAGE>
Schedule 2.11(c)
Confidentiality Agreements
1. Two technicians formerly employed by the Company did not sign the
Company's form of proprietary information and confidentiality
agreement. The technology that they were working on has either become
obsolete or has been publicly disclosed.
<PAGE>
Schedule 2.12(a)
Agreements, Contracts and Commitments
1. Consulting Agreement between Roger Cone and the Company has not been
documented.
2. Consulting Agreement between Susan Amara and the Company, dated November 1,
1996.
3. Consulting Agreement between the Company and Troy Fiddler, dated January 12,
1998.
4. Employment Agreement between the Company and Paul Woloshin, dated March 11,
1996, as amended on March 11, 1997.
5. Consulting Agreement between the Company and Mike Kavanaugh, dated September
10, 1996, renewed February 1, 1998.
6. Employment Agreement between the Company and Stephen Kurtz, dated May 12,
1997.
7. The Company is obligated to indemnify its officers and directors pursuant to
its Articles of Incorporation and its Bylaws.
8. All agreements listed in Schedules 2.10(a) and 2.11(b) are incorporated
herein by reference.
9. Consulting Agreement between the Company and Jeffrey Arriza, dated September
10, 1996 [expired].
10. Consulting Agreement between the Company and Richard Simerly, dated January
20, 1996 [expired].
<PAGE>
Schedule 2.12(b)
Breaches
None
<PAGE>
Schedule 2.13
Interested Party Transactions
1. Certain officers, directors and stockholders of the Company are parties
to the agreements set forth in Schedule 2.11(b) and Schedule 2.12(a),
as indicated thereon.
<PAGE>
Schedule 2.15
Litigation
None
<PAGE>
Schedule 2.19
Brokers/Finders Fees; Third Party Expenses
1. The Company has not incurred, nor will it incur, any liability for
brokerage or finders' fees or agents' commissions or similar charges in
connection with the Agreement or any transaction contemplated thereby.
2. The Company estimates its Third Party Expenses as follows:
a. Legal fees payable to Tonkon Torp LLP for the transaction:
[***].
b. Legal fees payable to Steve Lieberman in connection with
effecting certain conditions to the Agreement: [***]; and
c. Fees payable to NNL's accountants: [***].
<PAGE>
Schedule 2.20(b)
Employee Benefit Plans and Employee Agreements
1. The Company has Employment and Consulting Agreements as indicated on Schedule
2.12(a).
2. The Company offers health insurance through PacifiCare.
3. One of the Company's part-time employees (a lab technician) comes from
Latvia and is working under a work permit.
4. The Company has an Option Agreement with each optionee listed on Appendix A.
5. 1997 Stock Incentive Plan, as amended.
<PAGE>
Schedule 2.20(d)
Employee Plan Compliance
None
<PAGE>
Schedule 2.20(g)
Post Employment Obligations
None
<PAGE>
Schedule 2.20(h)(i)
Effect of Transaction
None
<PAGE>
Schedule 2.20(h)(ii)
Excess Parachute Payments
None
<PAGE>
Schedule 2.20(j)
Labor
None
<PAGE>
Schedule 5.10
Company Affiliate List
1. The Company believes that the following persons are or may be
"affiliates" of NNL within the meaning of SEC Rule 145:
[***]
<PAGE>
Schedule 5.14
Milestone Warrant Holder List
1. With respect to Milestone Warrant One, warrants for an aggregate of
50,000 shares of Parent Common Stock (subject to adjustment as
specified in the Agreement) shall be issued for [***]:
--------------------------------- ------------------------------------
Shareholder No. of NNL Shares Owned
--------------------------------- ------------------------------------
[***] [***]
--------------------------------- ------------------------------------
Total 750,000
--------------------------------- ------------------------------------
[***].
2. With respect to Milestone Warrant Two, warrants for an aggregate of
50,000 shares of Parent Common Stock (subject to adjustment as
specified in the Agreement) will be distributed pro rata pursuant to
the NNL ownership table shown in the preceding paragraph (without the
[***] described in the last sentence of that paragraph).
Exhibit 2.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made as of May
28, 1998, by and among Neurocrine Biosciences, Inc., a Delaware corporation (the
"Parent") and the persons listed on the signature page who become signatories to
this Agreement (collectively, the "Investors and individually an "Investor").
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Agreement and Plan of Reorganization dated May 1, 1998.
R E C I T A L S
WHEREAS, in connection with the merger (the "Merger") of a wholly owned
subsidiary of Parent with and into Northwest NeuroLogic, Inc., an Oregon
corporation ("NNL") pursuant to the Agreement and Plan of Reorganization dated
of even date herewith, Parent and the Investors desire to provide for certain
rights of the Investors with respect to registration of the Parent Common Stock
issued by Parent to the Investors upon exchange of the NNL Common Stock in the
Merger.
WHEREAS, it is a condition of the closing of the Merger that Parent
enter into this Agreement.
NOW THEREFORE, in consideration of the promises set forth above and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Form S-3" shall mean Form S-3 issued by the Commission or
any substantially similar form then in effect.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is an
Investor or an assignee or transferee of Registration rights as permitted by
Section 8.
(d) "Initiating Holders" shall mean Holders who in the
aggregate hold and propose to register at least [***] shares of Registrable
Securities.
<PAGE>
(e) "Material Adverse Event" shall mean an occurrence having a
consequence that either (a) is materially adverse as to the business,
properties, prospects or financial condition of the Parent or (b) is reasonably
foreseeable, has a reasonable likelihood of occurring, and if it were to occur
would materially adversely affect the business, properties, prospects or
financial condition of the Parent.
(f) The terms "Register", "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(g) "Registrable Securities" shall mean all shares of Parent
Common Stock issued or issuable to the Investors upon closing of the Merger,
including Common Stock issued pursuant to stock splits, stock dividends and
similar distributions with respect to such shares, provided that such shares (i)
are not available for immediate sale in the opinion of counsel to the Parent in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon consummation of such sale pursuant to
Regulation S, Rule 144, or otherwise under applicable federal securities laws,
or (ii) have not previously been sold to the public.
(h) "Registration Expenses" shall mean all expenses incurred
in complying with Section 2 of this Agreement, including, without limitation,
all federal and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Parent, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, other than Selling Expenses.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(j) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement, as well as fees and disbursements of legal counsel
for the selling Holders.
2. Demand Registration.
<PAGE>
2.1 Request for Registration on Form S-3. Subject to the terms
of this Agreement, in the event that Parent receives from Initiating Holders at
any time after the Effective Time and prior to the first anniversary of the
Effective Time, a written request that Parent effect any Registration on Form
S-3 (or any successor form to Form S-3 regardless of its designation) at a time
when Parent is eligible to register securities on Form S-3 (or any successor
form to Form S-3 regardless of its designation) for an offering of Registrable
Securities, the reasonably anticipated aggregate offering price to the public of
which would exceed [***], Parent will promptly give written notice of the
proposed Registration to all the Holders and will, as soon as practicable,
effect Registration of the Registrable Securities specified in such request,
together with all or such portion of the Registrable Securities of any Holder
joining in such request as are specified in a written request delivered to the
Parent within 20 days after written notice from the Parent of the proposed
Registration. Parent shall not be obligated to take any action to effect any
such registration pursuant to this Section 2.1: (i) prior to 90 days after the
Effective Time, (ii) subsequent to 365 days after the Effective Time, or (iii)
after Parent has effected one such Registration pursuant to this Section 2.1 and
such Registration has been declared effective and, if underwritten, has closed.
2.2 Right of Deferral of Registration. If (i) Parent shall
furnish to all such Holders who joined in the request a certificate signed by
the President of Parent stating that, in the good faith judgment of the Board of
Directors of Parent, it would be seriously detrimental to Parent for any
Registration to be effected as requested under Section 2.1, or (ii) Parent shall
have effected a Registration other than a Registration of securities issued or
issuable pursuant to an employee benefit plan (whether or not pursuant to
Section 2.1) within ninety (90) days preceding the date of such request, Parent
shall have the right to defer the filing of a Registration Statement with
respect to such offering for a period of not more than (i) sixty (60) days from
delivery of the request of the Initiating Holders, or (ii) ninety (90) days of
the date of filing of such prior Registration respectively; provided, however,
that Parent may not utilize this right more than twice in any 12-month period.
2.3 Registration of Other Securities. Any Registration
Statement filed pursuant to the request of the Initiating Holders under this
Section 2 may, subject to the provisions of Section 2.4, include securities of
Parent other than Registrable Securities.
2.4 Underwriting in Demand Registration.
2.4.1 Notice of Underwriting. If the
Initiating Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise Parent as a part
of their request made pursuant to this Section 2, and Parent shall include such
information in the written notice referred to in Section 2.1. The right of any
Holder to Registration pursuant to Section 2.1 shall be conditioned upon such
Holder's agreement to participate in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder with
respect to such participation and inclusion).
2.4.2 Inclusion of Other Holders in Demand
Registration. If Parent, officers or directors of Parent holding Common Stock
other than Registrable Securities, or holders of securities other than
Registrable Securities (who are collectively referred to as "Other Holders"),
request inclusion in such Registration, the Initiating Holders shall, subject to
the allocation provisions of Section 2.4.4 below, on behalf of all Holders,
offer to such Other Holders that such securities other than Registrable
Securities be included in the underwriting, conditioned upon the acceptance by
such Other Holders of the terms of this Section 2. In event of the inclusion in
the Registration of securities held by Other Holders, such Other Holders shall
be deemed to be Holders for all purposes under this Agreement, other than the
allocation provisions of Section 2.4.4 below.
<PAGE>
2.4.3 Selection of Underwriter in Demand
Registration. Parent shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into and perform its
obligations under an underwriting agreement in usual and customary form with the
representative ("Underwriter's Representative") of the underwriter or
underwriters selected for such underwriting by the Holders of a majority of the
Registrable Securities being registered by the Initiating Holders and consented
to by Parent (which consent shall not be unreasonably withheld).
2.4.4 Marketing Limitation in Demand
Registration. In the event the Underwriter's Representative advises the
Initiating Holders in writing that market factors (including, without
limitation, the aggregate number of shares of Common Stock requested to be
Registered, the general condition of the market, and the status of the persons
proposing to sell securities pursuant to the Registration) require a limitation
of the number of shares to be underwritten, then the Initiating Holders shall so
advise all Holders and Other Holders, and the number of shares of Registrable
Securities and other securities that may be included in the Registration and
underwriting shall be allocated first among all Holders of Registrable
Securities and Other Holders of securities subject to contractual registration
rights and second among all Other Holders of securities not subject to
contractual registration rights, in proportion, as nearly as practicable, to the
number of shares proposed to be included in such Registration by such Holder or
Other Holder. No Registrable Securities or other securities excluded from the
underwriting by reason of this Section 2.4.4 shall be included in such
Registration Statement.
2.4.5 Right of Withdrawal in Demand
Registration. If any Holder of Registrable Securities, or a holder of other
securities entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to Parent, the underwriter and the Initiating
Holders delivered at least seven days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn from
the Registration Statement.
2.5 Blue Sky in Demand Registration. In the event of any
Registration pursuant to Section 2, Parent will exercise reasonable efforts to
Register and qualify the securities covered by the Registration Statement under
such other securities or Blue Sky laws of such jurisdictions as the Holders
shall reasonably request and as shall be reasonably appropriate for the
distribution of such securities; provided, however, that Parent shall not be
required to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
3. Expenses of Registration. All Registration Expenses incurred in
connection with one Registration pursuant to Section 2.1 shall be borne by
Parent. However, Parent shall not be required to pay for any expenses of Holders
in connection with any registration proceeding begun pursuant to Section 2.1 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered (which Holders
shall bear such expenses); provided, however, that (i) if at the time of such
withdrawal, the Holders have learned of a Material Adverse Event not known to
the Holders at the time of their request or (ii) such withdrawal is made after a
deferral of such registration by Parent pursuant to Section 2.2, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 2.1. All Selling Expenses shall be borne by the
Holders of the securities registered pro rata on the basis of the number of
shares registered.
<PAGE>
4. Registration Procedures. Parent will keep each Holder whose
Registrable Securities are included in any registration pursuant to this
Agreement advised as to the initiation and completion of such Registration. At
its expense Parent will: (a) use reasonable efforts to keep such Registration
effective for a period ending on the first anniversary of the Effective Time or
until the Holder or Holders have completed the distribution described in the
Registration Statement relating thereto (including Registrable Securities that
will be released from lockup agreements after the effective date of the
Registration), whichever first occurs; (b) furnish such number of prospectuses
(including preliminary prospectuses) and other documents as a Holder from time
to time may reasonably request; (c) prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement; and (d) notify each
Holder of Registrable Securities covered by such Registration Statement at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
5. Information Furnished by Holder. It shall be a condition precedent
of Parent's obligations under this Agreement that each Holder of Registrable
Securities included in any Registration furnish to Parent such information
regarding such Holder and the distribution proposed by such Holder or Holders as
Parent may reasonably request.
6. Indemnification.
6.1 Parent's Indemnification of Holders. To the extent permitted by
law, Parent will indemnify each Holder, each of its officers, directors and
constituent partners, legal counsel and accountants for the Holders, and each
person controlling such Holder, with respect to which Registration,
qualification or compliance of Registrable Securities has been effected pursuant
to this Agreement, and each underwriter, if any, and each person who controls
any underwriter against all claims, losses, damages or liabilities (or actions
in respect thereof) to the extent such claims, losses, damages or liabilities
arise out of or are based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus or other document
(including any related Registration Statement) incident to any such
Registration, qualification or compliance, or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
Parent of the Securities Act, the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or any state securities law, or any rule or regulation
promulgated under the Securities Act, the 1934 Act or any state securities law,
applicable to Parent and relating to action or inaction required of Parent in
connection with any such Registration, qualification or compliance; and Parent
will reimburse each such Holder, each of its officers, directors and constituent
partners, legal counsel and accountants, each such underwriter, and each person
who controls any such Holder or underwriter, for any legal and any other
expenses reasonably incurred, as incurred, in connection with investigating or
defending any such claim, loss, damage, liability or action; provided, however,
that the indemnity contained in this Section 6.1 shall not apply to amounts paid
in settlement of any such claim, loss, damage, liability or action if settlement
is effected without the consent of Parent (which consent shall not unreasonably
be withheld); and provided, further, that Parent will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based upon any untrue statement or omission based upon
written information furnished to Parent by such Holder, its officers, directors,
constituent partners, legal counsel, accountants, underwriter or controlling
person and stated to be for use in connection with the offering of securities of
Parent.
6.2 Holder's Indemnification of Parent. To the extent
permitted by law, each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such Registration,
qualification or compliance is being effected pursuant to this Agreement,
indemnify Parent, each of its directors and officers, each legal counsel and
independent accountant of the Parent, each underwriter, if any, of Parent's
securities covered by such a Registration Statement, each person who controls
Parent or such underwriter within the meaning of the Securities Act, and each
other such Holder, each of its officers, directors, constituent partners, legal
counsel and accountants and each person controlling such other Holder, against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based upon any untrue statement (or alleged untrue statement)
by such Holder, of a material fact contained in any such Registration Statement,
prospectus, offering circular or other document (including any related
Registration Statement) incident to any such Registration, qualification or
compliance, or any omission (or alleged omission) by such Holder, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by such Holder of the
Securities Act, the 1934 Act or any state securities law, or any rule or
regulation promulgated under the Securities Act, the 1934 Act or any state
securities law, applicable to such Holder and relating to action or inaction
required of such Holder in connection with any such Registration, qualification
or compliance; and will reimburse Parent, such Holders, such directors,
officers, partners, persons, law and accounting firms, underwriters or control
persons for any legal and any other expenses reasonably incurred, as incurred,
in connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement), omission (or alleged
omission) or violation (or alleged violation) is made in such Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Parent by such Holder and
stated to be specifically for use in connection with the offering of securities
of Parent, provided, however, that each Holder's liability under this Section
6.2 shall not exceed such Holder's net proceeds from the offering of securities
made in connection with such Registration; and provided, further, that the
indemnity contained in this Section 6.2 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if settlement is
effected without the consent of the Holder (which consent shall not unreasonably
be withheld).
<PAGE>
6.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 6 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 6, notify the indemnifying
party in writing of the commencement thereof and generally summarize such
action. The indemnifying party shall have the right to participate in and to
assume the defense of such claim, jointly with any other indemnifying party
similarly noticed; provided, however, that the indemnifying party shall be
entitled to select counsel for the defense of such claim with the approval of
any parties entitled to indemnification, which approval shall not be
unreasonably withheld; provided further, however, that if either party
reasonably determines that there may be a conflict between the position of
Parent and the Investors in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity under this Section 6,
then counsel for such party shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to the ability of the
indemnifying party to defend such action, shall relieve such indemnifying party,
to the extent so prejudiced, of any liability to the indemnified party under
this Section 6, but the omission so to notify the indemnifying party will not
relieve such party of any liability that such party may have to any indemnified
party otherwise than under this Section 6.
7. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Investors the benefits of Rule 144 and any other rule or
regulation of the Commission that may at any time permit an Investor to sell
securities of Parent to the public without Registration or pursuant to a
Registration on Form S-3, Parent agrees to use reasonable efforts to:
(a) make and keep public information available, as those
terms are defined in Rule 144;
(b) file with the Commission in a timely manner all reports
and other documents required of Parent under the Securities Act and the 1934
Act; and
(c) furnish to any Investor, so long as such Investor owns any
Registrable Securities, forthwith upon request (i) a written statement by Parent
that it has complied with the reporting requirements of Rule 144, the Securities
Act and the 1934 Act, or that it qualifies as a registrant whose securities may
be resold pursuant to Form S-3, (ii) a copy of the most recent annual or
quarterly report of Parent and such other reports and documents so filed by
Parent, and (iii) such other information as may be reasonably requested in
availing any Investor of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
<PAGE>
8. Transfer of Rights. The Registration rights of the Investors set
forth in Section 2 may be assigned by any Holder to a transferee or assignee of
any Registrable Securities not sold to the public acquiring at least [***]
shares of such Holder's Registrable Securities (equitably adjusted for any
recapitalizations, stock splits, combinations, and the like) or acquiring all of
the Registrable Securities held by such Holder if transferred to a single
entity; provided, however, that (i) Parent must receive written notice prior to
the time of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such information
and Registration rights are being assigned, and (ii) the transferee or assignee
of such rights must not be a person deemed in good faith by the Board of
Directors of Parent to be a competitor or potential competitor of Parent.
Notwithstanding the limitation set forth in the foregoing sentence respecting
the minimum number of shares which must be transferred, any Holder which is a
partnership may transfer such Holder's Registration rights to such Holder's
constituent partners (or may transfer to their heirs in the case of individuals)
without restriction as to the number or percentage of shares acquired by any
such constituent partner (or heirs).
9. Miscellaneous.
9.1 Entire Agreement; Successors and Assigns. This Agreement
constitutes the entire contract between Parent and the Investors relative to the
subject matter hereof. Subject to the exceptions specifically set forth in this
Agreement, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective executors, administrators, heirs,
successors and assigns of the parties.
9.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into and wholly to be performed within the State of California
by California residents.
9.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.4 Notices. Any notice required or permitted hereunder shall
be given in writing and shall be conclusively deemed effectively given upon
personal delivery, or five (5) days after deposit in the United States mail, by
first class mail, postage prepaid, or upon sending if sent by commercial
overnight delivery service addressed (i) if to Parent, as set forth below
Parent's name on the signature page of this Agreement, and (ii) if to an
Investor, at such Investor's address as set forth on the signature page of this
Agreement, or at such other address as Parent or such Investor may designate by
ten (10) days' advance written notice to the Investors or to Parent,
respectively.
9.5 Amendment of Agreement. Except as otherwise specifically
provided herein, any provision of this Agreement may be amended by a written
instrument signed by Parent and by persons holding more than fifty-five percent
(55%) of the then outstanding Registrable Securities (calculated on an as
converted basis).
9.6 Aggregation of Stock. All Registrable Securities held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
9.7 Severability. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
The PARENT: NEUROCRINE BIOSCIENCES, INC.
/s/ Paul W. Hawran
Senior Vice President and
Chief Financial Officer
The INVESTORS: /s/ Susan G. Amara
/s/ John A. Beaulieu
Manager
Cascadia Pacific Management
/s/ Roger Cone
/s/ Richard Sessions
/s/ Sandra L. Shotwell
Director, Technology Management
Oregon Health Sciences University
Exhibit 2.3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE FOR SUCH OFFER, SALE, OR
TRANSFER, PLEDGE OR HYPOTHECATION IN THE OPINION OF LEGAL COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY.
MILESTONE WARRANT
To Purchase Shares of Common Stock of
NEUROCRINE BIOSCIENCES, INC.
THIS CERTIFIES that, for value received, _____________________, is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time after ____________, (the "Effective Date") and prior to
_________________, 2008 (or earlier as set forth in Section 10), to subscribe
for the purchase from Neurocrine Biosciences, Inc., a Delaware corporation (the
"Company"), __________ shares of the Company's Common Stock at an exercise price
("Exercise Price") equal to the average of the closing prices of the Company's
Common Stock as reported in the Wall Street Journal for the 15 trading days
preceding the completion of the Milestone (as such term is defined in Section
5.14 of the Agreement and Plan of Reorganization dated _____________________,
1998 (the "Merger Agreement")), subject to adjustment as set forth below. The
shares of Common Stock issuable upon exercise hereof are subject to repurchase
in certain events as set forth in the Merger Agreement and the Stock Restriction
Agreement appended thereto.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the Assignment
Form annexed hereto properly endorsed.
<PAGE>
Exhibit 2.3 6
2. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable by the registered holder hereof, in whole or in part, at any
time after the date hereof and prior to 4:00 p.m., La Jolla, California time, on
the date of termination hereof (as set forth in Section 10), subject to
adjustment as hereinafter provided, by the surrender of this Warrant and the
Notice of Exercise Form annexed hereto duly executed at the office of the
Company, in La Jolla, California (or such other office or agency of the Company
as it may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
of the Exercise Price for the shares thereby purchased (i) by cash or check or
bank draft payable to the order of the Company, (ii) by cancellation of
indebtedness of the Company payable to the holder hereof at the time of
exercise, or (iii) by delivery of an election in writing to receive a number of
shares of Common Stock equal to the aggregate number of shares of Common Stock
subject to this Warrant (or the portion thereof being canceled upon such
exercise), less that number of shares of Common Stock having a fair market value
as of such date equal to the aggregate Exercise Price of the Warrant (or such
portion thereof) whereupon the holder of this Warrant shall be entitled to
receive a certificate for the number of shares so purchased. The Company agrees
that if, at the time of the surrender of this Warrant (or portion thereof) and
exercise and purchase as aforesaid, the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to be
issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised as
aforesaid.
Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time after the date on which this Warrant
shall have been exercised as aforesaid.
If this Warrant is exercised with respect to less than all of the
shares covered hereby, the holder hereof shall be entitled to receive a new
Warrant, in this form, covering the number of shares with respect to which this
Warrant shall not have been exercised.
The Company covenants that all shares of stock which may be issued upon
the exercise of rights represented by this Warrant will, upon exercise of the
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
3. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
5. No Rights as Shareholders. This Warrant does not entitle the holder
hereof to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof.
6. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
<PAGE>
7. Loss, Theft, Destruction or Mutilation of Warrant. In case of loss,
theft or destruction or mutilation of this Warrant, upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to the Company, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
9. Adjustment. In the event of any subdivision or change or
subdivisions or changes of the shares of Common Stock of the Company at any time
while this Warrant is outstanding into a greater number of shares of Common
Stock, the Company shall thereafter deliver at the time of purchase of shares of
Common Stock under this Warrant, in lieu of the number of shares of Common Stock
in respect of which the right to purchase is then being exercised, such greater
number of shares of Common Stock of the Company as would result from said
subdivision or change or subdivisions or changes had the right of purchase been
exercised before such subdivision or change or subdivisions or changes without
the holder making any additional payment or giving any other consideration
therefor. The number of shares for which this Warrant is exercisable and the
time period for exercise are subject to adjustment from time to time as follows:
In the event of any consolidation or consolidations of the shares of
Common Stock of the Company at any time while this Warrant is outstanding into a
lesser number of shares of Common Stock, the Company shall thereafter deliver,
and the holder of this Warrant shall accept, at the time of purchase of shares
of Common Stock under this Warrant, in lieu of the number of shares of Common
Stock in respect of which the right to purchase is then being exercised, such
lesser number of shares of Common Stock of the Company as would result from such
consolidation or consolidations had the right of purchase been exercised before
such consolidation or consolidations.
In the event of any reclassification or reclassifications of the shares
of Common Stock of the Company at any time while this Warrant is outstanding,
the Company shall thereafter deliver at the time of purchase of shares of Common
Stock under this Warrant the number of shares of the Company of the appropriate
class or classes resulting from said reclassification or reclassifications as
the holder would have been entitled to receive in respect of purchase of shares
of Common Stock in respect of which the right of purchase is then being
exercised had the right of purchase been exercised before such reclassification
or reclassifications.
<PAGE>
If the Company, at any time while this Warrant is outstanding, shall
distribute any class of shares or rights, options or warrants (other than those
referred to above) or evidence of indebtedness or property (excluding cash
dividends paid in the ordinary course) to holders of shares of Common Stock of
the Company, the number of shares to be issued by the Company under this Warrant
shall, at the time of purchase, be appropriately adjusted and the holder shall
receive, in lieu of the number of shares in respect of which the right to
purchase is then being exercised, the aggregate number of shares or other
securities or property that the holder would have been entitled to receive as a
result of such event if, on the record date thereof, the holder has been the
registered holder of the number of shares of Common Stock to which the holder
was theretofore entitled upon exercise of the rights of the holder hereunder.
If the Company, at any time while this Warrant is outstanding, shall
pay any stock dividend or stock dividends upon shares of stock of the Company of
the class or classes in respect of which the right to purchase is then given
under this Warrant, then the Company shall thereafter deliver at the time of
purchase of shares under this Warrant, in addition to the number of shares of
stock of the Company in respect of which the right of purchase is then being
exercised, the additional number of shares of the appropriate class or classes
as would have been payable on the shares of stock of the Company so purchased if
the shares so purchased had been outstanding on the record date for the payment
of the said stock dividend or stock dividends.
On the happening of each and every such event, the applicable
provisions of this Warrant shall, ipso facto, be deemed to be amended
accordingly and the Company shall take all necessary action so as to comply with
such provisions as so amended.
10. Termination. This Warrant shall terminate on the earlier of: (a)
_________________, 2008, or (b) the voluntary or involuntary dissolution,
liquidation, winding up of the Company, sale of all or substantially all of the
assets of the Company, or a merger, consolidation or acquisition of the Company
in which the stockholders of the Company prior to such merger, consolidation or
acquisition receive cash or securities of another corporation which results in
the Company's stockholders not holding (by virtue of such shares or securities
issued solely with respect thereto) at least 50% of the voting power of the
surviving, continuing or purchasing entity, provided, however, that in the event
any such event or transaction described in Section 10(b) hereof is proposed, the
Company shall give at least 20 days prior written notice thereof to the holder
hereof, stating the approximate date on which such event is to take place and
the approximate date (which shall be at least 20 days after the giving of such
notice) as of which the owners of the Common Stock of record shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
such event. Such notice shall provide for the release of the Company's
repurchase right with respect to shares issuable upon exercise of this Warrant
so that such shares shall no longer be subject to repurchase as of the closing
of such transaction. If any such event or transaction shall occur, this Warrant
and all rights with respect hereto shall terminate on the date such event or
transaction is closed. Notices pursuant to this paragraph shall be given by
certified mail, return receipt requested, addressed to the holder hereof at the
holder's address in the Company's records, or such other address as the holder
hereof shall advise the Company in writing.
11. Registration Rights. The shares issuable upon exercise of this
Warrant shall be included in the Company's existing piggyback registration
rights, provided that the requisite consent of the other holders of registrable
securities of the Company can be obtained. The Company agrees to use its
reasonable efforts to obtain such consent.
12. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall constitute a
contract under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
(b) Restrictions. The holder hereof acknowledges that the
Common Stock acquired upon the exercise of this Warrant shall have restrictions
upon its resale imposed by state and federal securities laws.
(c) Authorized Shares. The Company covenants that during the
period the Warrant is exercisable, it will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
(d) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate in order to
protect the rights of the holder hereof against impairment.
(e) Notices of Record Date. In case
(i) the Company shall take a record of the
holders of its Common Stock for the purposes of entitling them to receive any
dividend (other than a cash dividend in the ordinary course) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares or stock of any class or any other securities or property, or to receive
any other right; or
(ii) of any capital reorganization of the
Company, any reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another corporation, or any
conveyance of all or substantially all of the assets of the Company to another
corporation; or
(iii) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
<PAGE>
then, and in each such case, the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least thirty (30) days prior to the
date therein specified.
<PAGE>
IN WITNESS WHEREOF, Neurocrine Biosciences, Inc. has caused this
Warrant to be executed by its officers thereunto duly authorized.
Dated: ______________
NEUROCRINE BIOSCIENCES, INC.
By:
Title:
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this form and supply required
information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to:
whose address is:
Dated: , 19 .
Holder's Signature:
Holder's Address:
Note: The signature to this Assignment Form must correspond with the
name as it appears on the face of the Warrant, without alteration or enlargement
or any change whatever, and must be guaranteed by a bank or trust company.
Officers of corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
<PAGE>
NOTICE OF EXERCISE
TO: NEUROCRINE BIOSCIENCES, INC.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of Neurocrine Biosciences, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said shares
of Common Stock in the name of the undersigned as specified below:
(Name)
(Address)
(3) The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
___________________ _____________________________
(Date) (Signature)
Exhibit 10.1
PUBLIC HEALTH SERVICE
PATENT LICENSE AGREEMENT--EXCLUSIVE
COVER PAGE
For PHS internal use only:
Patent License Number: L-259-97/0
Serial Numbers of Licensed Patents: A.) USPN 5,635,599 (=USSN 08/225,224);
B.) USSN 08/722,258 (CIPofUSSN 08/225,224); C.) USPN 4,892,827(=USSN 06/911,227)
and D.) USPN5,720,720 [ = USSN 08/616,785 (FWC of 08/112,370)].
Licensee: Neurocrine Biosciences, Inc., 3050 Science Park Road, San Diego,
California 92121.
CRADA Number (if applicable): N/A
Additional Remarks: Foreign Patent rights to the '827 Patent reside with the
inventors.
This Patent License Agreement, hereinafter referred to as the "Agreement,"
consists of this Cover Page, an attached Agreement, a Signature Page, Appendix A
(List of Patent(s) or Patent Application(s), Appendix B (Fields of Use and
Territory), Appendix C (Royalties), Appendix D (Modifications), Appendix E
(Benchmarks), Appendix F (Commercial Development Plan) and Appendix G ( PHS
Incurred Patent Prosecution Costs). The Parties to this Agreement are:
1) The National Institutes of Health ("NIH"), the Centers for Disease Control
and Prevention ("CDC"), or the Food and Drug Administration ("FDA"), agencies of
the United States Public Health Service ("PHS"), hereinafter singly or
collectively referred to as "PHS", within the Department of Health and Human
Services ("DHHS"); and
2) The person, corporation, or institution identified above and/or on the
Signature Page, having offices at the address indicated on the Signature Page,
hereinafter referred to as "Licensee".
<PAGE>
PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
PHS and Licensee agree as follows:
1. BACKGROUND
1.01 In the course of conducting biomedical and behavioral research, PHS
investigators made inventions that may have commercial applicability.
1.02 By assignment of rights from PHS employees and other inventors, DHHS, on
behalf of the United States Government, owns intellectual property rights
claimed in any United States and foreign Patent Applications or Patents
corresponding to the assigned inventions. DHHS also owns any tangible
embodiments of these inventions actually reduced to practice by PHS.
1.03 The Assistant Secretary for Health of DHHS has delegated to PHS the
authority to enter into this Agreement for the licensing of rights to these
inventions under 35 U.S.C. 200-212, the Federal Technology Transfer Act of 1986,
15 U.S.C. 3710a, and/or the regulations governing the licensing of
Government-owned inventions, 37 CFR Part 404.
1.04 PHS desires to transfer these inventions to the private sector through
commercialization licenses to facilitate the commercial development of products
and processes for public use and benefit.
1.05 Licensee desires to acquire commercialization rights to certain of these
inventions in order to develop processes, methods, or marketable products for
public use and benefit.
2. DEFINITIONS
2.01 "Benchmarks" mean the performance milestones set forth in Appendix E.
2.02 "Commercial Development Plan" means the written commercialization plan is
attached as Appendix F and/or is attached to this Agreement and/or is
incorporated by reference into this Agreement.
2.03 "Corporate Collaborator" means a non-affiliate third party to whom Licensee
has granted exclusive or non-exclusive commercialization rights, to one or more
Licensed Product(s) or Licensed Process(es), but not including exclusive or
non-exclusive commercialization rights to manufacture either Licensed Products
and/or Licensed Process(es).
2.04 "First Commercial Sale" means, subsequent to the regulatory approval in the
respective country, the initial transfer by or on behalf of Licensee or its
sublicensees of Licensed Products or the initial practice of a Licensed Process
by or on behalf of Licensee or its sublicensees in exchange for cash or some
equivalent to which value can be assigned for the purpose of determining Net
Sales.
2.05 "Government" means the Government of the United States of America.
"Licensed Fields of Use" means the fields of use identif~ed in Appendix B.
"Licensed Patent Rights" shall mean:
a) U.S. Patent Applications and Patents listed in Appendix A, all divisions and
continuations of these Applications, all Patents issuing from such Applications,
divisions, and continuations, and any reissues, reexaminations, and extensions
of all such Patents;
b) to the extent that the following contain one or more claims directed to the
invention or inventions disclosed in a) above: i) continuations-in-part of a)
above; ii) all divisions and continuations of these continuations-in-part; iii)
all Patents issuing from such continuations-in-part, divisions, and
continuations; and iv) any reissues, reexaminations, and extensions of all such
Patents;
c) to the extent that the following contain one or more claims directed to the
invention or inventions disclosed in a) above: all counterpart foreign
Applications and Patents to a) and b) above, excluding those corresponding to
United States Patent Number 4,892,827, entitled, "Recombinant Pseudomonas
Exotoxin: Construction of An Immunotoxin With Low Side Effects", Inventors; Drs.
Ira H. Pastan, Sankar Adhya and David Fitzgerald, as listed in Appendix A.
Licensed Patent Rights shall not include subject matter within b) or c) above to
the extent that such subject matter is covered by one or more claims directed to
new matter which is not the subject matter disclosed in a) above.
2.08 "Licensed Process(es)" means processes which, in the course of being
practiced would, in the absence of this Agreement, infringe one or more claims
of the Licensed Patent Rights that have not been held invalid or unenforceable
by an unappealed or unappealable judgment of a court of competent jurisdiction.
2.09 "Licensed Product(s)" means tangible materials which, in the course of
manufacture, use, or sale would, in the absence of this Agreement, infringe one
or more claims of the Licensed Patent Rights that have not been held invalid or
unenforceable by an unappealed or unappealable judgment of a court of competent
jurisdiction.
2.10 "Licensed Territory" means the geographical area identified in Appendix B.
2.11 "Net Sales" shall mean the total of all amounts invoiced by Licensee and
its authorized Affiliates and sublicensees, for sales of Licensed Product(s),
net of all separately invoiced and actually incurred charges, including (a)
credits, allowances, discounts and rebates to, and charge-backs from the account
of, such independent third parties; (b) actual freight and insurance costs
incurred in transporting Licensed Product(s) to such independent third parties;
(c) reasonable and customary cash, quantity and trade discounts and other price
reduction programs; (d) sales, use, value-added and other direct taxes incurred;
and (e) customs duties, surcharges and other government charges incurred in
connection with the exportation or importation of Licensed Product(s).
"Practical Application" means to manufacture in the case of a composition or
product, to practice in the case of a process or method, or to operate in the
case of a machine or system; and in each case, under such conditions as to
establish that the invention is being utilized and that its benefits are to the
extent permitted by law or Government regulations available to the public on
reasonable terms.
2.13 "Research License" means a nontransferable, nonexclusive license to make
and to use the Licensed Products or Licensed Processes as defined by the
Licensed Patent Rights for purposes of research and not for purposes of
commercial manufacture or distribution or in lieu of purchase.
2.14 "Affiliate" means a corporation or other business entity which, directly or
indirectly, is controlled by, controls, or is under common control with
Licensee. For this purpose, the term "control" shall mean ownership of more than
forty-eight percent (48%) of the voting stock or other ownership interest of the
corporation or other business entity, or the power to elect or appoint more than
forty-eight percent (48%) of the members of the governing body of the
corporation or other business entity.
2.15 "Optioned Field(s) of Use" means the fields of use identified in Appendix
B.
3. GRANT OF RIGHTS
3.01 PHS hereby grants and Licensee accepts, subject to the terms and conditions
of this Agreement, an exclusive license under the Licensed Patent Rights, in the
Licensed Territory to make and have made, to use and have used, and to sell and
have sold any Licensed Products in the Licensed Fields of Use and to practice
and have practiced any Licensed Processes in the Licensed Fields of Use.
3.02 Subject to Article 5, Paragraphs 5.01-5.05, PHS hereby grants and Licensee
accepts an exclusive option under the Licensed Patent Rights in the Licensed
Territory for any therapeutic application not within the Licensed Field of Use
(hereinafter defined as "Optioned Field(s) Use").
3.03 This Agreement confers no license or rights by implication, estoppel, or
otherwise under any Patent Applications or Patents of PHS other than Licensed
Patent Rights regardless of whether such Patents are dominant or subordinate to
Licensed Patent Rights.
4. SUBLICENSING
4.01 Licensee will provide PHS written notice of its intent to sublicense the
Licensed Patent Rights and a copy of the term sheet and/or pertinent
sublicensing terms within thirty (30) days [***]. However, PHS has the right to
require deletion or mod)fication of any provision(s) of such sublicensing
agreement(s) which PHS determines to be contrary to Law or Federal Statutes.
4.02 Licensee agrees that any sublicenses granted by it shall provide that the
obligations to PHS of paragraphs 6.01-6.04, 9.01-9.02, 11.01-11.02, 13.05 and
14.07-14.09 of this Agreement shall be binding upon the sublicensee as if it
were a party to this Agreement. Licensee further agrees to attach copies of
these Paragraphs to all sublicense agreements.
4.03 Any sublicenses granted by Licensee shall provide for the termination of
the sublicense, or the conversion to a license directly between such
sublicensees and PHS, at the option of the sublicensee, upon termination of this
Agreement under Article 14. Such conversion is subject to PHS approval and
contingent upon acceptance by the sublicensee of the remaining provisions of
this Agreement.
4.04 Licensee agrees to forward to PHS a copy of each fully executed sublicense
agreement postmarked within sixty (60) days of the execution of such agreement.
To the extent permitted by law, PHS agrees to maintain each such sublicense
agreement in confidence.
5. OPTION
5.01 The option period shall extend for five (5) years from the effective date
of this Agreement. Subject to the provisions of this Article 5, PHS will not
offer an exclusive or non-exclusive license or an exclusive or non-exclusive
option to any third party until the end of the option period, [***].
5.02 Licensee may exercise its option by providing a written notice to PHS prior
to expiration of the option period [***], said notice shall include a Commercial
Development Plan and Benchmarks for each therapeutic application within the
Optioned Field(s) of Use for which Licensee will undertake development.
5.03 [***], PHS will be free to license Licensed Patent Rights within the
Optioned Field(s) of Use to a third party [***] upon any terms PHS deems to be
commercially reasonable.
The Commercial Development Plan(s) and Benchmarks set forth in Paragraph 5.02
shall be subject to PHS ~ review and approval.
5.05 Upon PHS's receipt, review and approval of the Commercial Development
Plan(s) and Benchmarks, the parties to this Agreement shall meet and negotiate
in good faith the term of license for the use of the License Patent Rights for
each of the therapeutic applications be: requested by Licensee within the
Optioned Field(s) of Use. If the parties cannot agree upon terms of a license
for the Optioned Field(s) of Use within sixty (60) days after entering into
negotiations, PHS shall be free to license the Licensed Patent Rights for such
Optioned Fields of Use to a third party (a) at any time within two (2) months
from the termination of such negotiations at terms no more favorable than those
last offered to Licensee, or (b) at any time subsequent to the expiration of
three (3) months from the termination of such negotiations any terms PHS deems
to be commercially reasonable.
6. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
6.01 PHS reserves on behalf of the Government an irrevocable, nonexclusive,
nontransferable, royalty-free license for the practice of all inventions
licensed under the Licensed Patent Rights throughout the world by or on behalf
of the Government and on behalf of any foreign government or international
organization pursuant to any existing or future treaty or agreement which the
Government is a signatory. Prior to the First Commercial Sale, Licensee agrees
to provide PHS mutually acceptable quantities of Licensed Products or materials
made through Licensed Processes for research use. PHS shall supply Licensee with
a research plan outlining its intended use of the Licensed Products or materials
made through the Licensed Processes supplied by Licensee to PHS. PHS will allow
Licensee to provide its input regarding the PHS research plan and PHS will
provide Licensee with a summary of its results of research under research plan.
6.02 Licensee agrees that products used or sold in the United States embodying
Licensed Products or produced through use of Licensed Processes shall be
manufactured substantially in the United States, unless a written waiver is
obtained in advance from PHS.
6.03 Licensee acknowledges that PHS may enter into future Cooperative Research
and Development Agreements (CRADAs) under the Federal Technology Transfer Act of
1986 that relate to the subject matter of this Agreement. Licensee agrees not to
unreasonably deny requests for a Research License from such future collaborators
with PHS when acquiring such rights is necessary in order to make a CRADA
project feasible. Licensee may request an opportunity to join as a party to the
proposed CRADA.
6.04 In addition to the reserved license of Paragraph 5.01 above, PHS reserves
the right to grant such nonexclusive Research Licenses directly or to require
Licensee to grant nonexclusive Research Licenses on reasonable terms. The
purpose of this Research License is to encourage basic research, whether
conducted at an academic or corporate facility. In order to safeguard the
Licensed Patent Rights, however, PHS shall obtain the prior written consent of
Licensee, which consent shall not be unreasonably withheld, before granting an
commercial entities a Research License. If PHS desires to provide research
samples of biological materials claimed under the Licensed Patent Rights to a
commercial entity, PHS shall only do so under an appropriate Research License or
Material Transfer Agreement.
7. ROYALTIES AND REIMBURSEMENT
7.01 Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue
royalty as set forth in Appendix C within thirty (30) days from the date that
this Agreement becomes effective.
7.02 Licensee agrees to pay to PHS a [***] royalty payment as set forth in
Appendix C. The [***] royalty payment is due and payable on [***]. The [***]
royalty payment due for the first [***] of this Agreement may be prorated
according to the fraction of the calendar year remaining between the effective
date of the Agreement and the [***].
7.03 Licensee agrees to pay PHS earned royalties as set forth in Appendix C.
7.04 Licensee agrees to pay PHS benchmark royalties as set forth in Appendix C.
7.05 Licensee agrees to pay [***] as set forth in Appendix
C.
7.06 A claim of a Patent or Patent Application licensed under this Agreement
shall cease to fall within the Licensed Patent Rights for the purpose of
computing the minimum annual royalty and earned royalty payments in any given
country on the earliest of the dates that a) the claim has been abandoned but
not continued, b) the Patent expires or irrevocably lapses, or c) the claim has
been held to be invalid or unenforceable by an unappealed or unappealable
decision of a court of competent jurisdiction or administrative agency.
7.07 No multiple royalties shall be payable because any Licensed Products or
Licensed Processes are covered by more than one of the Licensed Patent Rights.
7.08 On sales of Licensed Products by Licensee to sublicensees or aff~liated
parties or on sales made in other than an arm's-length transaction, the value of
the Net Sales attributed under this Article 6 to such a transaction shall be
that which would have been received in an arm's-length transaction, based on
sales of like quantity and quality products on or about the time of such
transaction. Sales of Licensed Products for use in preclinical and clinical
testing and sales of Licensed Products, on a non-commercial basis, for research
purposes are excluded from this provision, as are limited interim transfers of
Licensed Products to Affiliates, sublicensees or incidental to a partnership or
joint venture collaboration between Licensee and a third party.
7.09 With regard to expenses associated with the preparation, filing,
prosecution, and maintenance of all Patent Applications and Patents, except for
USPN 4,892,827 (= USSN 06/911,227), included within the Licensed Patent Rights
incurred by PHS prior to the effective date of this Agreement, Licensee shall
pay to PHS, as an additional royalty, within sixty (60) days of PHS's submission
of a statement and request for payment to Licensee, the amount [***] to cover
Patent expenses previously incurred by PHS and detailed in Appendix G.
With regard to expenses associated with the preparation, filing, prosecution,
and maintenance of all Patent Applications and Patents included within the
Licensed Patent Rights incurred by PHS on or after the effective date of this
Agreement, PHS, at its sole option, may require Licensee:
(a) to pay PHS on an annual basis, within sixty (60) days of PHS's submission
of a statement and request for payment, a royalty amount equivalent to all
such Patent expenses incurred during the previous calendar year(s); or
(b) to pay such expenses directly to the law firm employed by PHS to handle
such functions. However, in such event, PHS and not Licensee shall be the
client of such law firm.
Under exceptional circumstances, Licensee may be given the right to assume
responsibility for the preparation, filing, prosecution, or maintenance of any
Patent Application or Patent included with the Licensed Patent Rights. In that
event, Licensee shall directly pay the attorneys or agents engaged to prepare,
file, prosecute or maintain such Patent Applications or Patents and shall
provide to PHS copies of each invoice associated with such services as well as
documentation that such invoices have been paid.
Licensee may elect to surrender its rights in any country of the Licensed
Territory under any Licensed Patent Rights upon sixty (60) days written notice
to PHS and owe no further obligation for Patent-related expenses incurred in
that country after the effective date of such written notice.
8. PATENT FILING, PROSECUTION, AND MAINTENANCE
8.01 Except as otherwise provided in this Article 8, PHS agrees to take
responsibility for, but to consult with, the Licensee in the preparation,
filing, prosecution, and maintenance of any Patent Applications or Patents
included in the Licensed Patent Rights and shall furnish cof relevant
Patent-related documents to Licensee.
8.02 Upon execution of this Agreement, Licensee shall assume the responsibility
for the preparation, filing, prosecution, and maintenance of United States
Patent Number 5,635,599 and United States Patent Application Serial Numbers
08/722,258 and 08/616,785 of Licensed Patent Rights, including all relevant
continuations-in-part, all divisions and continuations of these continuation
in-part; all Patents issuing from such continuation-in-part, divisions, and
continuations, and any reissues, reexaminations and extensions of all such
Patents, and shall on an ongoing basis promptly furnish copies of all
Patent-related documents to PHS. In such event, Licensee shall, subject to the
prior approval of PHS, select registered Patent attorneys or Patent agents to
provide such services on behalf of Licensee and PHS.PHS shall provide
appropriate powers of attorney and other documents necessary to undertake such
actions to the Patent attorneys or Patent agents providing such services.
Licensee and its attorneys or agents shall consult with PHS in all aspects of
the preparation, filing, prosecution and maintenance of Patent Applications and
Patents included within the Licensed Patent Rights and shall provide PHS
sufficient opportunity to comment on any document that Licensee intends to file
or to cause to be filed with the relevant intellectual property or Patent
office.
8.03 If Licensee has assumed control of the Licensed Patent Rights in accordance
with Paragraphs 7.10 and 8.02, at any time, PHS may provide Licensee with
written notice that PHS wishes to assume control of the preparation, filing,
prosecution, and maintenance of any and all Patent Applications or Patents
included in the Licensed Patent Rights. If PHS elects to assume such
responsibilities, Licensee agrees to cooperate fully with PHS, its attorneys and
agents in the preparation, filing, prosecution, and maintenance of any and all
Patent Applications or Patents included in the Licensed Patent Rights and to
provide PHS with complete copies of any and all documents or other materials
that PHS deems necessary to undertake such responsibilities. Licensee shall be
responsible for all costs associated with transferring Patent prosecution
responsibilities to an attorney or agent of PHS's choice.
8.04 Each party shall promptly inform the other as to all matters that come to
its attention that may affect the preparation, filing, prosecution, or
maintenance of the Licensed Patent Rights and permit each other to provide
comments and suggestions with respect to the preparation, filing, and
prosecution of Licensed Patent Rights, which comments and suggestions shall be
considered by the other party.
9. RECORD KEEPING
9.01 Licensee agrees to keep accurate and correct records of Licensed Products
made, used, or sold and Licensed Processes practiced under this Agreement
appropriate to determine the amount of royalties due PHS. Such records shall be
retained for at least [***] years following a given reporting period. Upon the
written request of PHS, and not more than once per calendar year, unless PHS
determines there is reason(s) for more frequent inspections, Licensee shall
permit an accountant or other designated auditor selected by PHS to inspect such
records for the sole purpose of verifying reports and payments hereunder at the
expense of PHS. The accountant or auditor shall only disclose to PHS infonnation
relating to the accuracy of reports and payments made under this Agreement. If
an inspection shows an underreporting or underpayment in excess of [***] for any
twelve (12) month period, then Licensee shall reimburse PHS for the cost of the
inspection at the time Licensee pays the unreported royalties, including any
late charges as required by Paragraph 10.08 of this Agreement. All payments
required under this Paragraph shall be due within thirty (30) days of the date
PHS provides Licensee notice of the payment due.
9.02 Licensee agrees to conduct an independent audit of sales and royalties at
least every two years if annual sales of the Licensed Product or Licensed
Processes are over [***] dollars. The audit shall address, at a minimum, the
amount of gross sales by or on behalf of Licensee during the audit period, the
amount of funds owed to the Government under this Agreement, and whether the
amount owed has been paid to the Government and is reflected in the records of
the Licensee. A report by the auditor shall be submitted promptly to PHS on
completion. Licensee shall pay for the entire cost of the audit, however,
Licensee may credit [***] of such costs for the audit against any future
royalties due to PHS under this Agreement.
10. REPORTS ON PROGRESS. BENCHMARKS. SALES. AND PAYMENTS
10.01 Prior to signing this Agreement, Licensee has provided to PHS the
Commercial Development Plan attached and/or as Appendix F, under which Licensee
intends to bring the subject matter of the Licensed Patent Rights to the point
of Practical Application. This Commercial Development Plan is attached and/or
hereby incorporated by reference into this Agreement. Based on this plan,
performance Benchmarks are determined as specified in Appendix E.
10.02 Licensee shall provide written annual reports on its product development
progress or efforts to commercialize under the Commercial Development Plan for
each of the Licensed Fields of Use within sixty (60) days after December 31 of
each calendar year. These progress reports shall include, but not be limited to:
progress on research and development, status of applications for regulatory
approvals, manufacturing, sublicensing, marketing, and sales during the
preceding calendar year, as well as plans for the present calendar year. PHS
also encourages these reports to include information on any of Licensee's public
service activities that relate to the Licensed Patent Rights. If reported
progress differs from that projected in the Commercial Development Plan and
Benchmarks, Licensee shall explain the reasons for such differences. Licensee
agrees to provide any additional information reasonably required by PHS to
evaluate Licensee's performance under this Agreement. PHS shall not unreasonably
withhold approval of any request of Licensee to extend the time periods of this
schedule if such request is supported by a reasonable showing by Licensee of
diligence in its performance under the Commercial Development Plan and toward
bringing the Licensed Products to the point of Practical
10.03 Licensee shall report to PHS the date of the First Commercial Sale in each
country in the Licensed Territory within thirty (30) days of such occurrence.
10.04 Licensee shall submit to PHS within sixty (60) days after each [***] a
royalty report setting forth for the preceding half-year period the amount of
the Licensed Products sold or Licensed Processes practiced by or on behalf of
Licensee in each country within the Licensed Territory, the Net Sales, and the
amount of royalty accordingly due. With each such royalty report, Licensee shall
submit payment of the earned royalties due. If no earned royalties are due to
PHS for any reporting period, the written report shall so state. The royalty
report shall be certified as correct by an authorized of ficer of Licensee and
shall include a detailed listing of all deductions made under Paragraph 2.10 to
determine Net Sales made under Article 7 to determine royalties due.
10.05 Licensee agrees to forward [***] to PHS a copy of such reports received by
Licensee from its sublicensees during the preceding [***] period as shall be
pertinent to a royalty accounting to PHS by Licensee for activities under the
sublicense.
10.06 Royalties due under Article 6 shall be paid in U.S. dollars. For
conversion of foreign currency to U.S. dollars, the conversion rate shall be the
New York foreign exchange rate quoted in The Wall Street Journal on the day that
the payment is due. All checks and bank drafts shall be drawn on United States
banks and shall be payable, as appropriate, for FDA or NIH licenses to the
National Institutes of Health, P.O. Box 360120, Pittsburgh, Pennsylvania
15251-6120. Any loss of exchange, value, taxes, or other expenses incurred in
the transfer or conversion to U.S. dollars shall be paid entirely by Licensee.
The royalty report required by Paragraph 9.04 of this Agreement shall accompany
each such payment and a copy of such report shall also be mailed to PHS at its
address for notices indicated on the Signature Page of this Agreement.
10.07 The parties acknowledge that Licensee and its sublicensees may be
obligated to pay taxes, fees, assessments or other charges imposed by government
authorities (the "Charges") up on royalty payments payable in connection with
the sale of Licensed Products. Licensee and its sublicensees shall provide PHS
with documentation regarding the Charges and the payment of such Charges to the
appropriate governmental authorities. Licensee and its sublicensees shall deduct
all such Charges from the royalty payments due in Paragraph 7.03 and shall
provide a listing of all such Charges in the royalty report due in Paragraph
10.04. Licensee shall pay the Charges to the appropriate governmental
authorities. Licensee shall promptly provide PHS with any documents which may
reasonably be necessary for PHS to obtain any credit to which it may be entitled
with respect to the Charges.
10.08 Late charges will be assessed by PHS as additional royalties on any
overdue payments at a rate of [***] percent per month compounded monthly. The
payment of such late charges shall not prevent PHS from exercising any other
rights it may have as a consequence of the lateness of any payment.
10.09 All plans and reports required by this Article 10 and marked confidential"
by Licensee shall, to the extent permitted by law, be treated by PHS as
commercial and financial information obtained from a person and as privileged
and confidential and any proposed disclosure of such records by the PHS under
the Freedom of Information Act, 5 U.S.C. 552 shall be subject to the
predisclosure notification requirements of 45 CFR 5.65(d).
11. PERFORMANCE
11.01 Licensee shall use its reasonable best efforts to bring the License
Products and Licensed Processes to Practical Application. "Reasonable best
efforts" for the purposes of this provision shall include Licensee's good faith
attempts to adhere to the Commercial Development Plan at Appendix F and perform
the Benchmarks at Appendix E.
The efforts of a sublicensee shall be considered the efforts of Licensee.
11.02 Upon the First Commercial Sale, until the expiration of this Agreement,
Licensee shall use its reasonable best efforts to make Licensed Products and
Licensed Processes reasonably accessible to the United States public.
12. INFRINGEMENT AND PATENT ENFORCEMENT
12.01 PHS and Licensee agree to notify each other promptly of each infringement
or possible infringement of the Licensed Patent Rights, as well as any facts
which may affect the validity, scope, or enforceability of the Licensed Patent
Rights of which either Party becomes aware.
12.02 Pursuant to this Agreement and the provisions of Chapter 29 of title 35,
United States Code, Licensee may a) bring suit in its own name, at its own
expense, and on its own behalf for infringement of presumably valid claims in
the Licensed Patent Rights; b) in any such suit, enjoin infringement and collect
for its use, damages, profits, and awards of whatever nature recoverable for
such infringement; and c) settle any claim or suit for infringement of the
Licensed Patent Rights provided, however, that [***]. If Licensee desires to
initiate a suit for Patent infringement Licensee shall notify PHS in writing. If
PHS does not [***]. PHS shall have a continuing right to intervene in such suit.
Licensee shall take no action to compel the Government either to initiate or to
join in any such suit for Patent infringement. Licensee may request the
Government to initiate or join in any such suit if necessary to avoid dismissal
of the suit. Should the Government be made a party to any such suit, Licensee
shall reimburse the Government for any costs, expenses, or fees which the
Government incurs as a result of such motion or other action, including any and
all costs incurred by the Government in opposing a such motion or other action.
In all cases, Licensee agrees to keep PHS reasonably apprised of status and
progress of any litigation. Before Licensee commences an infringement action,
Licensee shall notify PHS and give careful consideration to the views of PHS and
to any potential effects of the litigation on the public health in deciding
whether to bring suit.
12.03 In the event that a declaratory judgment action alleging invalidity or
non-infringement of any of the Licensed Patent Rights shall be brought against
Licensee or raised by way of counterclaim or affirmative defense in an
infringement suit brought by Licensee under Paragraph 12.02, pursuant to this
Agreement and the provisions of Chapter 29 of Title 35, United States Code or
other statutes, Licensee may a) defend the suit in its own name, at its own
expense, and on its own behalf for presumably valid claims in the Licensed
Patent Rights; b) in any such suit, ultimately to enjoin infringement and to
collect for its use, damages, profits, and awards of whatever nature recoverable
for such infringement; and c) settle any claim or suit for declaratory judgment
involving the Licensed Patent Rights-provided, however, that PHS and appropriate
Government Patent License Agreement authorities shall have the first right to
take such actions and shall have a continuing right to intervene in such suit.
If PHS does not notify Licensee of its intent to respond to the legal action
within sixty (60) days, Licensee will be free to do so. Licensee shall take no
action to compel the Government either to initiate or to join in any such
declaratory judgment action. Licensee may request the Government to initiate or
to join any such suit if necessary to avoid dismissal of the suit. Should the
Government be made a party to any such suit by motion or any other action of
Licensee, Licensee shall reimburse the Government for any costs, expenses, or
fees which the Government incurs as a result of such motion or other action. If
Licensee elects not to defend against such declaratory judgment action, PHS, at
its option, may do so at its own expense. In all cases, Licensee agrees to keep
PHS reasonably apprised of the status and progress of any litigation. Before
Licensee commences an infringement action, Licensee shall notify PHS and give
careful consideration to the views of PHS and to any potential effects of the
litigation on the public health in deciding whether to bring suit.
12.04 In any action under Paragraphs 12.02 or 12.03 initiated by Licensee, the
expenses including costs, fees, attorney fees, and disbursements, shall be paid
by Licensee. [***].
12.05 PHS shall cooperate fully with Licensee in connection with any action
under Paragraphs 12.02 or 12.03. PHS agrees promptly to provide access to all
necessary documents and to render reasonable assistance in response to a request
by Licensee.
13. NEGATION OF WARRANTIES AND INDEMNIFICATION
13.01 PHS offers no warranties other than those specified in Article 1.
13.02 PHS represents to the best of knowledge and belief of PHS, as of the
execution date hereof, there are no Patents or Patent Applications of PHS, other
than those within the Licensed Patent Rights, which would dominate the
manufacture, use or sale of Licensed Product(s) or the use of Licensed
Process(es).
13.03 PHS does not warrant the validity of the Licensed Patent Rights and makes
no representations whatsoever with regard to the scope of the Licensed Patent
Rights, or that the Licensed Patent Rights may be exploited without infringing
other Patents or other intellectual property rights of third parties.
13.04 PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS OF
THE LICENSED PATENT RIGHTS.
13.05 PHS does not represent that it will commence legal actions against third
parties infringing the Licensed Patent Rights.
13.06 Licensee shall indemnify and hold PHS, its employees, students, fellows,
agents, and consultants harmless from and against all liability, demands,
damages, expenses, and losses, including but not limited to death, personal
injury, illness, or property damage in connection with or arising out of
activities performed subsequent to the execution of the Agreement of a) the use
by or on behalf of Licensee, its Affiliates, sublicensees, and contractors and
their respective directors and employees of any Licensed Patent Rights, or b)
the design, manufacture, distribution, or use of any Licensed Products, Licensed
Processes or materials by Licensee, or other products or processes developed by
Licensee, its Affiliates, sublicensees, and contractors in connection with or
arising out of the Licensed Patent Rights. Licensee agrees to maintain a
liability insurance program consistent with sound business practice.
14. TERM. TERMINATION. AND MODIFICATION OF RIGHTS
14.01 This Agreement is effective when signed by all parties and shall extend to
the expiration of the last to expire of the Licensed Patent Rights on a
country-by-country basis, unless sooner terminated as provided in this Article
14.
14.02 In the event that Licensee is in default in the performance of any
material obligations under this Agreement, including but not limited to the
obligations listed in Article 14.05, and if the default has not been remedied
within ninety (90) days after the date of notice in writing of such default, PHS
may terminate this Agreement by written notice.
14.03 In the event that Licensee becomes insolvent, files a petition in
bankruptcy, has such a petition filed against it, determines to file a petition
in bankruptcy, or receives notice of a third party's intention to file an
involuntary petition in bankruptcy, Licensee shall immediately notify PHS in
writing.
14.04 Licensee shall have a unilateral right to terminate this Agreement and/or
any licenses in any country by giving PHS sixty (60) days written notice to that
effect.
14.05 PHS shall specifically have the right to terminate or modify, at its
option, this Agreement, if PHS determines that the Licensee: 1) is not executing
the Commercial Development Plan submiKed with its request for a license and the
Licensee carmot otherwise demonstrate to PHS's satisfaction that the Licensee
has taken, or can be expected to take within a reasonable time, effective steps
to achieve practical application of the Licensed Products or Licensed Processes;
2) has not achieved the Benchmarks as may be mod)fied under Paragraph 10.02; 3)
has willfully made a false statement of, or willfully omitted, a material fact
in the license application or in any report required by the license agreement;
4) has committed a material breach of a covenant or agreement contained in the
license; 5) is not keeping Licensed Products or Licensed Processes reasonably
available to the public after commercial use commences; 6) cannot reasonably
satisfy uninet health and safety needs; or 7) cannot reasonably justify a
failure to comply with the domestic production requirement of Paragraph 6.02
unless waived. In making this determination, PHS will talce into account the
normal course of such commercial development programs conducted with sound and
reasonable business practices and judgment and the ar~nual reports submitted by
Licensee under Paragraph 10.02. Prior to invoking this right, PHS shall give
written notice to Licensee providing Licensee specific notice of, and a ninety
(90) day opportunity to respond to, PHS's concerns as to the previous items 1)
to 7). If Licensee fails to alleviate PHS's concerns as to the previous items 1)
to 7) or fails to initiate corrective action to PHS's satisfaction, PHS may
terminate this Agreement.
14.06 When the public health and safety so require, and after written notice to
Licensee providing Licensee a sixty (60) day opportunity to respond, PHS'shall
have the right to require Licensee to grant sublicenses to responsible
applicants, on reasonable terms, in any Licensed Fields of Use under the
Licensed Patent Rights, unless Licensee can'reasonably demonstrate that the
granting of the sublicense would not materially increase the availability to the
public of the subject matter of the Licensed Patent Rights. PHS will not require
the granting of a sublicense unless the responsible applicant has first
negotiated in good faith with Licensee.
14.07 PHS reserves the right according to 35 U.S.C. * 209(f)(4) to terminate or
modify this Agreement if it is determined that such action is necessary to meet
requirements for public use specified by federal regulations issued after the
date of the license and such requirements are not reasonably satisfied by
Licensee.
14.08 Within thirty (30) days of receipt of written notice of PHS's unilateral
decision to modify or terminate this Agreement, Licensee may, consistent with
the provisions of 37 CFR 404.11, appeal the decision by written submission to
the designated PHS official. The decision of the designed PHS official shall be
the final agency decision. Licensee may thereafter exercise any and all
administrative or judicial remedies that may be available.
14.09 Within ninety (90) days of expiration or termination of this Agreement
under this Article 14, a final report shall be submitted by Licensee. Any
royalty payments, including those related to Patent expense, due to PHS shall
become immediately due and payable upon termination or expiration. If terminated
under this Article 14, sublicensees may elect to convert their sublicenses to
direct licenses with PHS pursuant to Paragraph 4.03.
15. GENERAL PROVISIONS
15.01 Neither Party may waive or release any of its rights or interests in this
Agreement except in writing. The failure of the Government to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right by the Government or
excuse a similar subsequent failure to perform any such term or condition by
Licensee.
15.02 This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of the Licensed Patent Rights, and all prior
negotiations, representations, agreements, and understandings are merged into,
extinguished by, and completely expressed by this Agreement.
15.03 The provisions of this Agreement are severable, and in the event that any
provision of this Agreement shall be determined to be invalid or unenforceable
under any controlling body c such determination shall not in any way affect the
validity or enforceability of the remainin~ provisions of this Agreement.
15.04 If either Party desires a mod)fication to this Agreement, the Parties
shall, upon reasonable notice of the proposed mod)fication by the Party desiring
the change, confer in good faith to determine the desirability of such
mod)fication. No mod)fication will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.
15.05 The construction, validity, performance, and effect of this Agreement
shall be governed by Federal law as applied by the Federal courts in the
District of Columbia.
15.06 All notices required or permitted by this Agreement shall be given by
prepaid, first class, registered or certified mail properly addressed to the
other Party at the address designated on the following Signature Page, or to
such other address as may be designated in writing by such other Party, and
shall be effective as of the date of the postmark of such notice.
15.07 This Agreement shall not be assigned by Licensee except a) with the prior
written consent of PHS, such consent not to be withheld unreasonably; or b) as
part of a sale or transfer of substantially the entire business of Licensee
relating to operations which concern this Agreement. Licensee shall notify PHS
within ten (10) days of any assignment of this Agreement by Licensee.
15.08 Licensee agrees in its use of any PHS-supplied materials to comply with
all applicable statutes, regulations, and guidelines, including Public Health
Service and National Institutes of Health regulations and guidelines. Licensee
agrees not to use the materials for research involving human subjects or
clinical trials in the United States without complying with 21 CFR Part 50 and
45 CFR Part 46. Licensee agrees not to use the materials for research involving
human subjects or clinical trials outside of the United States without notifying
PHS, in writing, of such research or trials and complying with the applicable
regulations of the appropriate national control authorities. Written
not)fication to PHS of research involving human subjects or clinical trials
outside of the United States shall be given no later than sixty (60) days prior
to commencement of such research or trials.
15.09 Licensee acknowledges that it is subject to and agrees to abide by the
United States laws and regulations (including the Export Administration Act of
1979 and Arms Export Control Act) controlling the export of technical data,
computer software, laboratory prototypes, biological material, and other
commodities. The transfer of such items may require a license from the cognizant
Agency of the U.S. Government or written assurances by Licensee that it shall
not export such items to certain foreign countries without prior approval of
such agency. PHS neither represents that a license is or is not required or
that, if required, it shall be issued.
15.10 Licensee agrees to mark the Licensed Products or their packaging sold in
the United States with all applicable U.S. Patent numbers and similarly to
indicate "Patent Pending" status. All Licensed Products manufactured in, shipped
to, or sold in other countries shall be marked in such a manner as to preserve
PHS Patent rights in such countries.
15.11 By entering into this Agreement, PHS does not directly or indirectly
endorse any product or service provided, or to be provided, by Licensee whether
directly or indirectly related to this Agreement. Licensee shall not state or
imply that this Agreement is an endorsement by the Government, PHS, any other
Government organizational unit, or any Government employee. Additionally,
Licensee shall not use the names of NIH, CDC, PHS, or DHHS or the Government or
their employees in any advertising, promotional, or sales literature without the
prior written consent of PHS.
15.12 The Parties agree to attempt to settle amicably any controversy or claim
arising under this Agreement or a breach of this Agreement, except for appeals
of modifications or termination decisions provided for in Article 13. Licensee
agrees first to appeal any such unsettled clad or controversies to the
designated PHS official, or designee, whose decision shall be considered the
final agency decision. Thereafter, Licensee may exercise any administrative or
judicial remedies that may be available.
15.13 Nothing relating to the grant of a license, nor the grant itself, shall be
construed to confer upon any person any immunity from or defenses under the
antitrust laws or from a charge of Patent misuse, and the acquisition and use of
rights pursuant to 37 CFR PaTt 404 shall not be immuniz~ from the operation of
state or Federal law by reason of the source of the grant.
15.14 Paragraphs 4.03, 9.01-9.02, 10.06-10.08, 13.01-13.05, 14.08, 14.09, and
l5.12 of this Agreement shall survive termination of this Agreement.
PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this agreement on the dates set
forth below. The Effective Date of this Agreement shall mean the date on which
the last party to this Agreement signs. Any communication or notice to be given
shall be forwarded to the respective addresses listed below.
FOR PHS
/s/ Jack Spiegle, Ph.D May 7, 1998
Director, Division of Technology Development and Transfer
Office of Technology Transfer
National Institutes of Health
Mailing Address for Notices:
Office of Technology Transfer
National Institutes of Health
6011 Executive Boulevard, Suite 325
Rockville, Maryland 20852
FOR LICENSEE (The undersigned expressly certifies or affirms that the contents
of any statements of LICENSEE, made or referred to in this document are truthful
and accurate.)
/s/ Gary Lyons May 7, 1998
President and C.E.O.
Neurocrine Biosciences, Inc.
Mailing Address for Notices:
Neurocrine Biosciences, Inc.
Attn.: Gary A. Lyons
President and C.E.O.
3050 Science Park Road
San Diego, California 92121
<PAGE>
APPENDIX A--Patent(s) or Patent Application(s)
Licensed Patent Rights
USPN 5,635,599 (= USSN 08/225,224), Entitled, "Circularly Permuted Ligands And
Circularly Permuted Fusion Proteins", Inventors: Drs. Ira H. Pastan, Robert
Kreitman, and Raj K. Puri.
USSN 08/722,258 (= CIP of USSN 08/225,224), Entitled, "Circularly Permuted
Ligands and Circularly Permuted Chimeric Molecules", Drs. Ira H. Pastan and
Robert Kreitman.
USPN 4,892,827 (= USSN 06/911,227), Entitled, "Recombinant Pseudomonas Exotoxin:
Construction of an Active Immunotoxin with Low Side Effects", Inventors: Drs.
Ira H. Pastan, Sankar Adhya, and David Fitzgerald, - excluding any foreign
equivalents corresponding to 4,892,827 (= USSN 06/911,227).
USSN 08/616,785, Entitled "Convention-enhanced Drug Delivery", Inventors: Drs.
Douglas W. Laske, Edward H. Oldfield, Richard H. Bobo, Robert L. Denrick, and
Paul F. Morrison.
<PAGE>
Licensed Fields of Use:
The use of Interleukin-4/Cytotoxin Fusion Proteins for the Therapeutic Treatment
of Cancer.
Licensed Territory:
Worldwide
Optioned Field(s) of Use:
The use of the Licensed Patent Rights for a therapeutic application(s) of
Interleukin4/Cytotoxin Fusion Proteins outside of the Licensed Fields of Use.
<PAGE>
APPENDIX C--Royalties
Licensee agrees to pay to PHS a noncreditable, nonrefundable license issue
royalty in the amount of [***] housand dollars [***].
Licensee agrees to pay to PHS a nonrefundable minimum annual royalty in the
amount of ten thousand dollars ($10,000.00) for each year this Agreement is in
[***].
Licensee agrees to pay PHS earned royalties on Net Sales as follows:
A. [***] on Net Sales of Licensed Products made, have made, used, or sold by
Licensee or its sublicensees in the United States and Licensee or its
sublicensees shall be entitled to a [***] credit against the earned royalty rate
for each [***] of royalty which Licensee must pay to other unaffiliated
licensors for all therapeutically active ingredients required for the
manufacture or sale of Licensed Products except for royalty which Licensee must
pay to other unaffiliated licensors for all counterpart foreign Applications and
Patents corresponding to United States Patent Number 4,892,827, entitled,
"Recombinant Pseudomonas Exotoxin: Construction Of An Immunotoxin With Low Side
Effects", inventors; Pastan, A&ya and Fitzgerald, as listed in Appendix A.
However, in no event shall the earned royalty due to PHS for the sale of
Licensed Products fall below [***].
B. [***] on Net Sales of Licensed Products made, have made, used, or
sold by Licensee or its sublicensees in the Licensed Territory outside of the
United States.
Licensee agrees to pay PHS benchmark royalties as follows:
[***]
PHS and Licensee agree to the following modifications to the Articles and
Paragraphs of this Agreement:
NONE DOES NOT APPLY/ NO MODIFICATIONS OR AMENDMENTS ARE HEREBY MADE TO THIS
AGREEMENT.
<PAGE>
APPENDIX E - Benchmarks and Performance
Licensee agrees to the following Benchmarks for its performance under this
Agreement and, within ten (10) days of Licensee achieving a Benchmark, shall
notify PHS in writing that a given Benchmark has been achieved.
[***]
<PAGE>
APPENDIX F--Commercial Development Plan
See Neurocrine Biosciences, Inc.'s License Application for L-259-97/0.
The Neurocrine Bioscience, Inc. "Commercial Development Plan" is attached to
this Agreement and/or hereby incorporated by reference into this Agreement.
<PAGE>
APPENDIX G--PHS Reimbursable Patent Prosecution Costs
As set forth in Section 7.09 of this Agreement.
1. USPN 5,635,599 (= USSN 08/225,224), Entitled, "Circularly Permuted Ligands
And Circularly Permuted Fusion Proteins", Inventors: Drs. Ira H. Pastan, Robert
Kreit~nan, and Raj K. Puri.
[***]
2. USSN 08/722,258 (= CIP of USSN 08/225,224), Entitled, "Circularly Permuted
Ligands and Circularly Permuted Chimeric Molecules", Drs. Ira H. Pastan and
Robert Kreitman.
[***]
3. USSN 08/616,785, Entitled "Convention-enhanced Drug Delivery", Inventors:
Drs. Douglas W. Laske, Edward H. Oldfield, Richard H. Bobo, Robert L. Denrick,
and Paul F. Morrison.
[***]
TOTAL AMOUNT: [***]
Exhibit 10.2
PASTAN/FITZGERALD AND NEUROCRINE BIOSCIENCES, INC.
PATENT LICENSE AGREEMENT
PATENT LICENSE AGREEMENT dated as of April 28, 1998, between Ira Pastan and
David J. FitzGerald (collectively, "Licensor") and Neurocrine Biosciences, Inc.,
a California corporation having an office at 3050 Science Park Road, San Diego,
California 92121 ("Licensee").
Licensor and Licensee agree as follows:
1. DEFINITIONS
1.01 "Affiliate" of either party to this Agreement means any person,
firm, or corporation which controls, is controlled by or is
under common control with such party. Control means either the
direct or indirect ownership of forty eight percent (48%) or
more of the voting stock of the subject entity.
1.02 "Licensed Patent Rights" means patent applications and patents
listed in Appendix A (together with all counterpart applications
and patents in other countries, if any), all divisions and
continuations of these applications, all patents issuing from
such applications, divisions, and continuations, and any
reissues, reexaminations, and extensions of all such patents.
For the avoidance of doubt, counterpart patent applications and
patents in the United States are not owned by Licensor and
therefore are not included in Licensed Patent Rights.
1.03 "Licensed Product(s)" means tangible materials which, in the
course of manufacture, use or sale would, in the absence of this
Agreement, infringe one or more claims of the Licensed Patent
Rights that have not been held invalid or unenforceable by an
unappealed or unappealable judgment of a court of competent
jurisdiction.
1.04 "Licensed Territory" means all countries in the world, excluding
the United States.
1.05 "Licensor Representative" means Dr. David FitzGerald, who is
authorized to act on behalf of Licensor in connection with this
Agreement.
1.06 "Net Sales" means the total gross receipts for sales of Licensed
Products by or on behalf of Licensee or its sublicensee and from
leasing, renting, or otherwise making Licensed Products
available to others without sale or other dispositions, whether
invoiced or not, less returns and allowances actually granted,
packing costs, insurance costs, freight out, taxes or excise
duties imposed on the transaction (if separately invoiced),
wholesaler and cash discounts in amounts customary in the trade,
credits, chargebacks, rebates or refunds incurred or granted
pursuant to legal or contractual requirements. No deductions
shall be made for commissions paid to individuals, whether they
be with independent sales agencies or regularly employed by
Licensee and on its payroll, or for the cost of collections. For
the avoidance of doubt, sales of Licensed Products, whether or
not manufactured in the Licensed Territory pursuant to the
license hereunder, in the United States (which is not part of
the Licensed Territory) shall not give rise to Net Sales for all
purposes of the Agreement.
1.07 "First Commercial Sale" means the initial transfer by or on
behalf of Licensee of Licensed Products in exchange for cash or
some equivalent to which value can be assigned for the purpose
of determining Net Sales.
1.08 "Licensed Fields of Use" means IL-4 conjugated with pseudomonas
exotoxin for the therapeutic treatment of cancer.
2. GRANT OF RIGHTS
2.01 Licensor hereby grants and Licensee accepts, subject to the
terms and conditions of this Agreement, an exclusive license to
Licensee under the Licensed Patent Rights in the Licensed
Territory to make and have made, to use and have used, and to
sell and have sold any Licensed Products in the Licensed Fields
of Use.
2.02 Licensee shall have the right to grant sublicenses. Any
sublicenses granted by Licensee shall provide for the
termination of the sublicense, or the conversion to a license
directly between such sublicensee and Licensor, at the option of
the sublicensee, upon termination of this Agreement. Such
conversion is subject to the approval of Licensor and contingent
upon acceptance by the sublicensee of the remaining provisions
of this Agreement.
2.03 Licensor hereby grants Licensee the exclusive option, for a
period of two (2) years from the completion of Phase II clinical
trials, to obtain an exclusive license to the use of the
Licensed Patent Rights for IL-4 conjugated with pseudomonas
exotoxin in all therapeutic applications outside of the Licensed
Fields of Use. In the event that Licensee provides written
notice to Licensor of its desire to exercise such an option, the
parties shall meet and negotiate in good faith the terms of such
a license. If the parties cannot agree upon the terms of the
license within ninety (90) days after entering such
negotiations, Licensor shall be free to license such Licensed
Patent Rights to a third party upon terms no more favorable than
those last offered to Licensee.
2.04 This Agreement confers no license or rights by implication,
estoppel, or otherwise under any patent applications or patents
of Licensor other than the Licensed Patent Rights regardless of
whether such patents are dominant or subordinate to Licensed
Patent Rights.
3. ROYALTIES AND REIMBURSEMENT
3.01 Licensee agrees to pay to Licensor a license issue royalty and
certain milestone payments as set forth in Appendix B within
thirty (30) days from the date that this Agreement becomes
effective or the applicable milestone is achieved, as the case
may be.
3.02 Licensee agrees to pay to Licensor a nonrefundable minimum
annual royalty as set forth in Appendix B. The minimum annual
royalty is due and payable on each anniversary of the date
hereof for a period not to exceed three (3) years.
3.03 Licensee agrees to pay to Licensor earned royalties as set
forth in Appendix B.
3.04 Licensee agrees to pay to Licensor an option fee as set forth
in Appendix B for the second year of the exclusive option
outlined in Section 2.03. Licensee will notify Licensor of its
intention to maintain the option for the second year and will
pay the fee within thirty (30) days of completion of the first
year of the exclusive option.
3.05 A claim of a patent licensed under this Agreement shall cease to
fall within the Licensed Patent Rights for the purpose of
computing the minimum annual royalty and earned royalty payments
in any given country on the earliest of the dates that a) the
claim has been abandoned but not continued, b) the patent
expires, c) the patent is no longer maintained by the Licensor,
d) all claims of the Licensed Patent Rights have been held to be
invalid or unenforceable by an unappealed or unappealable
decision of a court of competent jurisdiction or administrative
agency, or e) it has been pending longer than the later of: (i)
seven (7) years from the date of filing of the earliest asserted
priority patent application; or (ii) seven (7) years from the
date of the request for examination in a country in which such a
request is necessary.
3.06 No multiple royalties shall be payable because any Licensed
Products or Licensed Processes are covered by more than one of
the Licensed Patent Rights.
3.07 In the event that Licensee elects to take a license under one or
more patent rights of a third party in order to make, have made,
use, or sell a Licensed Product within the Licensed Field of
Use, then Licensee shall be entitled to reduce earned royalty
payments to Licensor under Paragraph 3.03 by one half of the
actual amount paid to such third parties, provided that the
royalty payable to Licensor shall not be reduced to less than
one half of the amount which would otherwise be due in that
calendar year.
3.08 On sales of Licensed Products by Licensee in other than an
arm's- length transaction, the value of the Net Sales attributed
under this Article 3 to such a transaction shall be that which
would have been received in an arm's-length transaction, based
on sales of like quantity and quality products on or about the
time of such transaction. The exclusive license hereunder is
granted to Licensee and its Affiliates. Accordingly,
inter-company sales among them will not be subject to the
imputed sales provision of this Paragraph.
4. RECORD KEEPING
4.01 Licensee agrees to keep accurate and correct records of Licensed
Products made, used, or sold under this Agreement appropriate to
determine the amount of royalties due Licensor. Such records
shall be retained for at least [***] following a given reporting
period. They shall be available during normal business hours for
inspection at the expense of Licensor by an accountant or other
designated auditor selected by Licensor for the sole purpose of
verifying reports and payments hereunder. The accountant or
auditor shall only disclose to Licensor information relating to
the accuracy of reports and payments made under this Agreement.
If an inspection shows an underreporting or underpayment in
excess of five percent (5%) for any twelve (12) month period,
then Licensee shall reimburse Licensor for the cost of the
inspection at the time Licensee pays the unreported royalties,
including any late charges as required by Paragraph 5.06 of this
Agreement. All payments required under this Paragraph shall be
due within thirty (30) days of the date Licensor provides
Licensee notice of the payment due.
5. REPORTS ON SALES AND PAYMENTS
5.01 From the date of first commercial sale, Licensee shall submit to
Licensor within sixty (60) days after [***] a royalty report
setting forth for the preceding [***] period the amount of the
Licensed Products sold by or on behalf of Licensee in each
country within the Licensed Territory, the Net Sales, and the
amount of royalty accordingly due. With each such royalty
report, Licensee shall submit payment of the earned royalties
due. If no earned royalties are due to Licensor for any
reporting period, the written report shall be certified as
correct by an authorized officer of Licensee and shall include a
detailed listing of all deductions made under Paragraph 1.06 to
determine Net Sales made under Article 3 to determine royalties
due.
5.02 Royalties and all other payments due under Article 3 shall be
paid in U.S. dollars, by wire transfer of funds to an account at
a commercial bank in New York City or Washington, D.C. as
designated by the Licensor Representative. For conversion of a
foreign currency to U.S. Dollars, the conversion rate shall be
the rate quoted in the Wall Street Journal on the day that the
payment is due (i.e., the last business day of the related [***]
period). Any loss of exchange, value, taxes, or other expenses
incurred in the transfer of conversion to U.S. dollars shall be
paid entirely by Licensee. The royalty report required by
Paragraph 5.01 of this Agreement shall be sent to the Licensor
Representative, at the address for notices indicated on the
signature page hereof, concurrently with each such payment.
6. PERFORMANCE
6.01 Licensee shall use its reasonable best efforts to introduce the
Licensed Products into the commercial market as soon as
practicable.
7. INFRINGEMENT AND PATENT ENFORCEMENT
7.01 Licensor and Licensee agree to notify each other promptly of
each infringement or possible infringement, as well as any facts
which may affect the validity, scope, or enforceability of the
Licensed Patent Rights of which either Party becomes aware.
7.02 If Licensor does not initiate legal action or otherwise abate an
infringement of the Licensed Patent Rights within sixty (60)
days of written notification to the Licensor Representative from
Licensee of the existence of a substantial infringement,
Licensee shall have the right (but not the obligation) to
institute infringement litigation against the infringer. If
Licensee institutes such infringement litigation within six (6)
months, Licensee shall be entitled, if applicable, to a
reduction in royalty rate as provided in Appendix B.
7.03 In the event that a declaratory judgment action alleging
invalidity of any of the Licensed Patent Rights shall be brought
against Licensor, Licensor agrees to notify Licensee that an
action alleging invalidity has been brought. Licensor represents
that it will either commence legal action to defend against such
a declaratory action alleging invalidity, or will allow Licensee
to undertake such defense, at its expense. Licensee shall take
no action to compel Licensor either to initiate or to join in
any such declaratory judgment action. Should Licensor be made a
party to any such suit by motion or any other action of
Licensee, Licensee shall reimburse Licensor for any costs,
expenses, or fees which Licensor incurs as a result of its
defending against such motion or other action taken in response
to the motion.
8. NEGATION OF WARRANTIES AND INDEMNIFICATION
8.01 Licensor does not warrant the validity of the Licensed Patent
Rights and makes no representations whatsoever with regard to
the scope of the Licensed Patent Rights, or that the Licensed
Patent Rights may be exploited without infringing other patents
or other intellectual property rights of third parties. However,
Licensor warrants that, as of the execution date hereof, there
are no patents or patent applications owned or controlled by
Licensor, other than those within the Licensed Patent Rights,
which would dominate the manufacture, use or sale of Licensed
Products.
8.02 LICENSOR MAKE NO WARRANTIES, EXPRESSED OR IMPLIED, OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY
SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT
RIGHTS.
8.03 Licensor does not represent that it will commence legal actions
against third parties infringing the Licensed Patent Rights.
8.04 Licensee shall indemnify and hold Licensor, its employees,
students, fellows, agents and consultants harmless from
and against all liability, demands, damages, expenses, and
losses, including but not limited to death, personal injury,
illness, or property damage in connection with or arising out
of activities performed subsequent to the execution of the
Agreement directly related to a) the use by or on behalf of
Licensee, its sublicensee, directors, or employees of any
Licensed Patent Rights, or b) the design, manufacture,
distribution, or use of any Licensed Products or other
products or processes developed in connection with or
arising out of the Licensed Patent Rights. For the avoidance
of doubt, Licensee shall be required to indemnify Licensor
and the other specified parties, under either clause (a) or
clause (b) above, only with respect to Licensed Products made or
sold, or Licensed Patent Rights otherwise used, in each case
by or on behalf of Licensee or its Affiliates. Licensee
agrees to maintain a liability insurance program consistent
with sound business practice.
9. TERMINATION AND MODIFICATION OF RIGHTS
9.01 This Agreement is effective when signed by all parties and shall
extend on a country-by-country basis to the expiration of the
last to expire of the Licensed Patent Rights unless sooner
terminated as provided in this Article 9.
9.02 In the event that Licensee is in default in the performance of
any material obligations under this Agreement, and if the
default has not been remedied within ninety (90) days after the
date of notice in writing of such default, Licensor may
terminate this Agreement by written notice.
9.03 At least thirty (30) days prior to filing a petition in
bankruptcy, Licensee must inform Licensor in writing of its
intention to file the petition in bankruptcy or of a third
party's intention to file an involuntary petition in bankruptcy.
9.04 In the event that Licensee becomes insolvent, files a petition
in bankruptcy, has such a petition filed against it, determines
to file a petition in bankruptcy, or receives notice of a third
party's intention to file an involuntary petition in bankruptcy,
Licensee shall immediately notify Licensor in writing.
Thereafter, Licensor shall have the right to terminate this
Agreement by giving Licensee sixty (60) days written notice.
9.05 Licensee shall have a unilateral right to terminate this
Agreement and/or its rights in any country by giving Licensor
sixty (60) day's written notice to that effect.
9.06 Within ninety (90) days of termination of this Agreement under
this Article 9 or expiration under Paragraph 9.01, a final
report shall be submitted by Licensee. Any royalty payments due
to Licensor become immediately due and payable upon termination
or expiration of this Agreement. If this Agreement is terminated
prior to expiration as contemplated in Paragraph 9.01, Licensee
shall return all Licensed Products or other materials included
within the Licensed Patent Rights to Licensor or provide
Licensor with certification of their destruction.
9.07 Paragraphs 4.01, 5.02, 8.02 and 8.04 of this Agreement shall
survive termination of this Agreement.
10. GENERAL PROVISIONS
10.01 Neither Party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of
either party to assert a right hereunder or to insist upon
compliance with any term or condition of this Agreement shall
not constitute a waiver of that right by such party or excuse a
similar subsequent failure to perform any such term or condition
by the other party.
10.02 This Agreement constitutes the entire agreement between the
parties relating to the subject matter of the Licensed Patent
Rights, and all prior negotiations, representations, agreements,
and understandings are merged into, extinguished by, and
completely expressed by this Agreement.
10.03 The provisions of this Agreement are severable, and in the event
that any provision of this Agreement shall be determined to be
invalid or unenforceable under any controlling body of law, such
determination shall not in any way affect the validity of
enforceability of the remaining provisions of this Agreement.
10.04 If either party desires a modification to this Agreement, the
parties shall, upon reasonable notice of the proposed
modification by the party desiring the change, confer in good
faith to determine the desirability of such modification. No
modification will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.
10.05 The construction, validity, performance, and effect of this
Agreement shall be governed by Federal law as applied by the
Federal courts in the District of Columbia.
10.06 All notices required or permitted by this Agreement shall be
given by prepaid, first class, registered or certified mail
properly addressed to the other party (to the Licensor
Representative, in the case of notices to Licensor) at the
address designated on the following signature page, or to such
other address as may be designated in writing by such other
party, and shall be effective as of the date of the postmark of
such notice.
10.07 This Agreement shall not be assigned by Licensee except a) with
the prior written consent of Licensor; or b) as part of a sale
or transfer of substantially the entire business of Licensee
relating to operations which concern this Agreement. Licensee
shall notify Licensor within ten (10) days of any assignment of
this Agreement by Licensee.
10.08 All Licensed Products manufactured in, shipped to, or sold in
the Licensed Territory shall be marked in such a manner as to
preserve Licensor patent rights therein.
10.09 By entering into this Agreement, Licensor does not directly or
indirectly endorse any product or service provided, or to be
provided, by Licensee whether directly or indirectly related to
this Agreement. Licensee shall not state or imply that this
Agreement is an endorsement by Licensor. Additionally, Licensee
shall not use the names of Licensor in any advertising,
promotional, or sales literature without the prior written
consent of Licensor.
10.10 The parties agree to attempt to settle amicably any controversy
or claim arising under this Agreement or a breach of this
Agreement. In this regard, if a dispute arises between the
parties relating to the interpretation or performance of this
Agreement or the grounds for the termination thereof, the
parties agree to hold a meeting, attended by individuals with
decision-making authority regarding the dispute, to attempt in
good faith to negotiate a resolution of the dispute prior to
pursuing other available remedies. If, within 30 days after such
meeting, the parties have not succeeded in negotiating a
resolution of the dispute, such dispute shall be submitted to
non-binding arbitration under the then current Licensing
Agreement Arbitration Rules of the American Arbitration
Association ("AAA"), with a panel of three arbitrators in
Chicago, IL. Such arbitrators shall be selected by mutual
agreement of the parties or, failing such agreement, shall be
selected according to the aforesaid AAA rules. The parties shall
bear the costs of arbitration equally unless the arbitrators,
pursuant to their right, but not their obligation, require the
non-prevailing party to bear all or any unequal portion of the
prevailing party's costs. The arbitrators will be instructed to
prepare and deliver a written, reasoned opinion conferring their
decision. The rights and obligations of the parties to arbitrate
any dispute relating to the interpretation or performance of
this Agreement or the grounds for the termination thereof shall
survive the expiration or termination of this Agreement for any
reason.
10.11 [***].
This Paragraph 10.11 does not apply to any license agreements
executed by Licensor prior to the effective date of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement of the date
first above written.
Licensor: Licensee:
Address of the Licensor Representative for notices:
/s/ David FitzGerald /s/ Gary Lyons
1202 Azalea Drive President and CEO
Rockville, MD 20850 Neurocrine Biosciences, Inc.
3050 Science Park Road
San Diego, CA 92121
/s/ Ira Pastan
<PAGE>
<TABLE>
APPENDIX A - PATENTS AND PATENT APPLICATIONS
(as of April 7, 1995)
<CAPTION>
Country Application No. Filing Date Status
<S> <C> <C> <C>
Australia 80211/87 09/22/87 Patent No. 618722 issued
Canada 547,614 09/23/87 Allowed
Denmark 2764/88 09/22/87 Pending
Europe 97113929.1 09/23/87 Patent No. 0261671 issued
Europe 93113917.4 08/31/93 Divisional pending
Finland 891321 09/22/87 Pending
Ireland 2552/87 09/22/87 Pending; div. to be filed
Israel 83971 09/22/87 Patent No. 83971 issued
Israel 105160 03/24/93 Divisional pending
Japan 505905/87 09/22/87 Pending
Korea 88-700570 09/22/87 Pending
Norway 882269 09/22/87 Pending
New Zealand 221923 09/23/87 Patent No. 221923 issued
Portugal 85777 09/23/87 Patent No. 85777 issued
Taiwan 76105894 10/02/87 Patent No. 54275 issued
South Africa 87/7153 09/23/87 Patent 87/7153 issued
</TABLE>
<PAGE>
APPENDIX B - PAYMENTS
Signing Fee
Licensee agrees to pay to Licensor a noncreditable, nonrefundable license issue
fee in the amount of [***].
[***] Royalty
Licensee agrees to pay Licensor a yearly [***] Royalty in the amount of [***]
the first year, [***] the second year, and [***] the third year subsequent to
execution of the Agreement. [***].
Royalties on Net Sales
Licensee agrees to pay Licensor earned royalties on Net Sales as follows: [***]
of Net Sales outside of the United States.
Milestone Payments
Licensee agrees to pay Licensor milestone payments as follows:
[***]
Option Fee
In the event that Licensee elects to exercise its right to maintain the second
year of the exclusive option outlined in Section 2.03, Licensee shall notify
Licensor within thirty (30) days of completion of the first year of the option.
Licensee agrees to pay Licensor [***] for the second year of the option.
Sublicensing Fee
Upon the first sublicensing of the Licensed Patent Rights in the Licensed
Territory, Licensee shall pay to Licensor the sum of [***].
Share of Patent Prosecution Costs
[***] incurred subsequent to the date of this Agreement for the prosecution
and/or maintenance of the Licensed Patent Rights, which expenses are not
otherwise reimbursed by a third party, [***].
Reduction of Royalty Rate During Infringement Litigation
If the Licensee has instituted an infringement litigation as provided in Section
7.02, Licensee shall be entitled reduction in royalty rate of [***] for the
period of the infringement litigation.
Exhibit 10.3
SUB-LICENSE AND DEVELOPMENT AGREEMENT
THIS AGREEMENT is effective this 30th day of June 1998, by and between
DOV Pharmaceutical, Inc., a New Jersey corporation, with offices at 1 Parker
Plaza, Suite 1500 Fort Lee, New Jersey 07024 ("DOV") and Neurocrine Biosciences,
Inc., a Delaware corporation with offices at 3050 Science Park Road, Suite 405,
San Diego, California 92121 ("Neurocrine").
WITNESSETH:
WHEREAS, DOV possesses rights to a certain chemical compound and to
pharmaceutical products to be processed from the Compound, such rights arising
from the License Agreement (defined below); and
WHEREAS, Neurocrine desires to acquire, and DOV is willing to grant to
Neurocrine, an exclusive sublicense to the patent rights and know-how, relating
to that certain chemical compound.
NOW THEREFORE, in consideration of the promises and of the mutual
covenants and obligations set forth herein, the parties hereto agree as follows:
ARTICLE 1
Definitions
1.1 "Affiliate" means with respect to a party, any other entity
which directly or indirectly controls, is controlled by, or is
under common control with, such party. An entity or party
shall be regarded as in control of another entity if it owns,
or directly or indirectly controls, at least fifty percent
(50%) of the voting stock or other ownership interest of such
entity, or if it directly or indirectly possesses the power to
direct or cause the direction of the management and policies
of the other entity by any means whatsoever.
1.2 "Compound" means the chemical compound described in Exhibit 1.
1.3 "DOV's Corporate Office" means 1 Parker Plaza, Suite 1500,
Fort Lee, New Jersey.
1.4 "FDA" means the United States Food and Drug Administration.
1.5 "IND" means an investigational new drug as defined in 21
CFR Part 312.
<PAGE>
1.6 "Know-How" means all ideas, inventions, data, instructions,
processes, formulas, expert opinions and information,
including, without limitation, biological, chemical,
pharmacological, toxicological, pharmaceutical, physical and
analytical, clinical, safety, manufacturing and quality
control data and information, in each case, which are
necessary or useful for and are specific to the research,
design, development, testing, use, manufacture or sale of the
Compound or a Licensed Product.
1.7 "License Agreement" means the license agreement between DOV
and American Cyanamid Company ("ACY") dated May 29, 1998
attached as Exhibit 2.
1.8 "Licensed Product"means any product based upon or derived from
the Compound and approved for sale by the USFDA or its foreign
equivalent.
1.9 "NDA" means a new drug application submitted to the United
States Food and Drug Administration in accordance with Section
505 of the Federal Food, Drug and Cosmetic Act and its
implementing regulations, or a comparable filing in Japan or
within the EU.
1.10 "Net Sales" means the gross amount invoiced for the Licensed
Product sold by Neurocrine or its Affiliate or its
sublicensee, less:
(1) transportation charges or allowances, if any;
(2) trade, quantity or cash discounts, service allowances
and broker's or agent's commissions, but not
salaries, commissions, bonuses or other incentive pay
to in-house sales or other personnel, if any, allowed
or paid;
(3) credits or allowances, if any, given or made on
account of price adjustments, returns, bad debts,
off-invoice promotional discounts, rebates, and any
or all federal, state or local government rebates
whether in existence now or enacted at any time
during the term of the Agreement, recalls, or
destruction requested or made by an appropriate
government agency; and
(4) Any tax, excise or governmental charge upon or
measured by the sale, transportation, delivery or use
of the Licensed Product; provided that, other than
pursuant to Section 1.5(e) below, Net Sales shall in
no event be less than 80% of Gross Sales.
(5) In the case of discounts on "bundles" of products or
services which include Licensed Products or the
Compound, the selling Party may, with notice to the
other Party, calculate Net Sales by discounting the
bona fide list price of such product by the average
percentage discount of all products of the selling
party and/or its Affiliates or sublicensees in a
particular "bundle", calculated as follows:
Average percentage
discount on a = (1-A/B) x 100
particular "bundle"
where A equals the total discounted price of a particular
"bundle" of products, and B equals the sum of the undiscounted
bona fide list prices of each unit of every product in such
"bundle". The selling party shall provide the other party
documentation, reasonably acceptable to the other party,
establishing such average discount with respect to each
"bundle", Net Sales shall be based on the undiscounted list
price of the Licensed Products or the Compound in the
"bundle". If a Licensed Product or the Compound in a "bundle"
is not sold separately and no bona fide list price exists for
such Licensed Product or the Compound, the Parties shall
negotiate in good faith an imputed list price for such
Licensed Product or the Compound, and Net Sales with respect
thereto shall be based on such imputed list price.
1.11 "Phase I" means that portion of the FDA submission and
approval process that provides for the first introduction into
humans of the Licensed Product with the purpose of determining
human toxicity, metabolism, absorption, elimination and other
pharmacological action as more fully defined in 21 C.F.R.
ss.213.2(a).
1.12 "Phase II" means that portion of the FDA submission and
approval process that provides for the initial trials of the
Licensed Product on a limited number of patients for the
purposes of determining dose and evaluating safety and
efficacy in the proposed therapeutic indication as more fully
defined as 21 C.F.R. ss.213.21(b).
1.13 "Phase III" means that portion of the FDA submission and
approval process that provides for continued trials of the
Licensed Product on sufficient numbers of patients to
establish the safety and efficacy of the Licensed Product and
generate pharmacoeconomics date to support regulatory approval
in the proposed therapeutic indication as more fully defined
in 21 C.F.R.
ss.312.21(c).
<PAGE>
1.14 "Pre-Phase I" means that portion of the development program
that starts with the selection of a compound for development
into the Licensed Product or the beginning of toxicological
studies relating to such compound. Pre-Phase I includes,
without limitation, toxicological, pharmacological and any
other studies, the results of which are required for filing
with an IND, as well as Licensed Product formulation and
manufacturing development necessary to obtain the permission
of regulatory authorities to begin and continue subsequent
human clinical testing. Toxicology, as used in this
definition, means full scale toxicology using "Good Laboratory
Practices" for obtaining approval from a regulatory authority
to administer the Licensed Product to humans. This toxicology
is distinguished from initial dose range finding toxicology,
which usually includes a single and repeated dose ranging
study in two species with less than half of the animals
required by the FDA, an Ames test and a related chromosome
test.
1.15 "Patent Rights" means all United States and foreign patents
(including all reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations,
revalidations and patents of addition) and patent applications
(including, without limitation, all continuations,
continuations-in-part and divisions thereof) in each case,
claiming an invention which is necessary or useful for the
design, development, testing, use, manufacture or sale of the
Compound or a Licensed Product.
1.16 "Pivotal Trial" means the ***] study which is one of two
Phase III registerable trials and which is comparable to and
of the same magnitude as the trial described in Exhibit 3
hereto.
1.17 "Territory" means all countries of the world.
1.18 "Valid Claim" means a claim of a pending patent application
within the Patent Rights (provided such application has not
been pending for more than [***] from the date it was first
filed with the governmental agency with jurisdiction over
patent applications) or an issued and unexpired patent
included within the Patent Rights that has not been held
unenforceable or invalid by a court or other governmental
agency of competent jurisdiction, and that has not been
disclaimed or admitted to be invalid or unenforceable through
reissue or otherwise.
ARTICLE 2
License Grant
As of the effective date of this Agreement, DOV hereby grants
Neurocrine an exclusive sublicense to DOV's interest under the License Agreement
in the Patent Rights and Know-How to make, have made, use, import, offer for
sale and sell the Compound and the Licensed Product in the Territory, with the
right to grant sublicenses.
ARTICLE 3
Development Activities
<PAGE>
3.1 As soon as practicable after the effective date of this
Agreement, Neurocrine shall commence, adequately fund, and
pursue a worldwide research and development program for the
development of the Licensed Product ("R & D Program") using
commercially reasonable and diligent efforts in its conduct of
the R & D Program in accordance with Neurocrine's usual and
customary practices for products of similar commercial
potential and value.
3.2 Management of the R & D Program will be provided by
Neurocrine. Arnold Lippa and Bernard Beer, upon Neurocrine's
request, will provide reasonable consultative services
pursuant to consulting agreements substantially in the form
set forth on Exhibit 4.
3.3 Neurocrine shall provide to DOV, on a [***] basis throughout
the term of this Agreement a written report setting forth the
efforts (and results of such efforts) taken by Neurocrine
pertaining to the R & D Program, including [***]. Neurocrine
shall provide such reports until the R & D Program is
terminated, or upon the first sale of the Licensed Product in
the United States, Japan or within the EU.
3.4 If Neurocrine terminates the R&D Program or halts all R&D
Program activities for a period of [***] or longer within the
United States (for reasons other than regulatory constraints),
DOV shall have the right to terminate this Agreement within
the entire Territory, or any country within the Territory,
effective upon Neurocrine's receipt of written notice of
termination from DOV. If Neurocrine terminates the R&D Program
or halts all R&D activities for a period of [***] or longer
within any other country of the Territory (for reasons other
than regulatory constraints) DOV shall have the right to
terminate this Agreement within such country, effective upon
Neurocrine's receipt of written notification from DOV. In
either such event DOV will be entitled to any payments
previously paid to, or which have accrued to DOV.
ARTICLE 4
Development Payments
4.1 In consideration of the rights granted to Neurocrine in
Article 2, herein, Neurocrine shall pay to DOV a licensing fee
of $5,000 upon the execution of this Agreement.
4.2 Neurocrine shall make scheduled payments and issue warrants
for the purchase of shares of Neurocrine's capital stock to
DOV in the amounts, and at the times, stated below:
<PAGE>
US [***] plus warrants to purchase 75,000 shares of
Neurocrine common stock, upon [***] for the Licensed
Product. A warrant to purchase 15,000 shares of
Neurocrine common stock shall have an exercise price
equal to the Market Price, as defined herein, as of
the effective date of this Agreement. Such warrant
shall be exercisable, at any time, in whole or in
part, from the grant date through the fifth
anniversary of the grant date. A warrant to purchase
60,000 shares of Neurocrine common stock shall have
an exercise price equal to the Market Price, as
defined herein, as of the date that the first Pivotal
Trial commences. Such warrant shall be exercisable,
at any time, in whole or in part, from the grant date
through the fifth anniversary of the grant date. Upon
approval by a majority of the signatories thereto,
Neurocrine's New Registration Rights Agreement dated
March 29, 1996 shall be amended to include such
warrant in the definition of "Registrable Securities"
thereunder, those shares of Neurocrine common stock
issuable upon exercise of such warrants. The terms of
the warrants shall be substantially as set forth as
the Form of Warrant attached to this Agreement as
Exhibit 5. For purposes of this Article 4.2, "market
price" shall mean the mean of the closing price of
Neurocrine's common stock as quoted on the National
Association of Security Dealers, Inc. Automated
Quotation System or such other national securities
exchange or over-the-counter market on which such
common stock is quoted for the twenty business days
prior to the date of this Agreement, and at the date
that the first Pivotal Trial is commenced,
respectively.
[***].
[***].
ARTICLE 5
Royalties
5.1 In consideration of the rights granted in Article 2 hereof,
and in addition to the payments and issuance of warrants set
forth in Article 4 herein, Neurocrine shall pay to DOV during
the term of this Agreement, on a country-by-country basis,
royalties consisting of [***] of Net Sales of Licensed
Product.
<PAGE>
5.2 If within any country of the Territory (I) marketing
exclusivity is lost to Neurocrine or its sublicensee prior to
the expiration of this Agreement and (ii) the manufacture, use
or sale of a Licensed Product would not infringe a Valid Claim
of a patent within the Patent Rights, then the royalty rate on
the Net Sales of such Licensed Product which would otherwise
be payable to DOV by Neurocrine will be reduced to a rate
which is equal to the [***].
5.3 All royalty payments shall be made in U.S. dollars, Net Sales
shall be converted on a country-by-country basis from the
currency used in each such country to United States Dollars.
The applicable exchange rate shall be the rate quoted in the
Wall Street Journal on the last business day of the period for
which royalties are being calculated. All royalty payments
shall be made in United States Dollars and remitted to DOV's
Corporate Office.
5.4 Within thirty (30) days after the end of [***] during the term
of this Agreement, Neurocrine shall pay to DOV the royalty
payment due for those three months.
Together with [***] royalty payment, Neurocrine shall submit
to DOV a written accounting showing its computation of
royalties due under this Agreement for such three months,
which shall set forth gross sales, Net Sales, the specific
deductions used in arriving at Net Sales, and the total
royalties due for the [***] in question. Such accounting shall
be on a country-by-country basis within the Territory.
<PAGE>
5.5 Neurocrine shall keep full and accurate books and records
setting forth gross sales, Net Sales, the specific deductions
used in arriving at Net Sales and the amount of royalties
payable to DOV hereunder for no less than [***] after the end
of each year during the term of this Agreement. Neurocrine
shall permit DOV, to have such books and records examined by
an independent certified public accountant retained by DOV and
acceptable to Neurocrine, during regular business hours upon
reasonable advance notice. Such accountant shall keep
confidential any information obtained during such examination
and shall report to DOV, only the amounts of royalties which
he or she believes to be due and payable hereunder. In the
event of a difference of opinion between such accountant and
Neurocrine as to the amount of royalties which are due and
payable, the parties hereto shall use their best efforts to
resolve such differences. If they cannot do so, each party
will appoint one additional independent certified public
accountant, and those two individuals will jointly appoint an
additional independent certified public accountant. A majority
decision of those three accountants will be conclusive as to
the amount of royalties which are due and payable. The
expenses of this dispute resolution procedure will be borne
equally by Neurocrine and DOV.
ARTICLE 6
Confidentiality
If, during the performance of this Agreement, one party hereto
discloses information to the other which it considers
confidential, such information may not be subsequently
disclosed by the receiving party to a third party, without the
written permission of the disclosing party. The parties to
this Agreement agree to hold in confidence all information;
including, but not limited to, all information that is the
subject of this Agreement, Know-How, marketing and
manufacturing practices, processes, product information, or
financial information disclosed or submitted in writing or in
other tangible form which is considered to be confidential for
a period of five (5) years from the date of such disclosure,
except:
(1) information, which at the time of disclosure, is in
the public domain;
(2) information, which after disclosure, is published or
otherwise becomes part of the public domain through
no fault of the receiving party;
(3) information which was in the possession of the
receiving party at the time of disclosure;
(4) information which is developed by or on behalf of the
receiving party independently of any disclosure to
them by the disclosing party hereunder; or
(5) information which is provided to the receiving party
by a third party with the right to so provide.
ARTICLE 7
Adverse Experiences
7.1 During the term of this Agreement, Neurocrine shall keep, and
shall cause its sublicensees to keep DOV promptly and fully
informed of all pharmaceutical, toxicological, clinical, and
all other findings, including clinical use, studies,
investigations, tests and prescription, relating to any
adverse experiences with the Licensed Product.
<PAGE>
7.2 Neurocrine undertakes to notify DOV, as soon as possible, of
any serious adverse event as such event is defined by the
responsible regulatory agency in the United States, Japan, or
within the EU, thought to be associated with clinical studies
of, or the use or application of, the Licensed Product. Such
notification shall be made promptly but in no event later than
five (5) working days after Neurocrine first learns of, or is
advised of, any adverse event described above.
7.3 Neurocrine shall inform DOV without delay, of any governmental
action, correspondence or reports to or from governmental
authorities which may affect the continued distribution and
sale of the Licensed Product and furnish DOV with copies of
any relevant documents relating thereto.
ARTICLE 8
Patent Infringement
8.1 In case any actions, claims, demands, suits or other legal
proceedings are brought or threatened to be brought against
Neurocrine, its Affiliates or sublicensees, by a third party
for infringement of such third party's patent(s), by virtue of
Neurocrine's manufacture, use, sale or offer for sale of the
Licensed Product, Neurocrine shall notify DOV forthwith of the
threat or existence of such actions with sufficient evidence
thereof, to enable the parties to prepare an appropriate
defense strategy. The parties shall consult together as to the
action to be taken and as to how the defense will be handled.
[***].
Neurocrine undertakes not to make any admission of liability
to a claimant or plaintiff or his, her or its legal
representative or insurer and not to sign any agreement in
respect of such proceedings adversely affecting the rights of
DOV [***], which will not be unreasonably withheld.
If Neurocrine, because of any settlement of the claimed
infringement or a final unappealable or non-appealed judgment
of a court of competent jurisdiction, is required to make
payments to one or more third parties to obtain a license
without which the marketing of the Licensed Product could not
be made in a given country, Neurocrine may deduct such
payments from the royalty payments due to DOV hereunder,
provided however that in no event shall the royalty rate be
reduced by more than [***] of that which would otherwise be
due to DOV.
8.2 Neurocrine shall promptly inform DOV of any suspected patent
infringement by a third party and provide DOV with any
available evidence of such suspected infringement.
<PAGE>
DOV shall have the right but not the obligation to institute
any claim, suit or proceeding against an infringer or a
presumed infringer. DOV shall control the prosecution of any
such suit, claim or proceeding, including, without limitation,
the choice of counsel and any settlement of any such suit or
claim. Neurocrine shall provide DOV with all reasonable
assistance (other than financial) required to institute and
maintain such proceedings.
Neurocrine shall only have the right to institute any claim,
suit or proceeding against an infringer or a presumed
infringer in the event that DOV elects not to do so. In such
event, Neurocrine shall control the prosecution of any such
suit, claim or proceeding, including, without limitation, the
choice of counsel and any settlement of any such suit or
claim. DOV shall provide Neurocrine with all reasonable
assistance (other than financial) required to institute and
maintain such proceedings. During such proceedings,
Neurocrine's royalty obligations to DOV shall be reduced to
the greater of [***] of the royalty payable hereunder and the
royalty rate that DOV owes to ACY at that time. Any proceeds
from such proceedings shall first be allocated to reimburse
Neurocrine for its costs in such proceedings, second to
reimburse DOV for its lost royalty revenue during such period
and the remainder to Neurocrine. In the event that Neurocrine
is not successful in its suit, DOV shall not be reimbursed for
any lost royalty revenue.
ARTICLE 9
Indemnification, Liability and Insurance
9.1 Neurocrine, in the absence of negligence or willful misconduct
on the part of DOV, its Affiliates and sublicensees and their
respective employees, agents, officers, directors and
permitted assigns, shall at all times during the term of this
Agreement and thereafter, indemnify, defend and hold DOV and
its respective directors, officers, partners, employees, and
agents harmless from and against any and all claims and
expenses, including, without limitation, legal expenses, court
costs, and reasonable attorney's fees, arising out of or
relating to the death of or actual or alleged injury to any
person(s) or damage to third party property, and from and
against any other third party claim, proceeding, demand,
expense, cost and liability of any kind whatsoever
(collectively "liabilities") resulting from, arising out of or
related to product liability claims involving the Licensed
Product.
<PAGE>
9.2 DOV, in the absence of negligence or willful misconduct on the
part of Neurocrine, its Affiliates and sublicensees and their
respective employees, agents, officers, directors and
permitted assigns shall at all times during the term of this
Agreement and thereafter, indemnify, defend and hold
Neurocrine and its respective directors, officers, partners,
employees, and agents harmless from and against any and all
claims and expenses including, without limitation, legal
expenses, court costs and reasonable attorney's fees arising
out of, or relating to, the death of or actual or alleged
injury to any person(s) or damage to third party property, and
from and against any other third-party claim, proceeding,
demand, expense, cost and liability of any kind whatsoever
resulting from, arising out of, or related to DOV's breach of
Article 10.9 herein, and any actions taken by DOV pertaining
to the Compound or Licensed Product prior to the effective
date of this Agreement.
9.3 Neurocrine shall maintain, and cause any sublicense to
maintain, a product liability insurance program which may
include funded self-insurance reserves, with additional
coverage by a nationally-recognized insurance carrier, with
respect to the development, manufacture and sale of the
Licensed Product. Coverage shall be in such amounts as are
customary within the industry. Neurocrine and any sublicensee
shall maintain such insurance program for so long as it, or
any sublicensee, continues to develop, manufacture or sell the
Licensed Product and thereafter for so long as required to
cover manufacture or sales of distributed Licensed Product.
9.4 Neurocrine (and its sublicensee) will name DOV and ACY as
additional insureds on its product liability insurance
policies. Upon execution of this Agreement, Neurocrine will
supply DOV with evidence of such coverage, and Neurocrine will
inform DOV, during the term of this Agreement, of any
modifications to such coverages.
ARTICLE 10
Warranties and Representations
10.1 Neurocrine represents and warrants that it is a corporation
duly organized, validly existing and in good standing under
the laws of Delaware.
10.2 Neurocrine represents and warrants that it has full corporate
authority to enter into, and to perform this Agreement.
10.3 Neurocrine represents and warrants that it is fully cognizant
of Good Laboratory Practices ("GLP") and Good Manufacturing
Practices ("GMP") as set forth by the FDA, and that it, and
any sublicensee, shall manufacture, or have manufactured,
Licensed Product in full compliance with GLP and GMP.
10.4 Neurocrine represents and warrants that the terms of any
sublicense it grants in accordance with Article 2 herein, will
not be inconsistent with the terms of this Agreement or the
License Agreement between DOV and ACY attached hereto as
Exhibit I.
10.5 Neurocrine represents and warrants that it has full corporate
authority to issue the warrants referred to in Article 4.2,
herein and that it shall have a sufficient amount of
authorized shares of capital stock to which the warrants
apply.
<PAGE>
10.6 DOV represents and warrants that it is a corporation duly
organized, validly existing and in good standing under the
laws of New Jersey.
10.7 DOV represents and warrants that it has full corporate
authority to enter into, and to perform this Agreement.
10.8 DOV represents and warrants that it has the right to grant the
sub-license to Neurocrine set forth in Article 2 herein.
10.9 DOV represents and warrants that all representations made by
it to Neurocrine pertaining to Licensed Product are true to
the best of DOV's knowledge.
ARTICLE 11
Assignment
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and the successors to substantially the
entire business and assets of the respective parties hereto.
Notwithstanding the foregoing, any party may void this
Agreement if the Agreement is assigned for the benefit of a
creditor. This Agreement shall not be assignable by either
party, except to an Affiliate, without the prior consent of
the other party; any other attempted assignment is void.
ARTICLE 12
Payments to ACY
DOV shall be responsible for all payments due to ACY pursuant
to the License Agreement, a true copy of which is attached
hereto as Exhibit 1.
ARTICLE 13
Applicable Law
This Agreement shall be governed by and construed according to
the laws of the State of Delaware.
ARTICLE 14
Force Majeure
<PAGE>
None of the parties shall be responsible for failure or delay
in the performance of any of its obligations hereunder due to
Force Majeure. Force Majeure shall mean any circumstances
which, due to an event or a legal position beyond the party's
reasonable control, shall render impossible the fulfillment of
any of the party's obligations hereunder, such as, but not
limited to, acts of God, acts, regulations, or laws of any
government, war, civil commotion, destruction of facilities or
materials by fires, earthquakes, or storms, labor
disturbances, shortages of public utilities, common carriers,
or raw materials, or any other cause, or causes of similar
effects, except, however, any economic occurrence. During any
such case of Force Majeure, this License Agreement shall not
be terminated, but only suspended and the party so affected
shall continue to perform its obligations as soon as such case
of Force Majeure is removed or alleviated.
ARTICLE 15
Term and Termination
15.1 This Agreement shall continue in full force and effect in each
country of the Territory until the later of the final
expiration of a patent covering the Compound or the Licensed
Product in such country, or a period of ten (10) years
following the first sale of Licensed Product by Neurocrine or
its sublicensee in such country.
15.2 Upon expiration of this Agreement, with respect to each
country of the Territory, Neurocrine shall be deemed to have a
full-paid, royalty-free license with the right to make or have
made, use or sell the Compound and the Licensed Product as
well as to freely utilize all data generated hereunder or
received from DOV by Neurocrine, without further obligation to
DOV, except for maintaining confidentiality as required by
Article 6 of this Agreement.
15.3 In the event that a party hereto shall be presumed by the
other to have breached any material condition herein
contained, the complaining party shall provide a written
notice of such presumed breach, requesting rectification
within a thirty (30) day period from the date of receipt of
such notice. The party presumed to be in breach of the
Agreement shall either submit a commercially reasonable plan
for rectification within 15 (fifteen) days of receipt of
notice (if the breach cannot be rectified within the thirty
(30) day period), or take appropriate steps to remedy the
breach within such period. If, within such thirty-day period,
neither the aforesaid plan shall have been submitted, nor the
breach cured, the party claiming breach shall be entitled to
[***]written notice to the other party, [***].
15.4 This Agreement may be terminated immediately by either party
by giving notice to the other party if such other party
becomes insolvent or has committed an act of bankruptcy or if
an order or resolution is made for the winding up of such
other party.
<PAGE>
15.5 In the event that this Agreement is terminated by DOV prior to
is full term pursuant to Article 15.3, or Article 15.4,
herein, Neurocrine shall, as soon as reasonably possible,
transfer, or authorize the transfer of, [***] to DOV. Any such
transfers or transfer authorizations shall be in writing and
acceptable, in form, to DOV.
15.6 Article 6 and Section 16.9 shall survive termination of this
agreement.
ARTICLE 16
Miscellaneous
16.1 This Agreement constitutes the full understanding between the
parties and supersedes any and all prior oral or written
understandings and agreements with respect to the subject
matter hereof. No terms, conditions, understandings or
Agreements purporting to modify, amend or vary this Agreement
shall be binding unless made in writing and signed by the
parties hereto.
16.2 The invalidity or unenforceability of an Article or any part
of an Article of this Agreement in any jurisdiction shall not
cause the invalidity of the entire Agreement as to such
jurisdiction, and shall not affect the validity or
enforceability of such Article or such part of an Article in
any other jurisdiction. The parties shall replace any Article
or part of an Article found invalid or unenforceable by
alternative provisions which shall be as similar as possible
in their conditions with regard to their spirit and commercial
effect. If this Agreement in any jurisdiction is found to be
invalid or unenforceable, the parties shall replace it by an
alternative agreement which shall be as similar as possible in
its conditions with regard to its spirit and commercial
effect.
16.3 No actual waiver of breach or default by either party hereto
of any provision of this Agreement shall be deemed or
construed to be a waiver of any succeeding breach or default
of the same or any other provision of this Agreement.
16.4 This Agreement shall not constitute either party as the joint
venturer, legal representative or agent of the other party for
any purpose, whatsoever. Neither party shall have any right or
authority to assume or create any obligation or responsibility
for, or on behalf of, the other party, or to otherwise bind
the other party.
<PAGE>
16.5 The parties recognize that this is a master agreement covering
a number of countries. If, for any country in the Territory it
becomes necessary to execute a separate instrument in order to
satisfy local requirements, the parties agree to execute such
further instrument, which shall, to the extent permitted by
the laws of the particular country, conform to the terms and
conditions of this Agreement.
16.6 This Agreement has been originally written and signed in the
English language. If any translation into any other language
is required for purposes of governmental filings, the parties
shall arrange for such translation, and the costs thereof
shall be borne by the party legally required to make such
filing. In the event of any question or dispute as to the
meaning or interpretation of any term, condition or provision
of this Agreement, the English language version shall in all
events govern for all purposes, whatsoever.
16.7 Termination of this Agreement for any reason, or expiration of
this Agreement, will not affect obligations, including the
payment of any Scheduled Payments or royalties which have
accrued as of the date of termination or expiration, and
rights and obligations which, are intended to survive
termination or expiration of this Agreement.
16.8 This Agreement is executed simultaneously in counterparts,
each of which shall be deemed an original, but all of which
shall constitute but one and the same instrument.
16.9 Neither party shall issue any press release or other publicity
materials, or make any oral or written presentation concerning
the Compound or Licensed Product without the 15 day prior
consent of the other party, which will not be unreasonably
withheld. This restriction shall not apply to disclosures
required by law or regulation within any country within the
Territory. However, the parties shall coordinate, to every
extent possible, as to the wording of any such disclosure.
ARTICLE 17
Notices
All notices pursuant to this Agreement will be in writing and sent by telecopy,
facsimile or other electronic means or sent by pre-paid regular, registered or
certified mail. All such notices will be delivered personally to, or addressed
as follows:
<PAGE>
TO: Neurocrine
Neurocrine Biosciences, Inc.
3050-Science Park Road, Suite 405
San Diego, California 92121
Attn: Gary Lyons
TO: DOV
DOV Pharmaceutical, Incorporated
1-Parker Plaza, Suite 1500
Fort Lee, New Jersey 07024
Attn: Dr. Arnold Lippa
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized representatives.
DOV Pharmaceutical, Inc.
By: /s/Arnold Lippa
Chief Executive Officer
Neurocrine Biosciences, Inc.
By: /s/Gary Lyons
President and
Chief Executive Officer
<PAGE>
EXHIBIT 1
CHEMICAL COMPOUND DESCRIPTION
<PAGE>
EXHIBIT 2
LICENSE AGREEMENT
<PAGE>
EXHIBIT 3
[***]
<PAGE>
EXHIBIT 4
FORM OF CONSULTING AGREEMENT
<PAGE>
EXHBIT 5
WARRANT AGREEMENT
Exhibit 10.4
Warrant Agreement dated June 30, 1998 between Neurocrine Biosciences, Inc., a
Delaware corporation (the "Company"), and DOV Pharmaceutical, Inc., a New Jersey
corporation ("Holder").
Whereas Holder and the Company are parties to a certain
Sublicense and Development Agreement dated June 30, 1998 (the "Sublicense
Agreement"); and
Whereas pursuant to the terms of the Sublicense Agreement, the
Company has agreed to issue Holder certain warrants to purchase shares of the
Company's Common Stock (as defined in section 8.5), with no par value; and
Now therefore for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
1 Grant. The Company grants Holder warrants ("Warrants") to
purchase up to [***] shares of Common Stock ("Warrants") at the Exercise Price
(as defined in section 2.1), subject to adjustment as provided in Section 8,
during the period commencing on the start date of the [***] (as defined in the
Sublicense Agreement) and ending five years thereafter (the "Exercise Period").
2. Exercise Price.
2.1 The Exercise Price for (a) [***] warrants shall be
$8.040625 per share of Common Stock representing the Market Price (as defined in
section 2.2) per share of the Common Stock on the date hereof, and for (b) [***]
warrants shall be the Market Price of the Common Stock on the start date of the
[***].
<PAGE>
2.2 "Market Price" shall be the mean of the closing price of
the Common Stock as quoted on the National Association of Securities Dealers,
Inc. Automated Quotation System or such other national securities exchange or
over-the-counter market on which the Common Stock is quoted; in the case of the
aforementioned [***] warrants for the 20-day period prior to the date hereof and
in the case of the aforementioned [***] warrants for the 20-day period prior to
start of the [***].
3. Warrant Certificates. The warrant certificates delivered
pursuant to this Warrant Agreement shall be in the form set forth in Exhibit A
with such appropriate changes required or permitted by this Warrant Agreement
(the "Warrant Certificates").
4. Exercise of Warrant.
4.1 Manner of Exercise. The Warrants are exercisable during
the Exercise Period (but not thereafter) at the Exercise Price and payable to
the Company at its executive offices located at 3050 Science Park Road, San
Diego, California 42121, attn: Chief Financial Officer (or such other officer as
designated to Holder by the Company by notice), by certified or official bank
check in New York Clearing House funds or wire transfer. Upon surrender of a
Warrant Certificate, submission of an executed election to purchase in the form
set forth in Exhibit B and payment of the Exercise Price, Holder shall be
entitled to receive a certificate for the shares of Common Stock so purchased.
The purchase rights represented by each Warrant Certificate are exercisable at
the option of Holder in whole or in part, but not as to fractional shares of
Common Stock.
<PAGE>
4.2 Non-Cash Exercise. In addition to the method of payment
set forth in section 4.1 and in lieu of cash payment, Holder shall have the
right to exercise the Warrants in full or in part by surrendering the Warrant
Certificate in the manner specified in section 4.1 in exchange for the number of
shares of Common Stock equal to the product of (x) the number of shares covered
by the Warrants are being exercised multiplied by (y) a fraction, the numerator
of which is the closing price of the Company's Common Stock on the date of
exercise less the Exercise Price, and the denominator of which is such closing
price.
5. Issuance of Certificates.
5.1 Prompt Issuance. Upon exercise of the Warrants, the
certificates for the shares of Common Stock underlying such Warrants shall be
issued within ten business days without charge to the Holder including, without
limitation, any tax that may be payable in connection with the issuance, and
such certificates shall be issued in the name of, or in such name as may be
directed by, Holder, provided that the Company shall not be required to pay any
tax payable solely due to the issuance of a certificates in a name other than
Holder. The Company shall not be required to issue or deliver such certificates
until Holder pays the amount of such tax to the Company or establishes to the
satisfaction of the Company that such tax has been paid.
5.2 Execution of Certificates. Stock certificates issued upon
exercise of the Warrants shall be executed by authorized officers of the
Company. The person in whose name any such stock certificate is issued shall,
for all purposes, be deemed to have become the holder of record of such shares
on the date of exercise of the Warrant.
5.3 New Warrant Certificate. If Holder purchases less than all
the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock not so purchased.
6. Transfer of Warrants. Subject to the restrictions set forth
in section 7, Holder may sell, assign, pledge, hypothecate or otherwise transfer
any rights under this Warrant Agreement, following notice to the Company in the
form of Exhibit C.
<PAGE>
7. Registration.
7.1 Registration Under the Securities Act of 1933. Neither the
Warrants nor the shares of Common Stock issuable upon exercise of the Warrants
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any applicable state securities or blue sky laws. Upon
exercise of the Warrants, the Company may cause a legend in substantially the
form set forth below to be placed on each certificate representing the shares of
Common Stock issued.
The securities represented by this certificate have not been
registered for public resale under the Securities Act of 1933,
as amended ("Securities Act"), and may not be offered,
transferred or sold except pursuant to (i) an effective
registration statement under the Securities Act and any
applicable state securities or blue sky laws, (ii) Rule 144
under the Securities Act (or any similar rule under the
Securities Act relating to the disposition of securities), to
the extent applicable, together with an opinion of counsel if
such opinion, reasonably satisfactory to issuer's counsel, is
that such transfer is permitted or (iii) an opinion of
counsel, if such opinion, reasonably satisfactory to issuer's
counsel, is that an exemption from registration under the
Securities Act and any applicable state securities or blue sky
laws is available.
7.2 Registration Rights. Holder shall have such registration
rights set forth in that certain New Registration Rights Agreement dated March
29, 1996.
8. Adjustments to Exercise and Number of Securities.
<PAGE>
8.1 Recapitalization and Reclassifications. If upon a
recapitalization or reclassification the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof the number of shares of Common Stock that Holder
shall be entitled to purchase upon exercise of the Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization or
reclassification, and the Exercise Price shall be, in the case of an increase in
the number of shares, proportionately decreased and, in the case of a decrease
in the number of shares, proportionately increased.
8.2 Sale; Merger; Consolidation. Subject to the prior
notification requirements of section 13, upon a transfer or sale of all or
substantially all the assets of the Company or in the case of any consolidation
or merger of the Company with another entity (other than a consolidation or
merger that does not result in any reclassification or change of the outstanding
Common Stock), the transferee, purchaser or entity formed by or surviving a
consolidation or merger, as the case may be, shall execute and deliver to Holder
a supplemental warrant agreement giving Holder the right during the Exercise
Period to receive, upon exercise of a Warrant, the kind and amount of shares of
stock and/or other securities receivable upon such transfer, sale, consolidation
or merger, as the case may be, by a holder of the number of shares of Common
Stock for which such Warrant might have been exercised immediately prior to such
transfer, sale, consolidation or merger; provided that if such transfer, sale,
consolidation or merger shall result in the shareholders of the Company
receiving cash or publicly traded securities having a value per share in excess
of the Exercise Price, this Warrant Agreement shall terminate if not exercised
prior to the closing date of such transaction. Such supplemental warrant
agreement shall provide for adjustments that shall be identical to the
adjustments provided in this section 8.
<PAGE>
8.3 Dividends and Other Distributions. If the Company declares
a dividend payable in shares of Common Stock, Holder shall be entitled to
receive upon exercise of the Warrant, in addition to the number of shares of
Common Stock as to which the Warrant is exercised, such additional shares of
Common Stock as Holder would have received had the Warrant been exercised
immediately prior to such record date for the dividend. If the Company declares
a dividend of securities other than a dividend of Common Stock, Holder shall
thereafter be entitled to receive, in addition to the shares of Common Stock
receivable upon the exercise of such Warrants, such non-Common Stock dividend as
Holder would have received had the Warrant been exercised immediately prior to
such record date for the dividend. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this section 8.3. If the Company declares a
cash dividend the Holder shall not be entitled to receive any such dividend.
8.4 Definition of Common Stock. For the purpose of this
Agreement, the term Common Stock
shall mean the following:
(a) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended, or any
other class of stock resulting from successive changes or reclassifications of
such Common Stock; and
(b) if, as a result of an adjustment made pursuant to
section 8, Holder shall upon
exercise of the Warrants become entitled to receive securities other than Common
Stock, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such other securities and thereafter the
number of such other securities shall be subject to adjustment from time to time
in a manner and upon terms as nearly equivalent as practicable to the provisions
of this section 8.
<PAGE>
9. Issuance of New Warrant Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to it of a loss, theft, destruction
or mutilation of a Warrant Certificate, reimbursement by Holder to the Company
of all incidental expenses and, in the case of loss, theft or destruction,
receipt of indemnity or security from Holder reasonably satisfactory to it, or,
in the case of a mutilated Warrant Certificate, upon surrender and cancellation
thereof the Company shall make and deliver a replacement Warrant Certificate to
Holder.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants. The Company shall have the option to
make payment in cash in respect of any fractional shares or to round any
fraction up to the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price by Holder, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. The Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges, if any, on which the Common Stock may then be
listed and/or quoted.
12. Representations and Warranties of Holder. Holder
represents and warrants to the Company that the Warrants are being acquired
solely for Holder's own account, for investment, and not with a view to resale,
distribution, assignment, subdivision or fractionalization thereof, and Holder
has no present plans to enter into any contract, undertaking, agreement or
arrangement for such purpose.
<PAGE>
13. Notice to Warrant Holder. Nothing contained in this
Warrant Agreement shall be construed as conferring upon Holder, by virtue of
holding the Warrants, the right to vote, consent or receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights as a stockholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment (which treatment shall be in accordance
with generally accepted accounting principles) of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchange for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation, winding up, transfer,
consolidation, merger or a sale of all or substantially all its property, assets
and business as an entirety shall be proposed;
<PAGE>
the Company shall give notice of such event at least 15 days prior to the date
fixed as a record date or the date of the closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
14. Notices. Any notice or demand pursuant to this Warrant
Agreement shall be in writing and shall be deemed sufficiently given or made (a)
upon personal delivery; (b) the day following delivery to a reputable overnight
courier or (c) three days following mailing by certified or registered mail,
return receipt requested, postage prepaid, and addressed, until the other party
is notified of another address, as follows:
If to the Company:
Neurocrine Biosciences, Inc.
3050 Science Park
San Diego, California 42121
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Michael O' Donnell, Esq.
If to Holder:
DOV Pharmaceutical, Inc.
1 Parker Plaza, Suite 1500
Fort Lee, New Jersey
Attn: Dr. Arnold Lippa
with a copy to:
Friedman Siegelbaum LLP
399 Park Avenue
20th Floor
New York, New York 10022
Attn: Joseph R. Siegelbaum, Esq.
<PAGE>
15. Supplements and Amendments. This Warrant Agreement may be
amended or waived at any time but only by written agreement of the parties.
16. Successors. All the covenants and provisions of this
Warrant Agreement shall be binding upon and inure to the benefit of the Company,
Holder and their respective successors and assigns hereunder.
17. Governing Law; Submission to Jurisdiction. (a) This
Warrant Agreement and each Warrant Certificate issued hereunder shall be deemed
to be a contract made under the laws of Delaware without giving effect to rules
governing conflicts of law.
(b) Any process or summons to be served upon either the
Company or Holder (at the option of the party bringing such action, proceeding
or claim) may be served in accordance with section 14. The prevailing party in
any such action or proceeding shall be entitled to recover from the other party
all its reasonable legal costs and expenses incurred in connection with such
action or proceeding
18. Entire Agreement; Modification. This Warrant Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof and may not be modified or amended except by both parties.
19. Severability. If any provision of this Warrant Agreement
is held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof.
20. Captions. The caption headings of the sections of this
Warrant Agreement are for convenience of reference only, are not a part of this
Warrant Agreement and shall be given no substantive effect.
21. Benefits of this Warrant Agreement. Nothing in this
Warrant Agreement shall be construed to give to any person or entity other than
the Company and Holder any legal or equitable right, remedy or claim hereunder;
and this Warrant Agreement shall be for the sole and exclusive benefit of the
Company and Holder.
22. Counterparts. This Warrant Agreement may be executed in
any number of counterparts and each of such counterparts shall be deemed to be
an original, and such counterparts shall together constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the date first set forth above.
DOV Pharmaceutical, Inc.
By: /s/Arnold Lippa
Chief Executive Officer
Neurocrine Biosciences, Inc.
By: /s/ Gary Lyons
President and
Chief Executive Officer
Exhibit 10.5
Warrant Agreement dated June 30, 1998 between Neurocrine
Biosciences, Inc., a Delaware corporation (the "Company"), and Jeff Eliot
Margolis ("Holder").
Whereas Holder and the Company are parties to a certain
Sublicense and Development Agreement dated June 30, 1998 (the "Sublicense
Agreement"); and
Whereas pursuant to the terms of the Sublicense Agreement, the
Company has agreed to issue Holder certain warrants to purchase shares of the
Company's Common Stock (as defined in section 8.5), with no par value; and
Now therefore for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
1 Grant. The Company grants Holder warrants ("Warrants") to
purchase up to [***] shares of Common Stock ("Warrants") at the Exercise Price
(as defined in section 2.1), subject to adjustment as provided in Section 8,
during the period commencing on the start date of the [***] (as defined in the
Sublicense Agreement) and ending five years thereafter (the "Exercise Period").
2. Exercise Price.
2.1 The Exercise Price for (a) [***] warrants shall be
$8.040625 per share of Common Stock representing the Market Price (as defined in
section 2.2) per share of the Common Stock on the date hereof, and for (b) [***]
warrants shall be the Market Price of the Common Stock on the start date of the
[***].
<PAGE>
2.2 "Market Price" shall be the mean of the closing price of
the Common Stock as quoted on the National Association of Securities Dealers,
Inc. Automated Quotation System or such other national securities exchange or
over-the-counter market on which the Common Stock is quoted; in the case of the
aforementioned [***] warrants for the 20-day period prior to the date hereof and
in the case of the aforementioned [***] warrants for the 20-day period prior to
start of the [***].
3. Warrant Certificates. The warrant certificates delivered
pursuant to this Warrant Agreement shall be in the form set forth in Exhibit A
with such appropriate changes required or permitted by this Warrant Agreement
(the "Warrant Certificates").
4. Exercise of Warrant.
4.1 Manner of Exercise. The Warrants are exercisable during
the Exercise Period (but not thereafter) at the Exercise Price and payable to
the Company at its executive offices located at 3050 Science Park Road, San
Diego, California 42121, attn: Chief Financial Officer (or such other officer as
designated to Holder by the Company by notice), by certified or official bank
check in New York Clearing House funds or wire transfer. Upon surrender of a
Warrant Certificate, submission of an executed election to purchase in the form
set forth in Exhibit B and payment of the Exercise Price, Holder shall be
entitled to receive a certificate for the shares of Common Stock so purchased.
The purchase rights represented by each Warrant Certificate are exercisable at
the option of Holder in whole or in part, but not as to fractional shares of
Common Stock.
4.2 Non-Cash Exercise. In addition to the method of payment
set forth in section 4.1 and in lieu of cash payment, Holder shall have the
right to exercise the Warrants in full or in part by surrendering the Warrant
Certificate in the manner specified in section 4.1 in exchange for the number of
shares of Common Stock equal to the product of (x) the number of shares covered
by the Warrants are being exercised multiplied by (y) a fraction, the numerator
of which is the closing price of the Company's Common Stock on the date of
exercise less the Exercise Price, and the denominator of which is such closing
price.
<PAGE>
5. Issuance of Certificates.
5.1 Prompt Issuance. Upon exercise of the Warrants, the
certificates for the shares of Common Stock underlying such Warrants shall be
issued within ten business days without charge to the Holder including, without
limitation, any tax that may be payable in connection with the issuance, and
such certificates shall be issued in the name of, or in such name as may be
directed by, Holder, provided that the Company shall not be required to pay any
tax payable solely due to the issuance of a certificates in a name other than
Holder. The Company shall not be required to issue or deliver such certificates
until Holder pays the amount of such tax to the Company or establishes to the
satisfaction of the Company that such tax has been paid.
5.2 Execution of Certificates. Stock certificates issued upon
exercise of the Warrants shall be executed by authorized officers of the
Company. The person in whose name any such stock certificate is issued shall,
for all purposes, be deemed to have become the holder of record of such shares
on the date of exercise of the Warrant.
5.3 New Warrant Certificate. If Holder purchases less than all
the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock not so purchased.
6. Transfer of Warrants. Subject to the restrictions set forth
in section 7, Holder may sell, assign, pledge, hypothecate or otherwise transfer
any rights under this Warrant Agreement, following notice to the Company in the
form of Exhibit C.
<PAGE>
7. Registration Under the Securities Act of 1933 .
7.1 Neither the Warrants nor the shares of Common Stock
issuable upon exercise of the Warrants have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any applicable state
securities or blue sky laws. Upon exercise of the Warrants, the Company may
cause a legend in substantially the form set forth below to be placed on each
certificate representing the shares of Common Stock issued.
The securities represented by this certificate have not been
registered for public resale under the Securities Act of 1933,
as amended ("Securities Act"), and may not be offered,
transferred or sold except pursuant to (i) an effective
registration statement under the Securities Act and any
applicable state securities or blue sky laws, (ii) Rule 144
under the Securities Act (or any similar rule under the
Securities Act relating to the disposition of securities), to
the extent applicable, together with an opinion of counsel if
such opinion, reasonably satisfactory to issuer's counsel, is
that such transfer is permitted or (iii) an opinion of
counsel, if such opinion, reasonably satisfactory to issuer's
counsel, is that an exemption from registration under the
Securities Act and any applicable state securities or blue sky
laws is available.
7.2 Holder shall have such registration rights set forth in
that certain New Registration Rights Agreement dated March 29, 1996.
8. Adjustments to Exercise and Number of Securities.
<PAGE>
8.1 Recapitalization and Reclassifications. If upon a
recapitalization or reclassification the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof the number of shares of Common Stock that Holder
shall be entitled to purchase upon exercise of the Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization or
reclassification, and the Exercise Price shall be, in the case of an increase in
the number of shares, proportionately decreased and, in the case of a decrease
in the number of shares, proportionately increased.
8.2 Sale; Merger; Consolidation. Subject to the prior
notification requirements of section 13, upon a transfer or sale of all or
substantially all the assets of the Company or in the case of any consolidation
or merger of the Company with another entity (other than a consolidation or
merger that does not result in any reclassification or change of the outstanding
Common Stock), the transferee, purchaser or entity formed by or surviving a
consolidation or merger, as the case may be, shall execute and deliver to Holder
a supplemental warrant agreement giving Holder the right during the Exercise
Period to receive, upon exercise of a Warrant, the kind and amount of shares of
stock and/or other securities receivable upon such transfer, sale, consolidation
or merger, as the case may be, by a holder of the number of shares of Common
Stock for which such Warrant might have been exercised immediately prior to such
transfer, sale, consolidation or merger, provided that if such transfer, sale,
consolidation or merger shall result in the shareholders of the Company
receiving cash or publicly traded securities having a value per share in excess
of the Exercise Price, this Warrant Agreement shall terminate if not exercised
prior to the closing date of such transaction. Such supplemental warrant
agreement shall provide for adjustments that shall be identical to the
adjustments provided in this section 8.
<PAGE>
8.3 Dividends and Other Distributions. If the Company declares
a dividend payable in shares of Common Stock, Holder shall be entitled to
receive upon exercise of the Warrant, in addition to the number of shares of
Common Stock as to which the Warrant is exercised, such additional shares of
Common Stock as Holder would have received had the Warrant been exercised
immediately prior to such record date for the dividend. If the Company declares
a dividend of securities other than a dividend of Common Stock, Holder shall
thereafter be entitled to receive, in addition to the shares of Common Stock
receivable upon the exercise of such Warrants, such non-Common Stock dividend as
Holder would have received had the Warrant been exercised immediately prior to
such record date for the dividend. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this section 8.3. If the Company declares a
cash dividend the Holder shall not be entitled to receive any such dividend.
8.4 Definition of Common Stock. For the purpose of this
Agreement, the term Common Stock shall mean the following:
(a) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended, or any
other class of stock resulting from successive changes or reclassifications of
such Common Stock; and
(b) if, as a result of an adjustment made pursuant to
section 8, Holder shall upon exercise of the Warrants become entitled to receive
securities other than Common Stock, wherever appropriate, all references herein
to shares of Common Stock shall be deemed to refer to and include such other
securities and thereafter the number of such other securities shall be subject
to adjustment from time to time in a manner and upon terms as nearly equivalent
as practicable to the provisions of this section 8.
<PAGE>
9. Issuance of New Warrant Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to it of a loss, theft, destruction
or mutilation of a Warrant Certificate, reimbursement by Holder to the Company
of all incidental expenses and, in the case of loss, theft or destruction,
receipt of indemnity or security from Holder reasonably satisfactory to it, or,
in the case of a mutilated Warrant Certificate, upon surrender and cancellation
thereof the Company shall make and deliver a replacement Warrant Certificate to
Holder.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants. The Company shall have the option to
make payment in cash in respect of any fractional shares or to round any
fraction up to the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price by Holder, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. The Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges, if any, on which the Common Stock may then be
listed and/or quoted.
12. Representations and Warranties of Holder. Holder
represents and warrants to the Company that it is an accredited investor, as
defined in Section 501 of Regulations under the Securities Act, the Warrants are
being acquired solely for Holder's own account, for investment, and not with a
view to resale, distribution, assignment, subdivision or fractionalization
thereof, and Holder has no present plans to enter into any contract,
undertaking, agreement or arrangement for such purpose.
<PAGE>
13. Notice to Warrant Holder. Nothing contained in this
Warrant Agreement shall be construed as conferring upon Holder, by virtue of
holding the Warrants, the right to vote, consent or receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights as a stockholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment (which treatment shall be in accordance
with generally accepted accounting principles) of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchange for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation, winding up, transfer,
consolidation, or merger) or a sale of all or substantially all its property,
assets and business as an entirety shall be proposed;
<PAGE>
the Company shall give notice of such event at least 15 days prior to the date
fixed as a record date or the date of the closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
14. Notices. Any notice or demand pursuant to this Warrant
Agreement shall be in writing and shall be deemed sufficiently given or made (a)
upon personal delivery; (b) the day following delivery to a reputable overnight
courier or (c) three days following mailing by certified or registered mail,
return receipt requested, postage prepaid, and addressed, until the other party
is notified of another address, as follows:
If to the Company:
Neurocrine Biosciences, Inc.
3050 Science Park
San Diego, California 42121
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Michael O'Donnell, Esq.
If to Holder:
Jeff Eliot Margolis
c/o Aurora Capital Corp.
425 Park Avenue
New York, New York 10022-3506
15. Supplements and Amendments. This Warrant Agreement may be
amended or waived at any time but only by written agreement of the parties.
<PAGE>
16. Successors. All the covenants and provisions of this
Warrant Agreement shall be binding upon and inure to the benefit of the Company,
Holder and their respective successors and assigns hereunder.
17. Governing Law; Submission to Jurisdiction. (a) This
Warrant Agreement and each Warrant Certificate issued hereunder shall be deemed
to be a contract made under the laws of Delaware without giving effect to rules
governing conflicts of law.
(b) Any process or summons to be served upon either the
Company or Holder (at the option of the party bringing such action, proceeding
or claim) may be served in accordance with section 14. The prevailing party in
any such action or proceeding shall be entitled to recover from the other party
all its reasonable legal costs and expenses incurred in connection with such
action or proceeding
18. Entire Agreement; Modification. This Warrant Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof and may not be modified or amended except by both parties.
19. Severability. If any provision of this Warrant Agreement
is held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof.
20. Captions. The caption headings of the sections of this
Warrant Agreement are for convenience of reference only, are not a part of this
Warrant Agreement and shall be given no substantive effect.
<PAGE>
21. Benefits of this Warrant Agreement. Nothing in this
Warrant Agreement shall be construed to give to any person or entity other than
the Company and Holder any legal or equitable right, remedy or claim hereunder;
and this Warrant Agreement shall be for the sole and exclusive benefit of the
Company and Holder.
22. Counterparts. This Warrant Agreement may be executed in
any number of counterparts and each of such counterparts shall be deemed to be
an original, and such counterparts shall together constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the date first set forth above.
/s/Jeff Eliot Margolis
Neurocrine Biosciences, Inc.
/s/ Gary Lyons
President and
Chief Executive Officer
<PAGE>
Exhibit 10.6
Warrant Agreement dated June 30, 1998 between Neurocrine
Biosciences, Inc., a Delaware corporation (the "Company"), and Stephen L. Ross
("Holder").
Whereas Holder and the Company are parties to a certain
Sublicense and Development Agreement dated June 30, 1998 (the "Sublicense
Agreement"); and
Whereas pursuant to the terms of the Sublicense Agreement, the
Company has agreed to issue Holder certain warrants to purchase shares of the
Company's Common Stock (as defined in section 8.5), with no par value; and
Now therefore for good and valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows:
1 Grant. The Company grants Holder warrants ("Warrants") to
purchase up to [***] shares of Common Stock ("Warrants") at the Exercise Price
(as defined in section 2.1), subject to adjustment as provided in Section 8,
during the period commencing on the start date of the [***] (as defined in the
Sublicense Agreement) and ending five years thereafter (the "Exercise Period").
2. Exercise Price.
2.1 The Exercise Price for (a) [***] warrants shall be
$8.040625 per share of Common Stock representing the Market Price (as defined in
section 2.2) per share of the Common Stock on the date hereof, and for (b) [***]
warrants shall be the Market Price of the Common Stock on the start date of the
[***].
<PAGE>
2.2 "Market Price" shall be the mean of the closing price of
the Common Stock as quoted on the National Association of Securities Dealers,
Inc. Automated Quotation System or such other national securities exchange or
over-the-counter market on which the Common Stock is quoted; in the case of the
aforementioned [***] warrants for the 20-day period prior to the date hereof and
in the case of the aforementioned [***] warrants for the 20-day period prior to
start of the [***].
3. Warrant Certificates. The warrant certificates delivered
pursuant to this Warrant Agreement shall be in the form set forth in Exhibit A
with such appropriate changes required or permitted by this Warrant Agreement
(the "Warrant Certificates").
4. Exercise of Warrant.
4.1 Manner of Exercise. The Warrants are exercisable during
the Exercise Period (but not thereafter) at the Exercise Price and payable to
the Company at its executive offices located at 3050 Science Park Road, San
Diego, California 42121, attn: Chief Financial Officer (or such other officer as
designated to Holder by the Company by notice), by certified or official bank
check in New York Clearing House funds or wire transfer. Upon surrender of a
Warrant Certificate, submission of an executed election to purchase in the form
set forth in Exhibit B and payment of the Exercise Price, Holder shall be
entitled to receive a certificate for the shares of Common Stock so purchased.
The purchase rights represented by each Warrant Certificate are exercisable at
the option of Holder in whole or in part, but not as to fractional shares of
Common Stock.
4.2 Non-Cash Exercise. In addition to the method of payment
set forth in section 4.1 and in lieu of cash payment, Holder shall have the
right to exercise the Warrants in full or in part by surrendering the Warrant
Certificate in the manner specified in section 4.1 in exchange for the number of
shares of Common Stock equal to the product of (x) the number of shares covered
by the Warrants are being exercised multiplied by (y) a fraction, the numerator
of which is the closing price of the Company's Common Stock on the date of
exercise less the Exercise Price, and the denominator of which is such closing
price.
<PAGE>
5. Issuance of Certificates.
5.1 Prompt Issuance. Upon exercise of the Warrants, the
certificates for the shares of Common Stock underlying such Warrants shall be
issued within ten business days without charge to the Holder including, without
limitation, any tax that may be payable in connection with the issuance, and
such certificates shall be issued in the name of, or in such name as may be
directed by, Holder, provided that the Company shall not be required to pay any
tax payable solely due to the issuance of a certificates in a name other than
Holder. The Company shall not be required to issue or deliver such certificates
until Holder pays the amount of such tax to the Company or establishes to the
satisfaction of the Company that such tax has been paid.
5.2 Execution of Certificates. Stock certificates issued upon
exercise of the Warrants shall be executed by authorized officers of the
Company. The person in whose name any such stock certificate is issued shall,
for all purposes, be deemed to have become the holder of record of such shares
on the date of exercise of the Warrant.
5.3 New Warrant Certificate. If Holder purchases less than all
the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel the Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock not so purchased.
6. Transfer of Warrants. Subject to the restrictions set forth
in section 7, Holder may sell, assign, pledge, hypothecate or otherwise transfer
any rights under this Warrant Agreement, following notice to the Company in the
form of Exhibit C.
<PAGE>
7. Registration Under the Securities Act of 1933 .
7.1 Neither the Warrants nor the shares of Common Stock
issuable upon exercise of the Warrants have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or any applicable state
securities or blue sky laws. Upon exercise of the Warrants, the Company may
cause a legend in substantially the form set forth below to be placed on each
certificate representing the shares of Common Stock issued.
The securities represented by this certificate have not been
registered for public resale under the Securities Act of 1933,
as amended ("Securities Act"), and may not be offered,
transferred or sold except pursuant to (i) an effective
registration statement under the Securities Act and any
applicable state securities or blue sky laws, (ii) Rule 144
under the Securities Act (or any similar rule under the
Securities Act relating to the disposition of securities), to
the extent applicable, together with an opinion of counsel if
such opinion, reasonably satisfactory to issuer's counsel, is
that such transfer is permitted or (iii) an opinion of
counsel, if such opinion, reasonably satisfactory to issuer's
counsel, is that an exemption from registration under the
Securities Act and any applicable state securities or blue sky
laws is available.
7.2 Holder shall have such registration rights set forth in
that certain New Registration Rights Agreement dated March 29, 1996.
8. Adjustments to Exercise and Number of Securities.
<PAGE>
8.1 Recapitalization and Reclassifications. If upon a
recapitalization or reclassification the shares of Common Stock shall be changed
into or become exchangeable for a larger or smaller number of shares, then upon
the effective date thereof the number of shares of Common Stock that Holder
shall be entitled to purchase upon exercise of the Warrant shall be increased or
decreased, as the case may be, in direct proportion to the increase or decrease
in the number of shares of Common Stock by reason of such recapitalization or
reclassification, and the Exercise Price shall be, in the case of an increase in
the number of shares, proportionately decreased and, in the case of a decrease
in the number of shares, proportionately increased.
8.2 Sale; Merger; Consolidation. Subject to the prior
notification requirements of section 13, upon a transfer or sale of all or
substantially all the assets of the Company or in the case of any consolidation
or merger of the Company with another entity (other than a consolidation or
merger that does not result in any reclassification or change of the outstanding
Common Stock), the transferee, purchaser or entity formed by or surviving a
consolidation or merger, as the case may be, shall execute and deliver to Holder
a supplemental warrant agreement giving Holder the right during the Exercise
Period to receive, upon exercise of a Warrant, the kind and amount of shares of
stock and/or other securities receivable upon such transfer, sale, consolidation
or merger, as the case may be, by a holder of the number of shares of Common
Stock for which such Warrant might have been exercised immediately prior to such
transfer, sale, consolidation or merger, provided that if such transfer, sale,
consolidation or merger shall result in the shareholders of the Company
receiving cash or publicly traded securities having a value per share in excess
of the Exercise Price, this Warrant Agreement shall terminate if not exercised
prior to the closing date of such transaction. Such supplemental warrant
agreement shall provide for adjustments that shall be identical to the
adjustments provided in this section 8.
<PAGE>
8.3 Dividends and Other Distributions. If the Company declares
a dividend payable in shares of Common Stock, Holder shall be entitled to
receive upon exercise of the Warrant, in addition to the number of shares of
Common Stock as to which the Warrant is exercised, such additional shares of
Common Stock as Holder would have received had the Warrant been exercised
immediately prior to such record date for the dividend. If the Company declares
a dividend of securities other than a dividend of Common Stock, Holder shall
thereafter be entitled to receive, in addition to the shares of Common Stock
receivable upon the exercise of such Warrants, such non-Common Stock dividend as
Holder would have received had the Warrant been exercised immediately prior to
such record date for the dividend. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this section 8.3. If the Company declares a
cash dividend the Holder shall not be entitled to receive any such dividend.
8.4 Definition of Common Stock. For the purpose of this
Agreement, the term Common Stock shall mean the following:
(a) the class of stock designated as Common
Stock in the Articles of Incorporation of the Company as may be amended, or any
other class of stock resulting from successive changes or reclassifications of
such Common Stock; and
(b) if, as a result of an adjustment made pursuant to
section 8, Holder shall upon
exercise of the Warrants become entitled to receive securities other than Common
Stock, wherever appropriate, all references herein to shares of Common Stock
shall be deemed to refer to and include such other securities and thereafter the
number of such other securities shall be subject to adjustment from time to time
in a manner and upon terms as nearly equivalent as practicable to the provisions
of this section 8.
<PAGE>
9. Issuance of New Warrant Certificate. Upon receipt by the
Company of evidence reasonably satisfactory to it of a loss, theft, destruction
or mutilation of a Warrant Certificate, reimbursement by Holder to the Company
of all incidental expenses and, in the case of loss, theft or destruction,
receipt of indemnity or security from Holder reasonably satisfactory to it, or,
in the case of a mutilated Warrant Certificate, upon surrender and cancellation
thereof the Company shall make and deliver a replacement Warrant Certificate to
Holder.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants. The Company shall have the option to
make payment in cash in respect of any fractional shares or to round any
fraction up to the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities. The Company shall
at all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price by Holder, all shares of Common Stock issuable
upon such exercise shall be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. The Company shall
use its best efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants to be listed (subject to official notice of issuance)
on all securities exchanges, if any, on which the Common Stock may then be
listed and/or quoted.
12. Representations and Warranties of Holder. Holder
represents and warrants to the Company that it is an accredited investor, as
defined in Section 501 of Regulations under the Securities Act, the Warrants are
being acquired solely for Holder's own account, for investment, and not with a
view to resale, distribution, assignment, subdivision or fractionalization
thereof, and Holder has no present plans to enter into any contract,
undertaking, agreement or arrangement for such purpose.
<PAGE>
13. Notice to Warrant Holder. Nothing contained in this
Warrant Agreement shall be construed as conferring upon Holder, by virtue of
holding the Warrants, the right to vote, consent or receive notice as a
stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights as a stockholder of the
Company. If, however, at any time prior to the expiration of the Warrants and
their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment (which treatment shall be in accordance
with generally accepted accounting principles) of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchange for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation, winding up, transfer,
consolidation, or merger) or a sale of all or substantially all its property,
assets and business as an entirety shall be proposed;
<PAGE>
the Company shall give notice of such event at least 15 days prior to the date
fixed as a record date or the date of the closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such notice
shall specify such record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein shall not affect
the validity of any action taken in connection with the declaration or payment
of any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
14. Notices. Any notice or demand pursuant to this Warrant
Agreement shall be in writing and shall be deemed sufficiently given or made (a)
upon personal delivery; (b) the day following delivery to a reputable overnight
courier or (c) three days following mailing by certified or registered mail,
return receipt requested, postage prepaid, and addressed, until the other party
is notified of another address, as follows:
If to the Company:
Neurocrine Biosciences, Inc.
3050 Science Park
San Diego, California 42121
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Michael O'Donnell, Esq.
If to Holder:
Stephen L. Ross
c/o Aurora Capital Corp.
425 Park Avenue
New York, New York 10022-3506
15. Supplements and Amendments. This Warrant Agreement may be
amended or waived at any time but only by written agreement of the parties.
<PAGE>
16. Successors. All the covenants and provisions of this
Warrant Agreement shall be binding upon and inure to the benefit of the Company,
Holder and their respective successors and assigns hereunder.
17. Governing Law; Submission to Jurisdiction. (a) This
Warrant Agreement and each Warrant Certificate issued hereunder shall be deemed
to be a contract made under the laws of Delaware without giving effect to rules
governing conflicts of law.
(b) Any process or summons to be served upon either the
Company or Holder (at the option of the party bringing such action, proceeding
or claim) may be served in accordance with section 14. The prevailing party in
any such action or proceeding shall be entitled to recover from the other party
all its reasonable legal costs and expenses incurred in connection with such
action or proceeding
18. Entire Agreement; Modification. This Warrant Agreement
contains the entire understanding between the parties with respect to the
subject matter hereof and may not be modified or amended except by both parties.
19. Severability. If any provision of this Warrant Agreement
is held to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision hereof.
20. Captions. The caption headings of the sections of this
Warrant Agreement are for convenience of reference only, are not a part of this
Warrant Agreement and shall be given no substantive effect.
21. Benefits of this Warrant Agreement. Nothing in this
Warrant Agreement shall be construed to give to any person or entity other than
the Company and Holder any legal or equitable right, remedy or claim hereunder;
and this Warrant Agreement shall be for the sole and exclusive benefit of the
Company and Holder.
22. Counterparts. This Warrant Agreement may be executed in
any number of counterparts and each of such counterparts shall be deemed to be
an original, and such counterparts shall together constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the date first set forth above.
/s/ Stephen L. Ross
Neurocrine Biosciences, Inc.
/s/ Gary Lyons
President and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10643
<SECURITIES> 54556
<RECEIVABLES> 921
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 66545
<PP&E> 13541
<DEPRECIATION> 3688
<TOTAL-ASSETS> 83536
<CURRENT-LIABILITIES> 3406
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 78406
<TOTAL-LIABILITY-AND-EQUITY> 83536
<SALES> 0
<TOTAL-REVENUES> 6427
<CGS> 0
<TOTAL-COSTS> 18285
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> (9161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9161)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> (.51)
</TABLE>
