U.S. Securities and Exchange Commission
Washington, D.C. 2054
FORM 10-QSB/A
(Amendment No. 5)
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-25828
Electropharmacology, Inc.
-------------------------
Exact name of small business issuer as specified in its charter
Delaware 95-4315412
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12085 Research Drive, Alachua, Florida 32615
--------------------------------------------
(Address of principal executive offices)
(904) 462-2249
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Number of Shares Outstanding
Class On September 30, 1998
----- ---------------------
Common Stock, $ .01 par value 12,505,485
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE>
The following exhibits are hereby amended:
Part II. Item 2. Exhibits and Reports on Form 8-K
Exhibit
Number Description of Exhibit
- ------ ----------------------
10.2 Memorandum to Arup Sen from Electropharamaoclogy, Inc.("Epi")
Board of Directors, dated August 25, 1998, regarding terms of
employment
10.3 Memorandum to David Saloff from EPi Board of Directors, dated
August 25, 1998 regarding terms of employment
10.7 Securities Purchase Agreement between EPi and Elan International
Services, Ltd. dated September 30, 1998 /*/
10.8 License Agreement between EPi and Elan Pharma Internation dated
September 30, 1998 /*/
- --------
/*/ Confidential portions of this Exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
SIGNATURES
In accordance with 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 authorized.
ELECTROPHARMACOLOGY, INC.
Registrant
Dated January 26, 2000 /s/ Arup Sen
--------------------------------------
Arup Sen
President and Chief Executive Officer
Dated January 26, 2000 /s/ Arup Sen
--------------------------------------
Arup Sen
Acting Chief Financial Officer
Exhibit 10.2
From: The Board of Directors
To: Arup Sen, Chairman and Chief Executive Officer
The following summarizes, in general terms, your compensation package
and incentives for your employment as Chief Executive Officer of
Electropharmacology, Inc. following the successful completion of the recent
corporate reorganization.
1. Annual base compensation:
-------------------------
Initial (as of September 1, 1998) $130,000
Upon closing of Elan transaction 150,000
Upon closing of a total $4MM(+) financing 160,000
Upon achieving $2.0MM(+) in annual revenue 170,000
Upon closing of a total $10MM(+) financing 180,000
Upon achieving $5.0MM(+) in annual revenue 200,000
2. Stock Option Vesting:
---------------------
Total granted 500,000 shares pursuant to the EPi Stock Option Plan
(exercise price is EPi common stock price at close of trading on August 25,
1998; term of exercise - 10 years from date of grant) and subject to approval by
the new Board of Directors:
Successful conclusion of reorganization 75,000 shares
Closing of Elan transaction 100,000 shares
Annual revenue of $2MM(+) 50,000 shares
First anniversary of employment 25,000 shares
Milestones to be set by the Board of Directors 250,000 shares
3. One time Bonuses: Cash and/or Stock - At the sole discretion of the
Board.
4. Miscellaneous: All standard employee benefits, incl. disability and
four weeks paid vacation per year; maximum carryover of vacation - two weeks.
In the event that your employment is terminated without "cause" before
three years, a severance of six months' base salary subject to your mitigation
of such payment by diligently seeking other employment. All stock options vest
immediately and will remain exercisable for the original term of exercise (10
years from date of grant) in the event your employment is terminated (a) due to
an acquisition by or merger with a third party not recommended and/or approved
by you or (b) without "cause".
For Epi: /s/ For HTD: /s/
----------------------------- -----------------------------
By: By:
----------------------------------- -----------------------------------
Murray Feldman Richard K. Kneipper
For Gemini: /s/
--------------------------
By:
----------------------------------
Dr. Krishna Jayaraman
Exhibit 10.3
David Saloff, Executive Vice President - Sales and Marketing
Electropharmacology, Inc.
2301 NW 33rd Court; Suite 102
Pompano Beach, Florida 33069
The following summarizes your compensation package and incentives for your
employment as Executive Vice President - Sales and Marketing of
Electropharmacology, Inc. (as reorganized recently), effective as of August 25,
1998. Your previous employment contract is terminated by mutual agreement. Your
compensation will, as shown below, be dependent on revenues of the Gemini
Biotech Division.
1. Annual base compensation:
-- -------------------------
Initial (effective September 1, 1998) $ 80,000
Completion of 6 months or achieving $1MM annual revenue 100,000
Achieving $2MM annual revenue 110,000
Annual revenue will be calculated by annualizing based on prior six
months' revenues.
2. Override on Sales revenue:
-- --------------------------
Starting on month 7 or achieving $1MM annualized revenue run rate: 2.5%
on first $0.5MM, 3.0% on the next $1.0MM and 3.25% on amounts over $1.5MM; the
override amounts will be paid on the 15th day of the month for the prior month
based on the annualized rate calculated based on the revenue of said month. Once
your aggregate annual compensation equals or exceeds $200,000, you and the
Company agree to negotiate a new, mutually agreeable compensation arrangement.
3. Stock Option:
-- -------------
Total grant 200,000 shares, pursuant to EPi Stock Option Plan (exercise
price is Epi common stock price at close of trading day on August 25, 1998; term
of exercise - 10 years from date of grant) and subject to approval by the new
Board of Directors:
|> Vesting at 20% per year starting with first anniversary of the
grant date over five years.
|> Vesting will accelerate based on sales revenue growth as
follows: achieving $1MM annual revenue 25%, achieving $2MM
annual revenue, additional 25%, achieving $5MM annual revenue,
remaining 50% (revenue excludes those through business
acquisition/merger).
|> Vesting will accelerate (at a rate to be determined by the
Board of Directors) in the event the Company successfully
demonstrates that PEMS facilitates cell regeneration for wound
healing and based upon such demonstration, the Company pursues
a product approval in the US or in a major country in Europe
or in Japan
|> Vesting will accelerate (at a rate to be determined by the
Board of Directors) in the event that EPi receives warrants
from ADM Tronics as set forth in the Asset Purchase Agreement
1. One time Bonuses: Cash and/or Stock: at the discretion of the
Board
<PAGE>
2. Miscellaneous:
-- --------------
You are entitled to all standard employee benefits, incl. disability
and four weeks paid vacation per year; maximum carryover of vacation - two
weeks.
In the event that your employment is terminated without "cause" before
18 months, a severance equal to compensation for the prior six months. The
severance payment is subject to your mitigation of such payment by diligently
seeking other employment unless: (i) you have not been given notice of
termination at least three months prior to the end of the 18-month period and
(ii) Dr. Sen is no longer serving as the Company's Chief Executive Officer at
such time. All stock options vest immediately and will remain exercisable for
the original term of exercise (10 years from date of grant) in the event
employment is terminated (a) due to acquisition by or merger with a third party
not recommended and/or approved by you or (b) without "cause".
Sincerely,
Accepted and Agreed:
/s/
Arup Sen, PhD /s/ Richard K Kneipper
Chairman & CEO ---------------------------------------
for HTD: Richard K Kneipper
/s/ Krishna Jayaraman
---------------------------------------
for Gemini: Dr. Krishna Jayaraman
/s/ David Saloff
---------------------------------------
David Saloff
Exhibit 10.7
For Execution
SECURITIES PURCHASE AGREEMENT /*/
SECURITIES PURCHASE AGREEMENT dated as of September 30, 1998, between
Elan International Services, Ltd., a Bermuda corporation ("EIS"), and
Electropharmacology, Inc., a Delaware corporation (together with all
subsidiaries thereof, the "Company").
R E C I T A L S:
A. The Company desires to issue and sell to EIS, and EIS
desires to purchase from the Company, as provided herein (i) 7,500 shares of
convertible preferred stock (the "Preferred Stock"), with the designations,
rights and preferences as set forth in the certificate of designations (the
"Certificate of Designations") in the form attached hereto as Exhibit A, and
(ii) a warrant to acquire up to 1,000,000 shares (subject to adjustment) of the
Company's common stock, par value $ .01 per share (the "Common Stock"), at an
exercise price of $2.50 per share, in the form attached hereto as Exhibit B (the
"Warrant"), for aggregate consideration of $7,500,000 (the "Initial Funding").
B. During the 60 day period immediately following the Initial
Closing Date (the "Placement Period"), the Company shall undertake to privately
place up to $4,000,000 of Common Stock (the "Third Party Placement"), and, in
addition, EIS shall purchase from the Company a certain number of shares of
Common Stock (the "Subsequent Common Stock"; together with the Preferred Stock
and the Warrant, the "Securities") for aggregate consideration of $2,000,000
(the "Subsequent Funding").
C. The Company and EIS are executing and delivering on the
date hereof a Registration Rights Agreement in the form attached hereto as
Exhibit C (the "Registration Rights Agreement"; together with this Agreement,
the Certificate of Designations, the Warrant, and each other document or
instrument executed and delivered in connection with the transactions
contemplated hereby, the "Transaction Documents") in respect of the shares of
Common Stock, if any, issuable upon conversion of the Preferred Stock or upon
exercise of the Warrant, and the Subsequent Common Stock, and any other Common
Stock that may at any time be acquired or owned by EIS or any of its affiliates.
/*/ Confidential portions of this Exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934 as amended.
<PAGE>
A G R E E M E N T:
The parties agree as follows:
SECTION 1. Closings. (a) Initial Closing. The closing of the
Initial Funding (the "Initial Closing") shall occur on the date hereof (the
"Initial Closing Date"), at such place as the parties may agree.
(b) Subsequent Closing. The closing of the Subsequent Funding
(the "Subsequent Closing Date") shall occur, if at all, on the 60th day
following the Initial Closing Date, or if such date is not a business day, the
following business date, or on such other date as the parties may agree;
provided, that the Company shall have provided written notice of its intention
to issue and sell the Subsequent Common Stock to EIS, which notice shall be
delivered to EIS prior to the expiration of the Placement Period.
(c) Initial Issuance of Securities. At the Initial Closing,
subject to the terms and conditions herein, the Company shall issue and sell to
EIS, and EIS shall purchase from the Company, (i) the Preferred Stock and (ii)
the Warrant, for an aggregate purchase price of $7,500,000.
(d) Initial Delivery. At the Initial Closing, EIS shall pay
the purchase price for the Preferred Stock and the Warrant to an account
designated by the Company, and the parties hereto shall execute and deliver to
each other, as applicable, (i) certificates in respect of the shares of
Preferred Stock, (ii) the Warrant, (iii) certificates as to the incumbency of
the officers of the Company executing this Agreement and (iv) any other
documents or instruments executed in connection herewith. In addition, at the
Initial Closing, the Company shall cause to be delivered to EIS an opinion of
counsel in connection with the issuance of the Preferred Stock and the Warrant
in form attached hereto as Exhibit D.
(e) Subsequent Delivery. At the Subsequent Closing, if it
shall occur, EIS shall pay the purchase price for the Subsequent Common Stock to
an account designated by the Company, and the parties hereto shall execute and
deliver to each other, as applicable, (i) certificates in respect of the number
of shares of Subsequent Common Stock as determined in accordance with Section 2
hereof and (iii) any other documents or instruments to be executed in connection
therewith. In addition, the Company shall cause to be delivered to EIS an
opinion of counsel in connection with the issuance of the Subsequent Common
Stock in a form reasonably acceptable to EIS.
(f) Exemption from Registration. The Securities will be issued
under an exemption or exemptions from registration under the Securities Act of
1933, as amended (the "Securities Act"); accordingly, the certificates
evidencing any shares of Common Stock issuable hereunder or upon the exercise or
repayment of any of the Securities shall contain the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. WITHOUT SUCH REGISTRATION, NO TRANSFER OF THESE SHARES OR
ANY INTEREST THEREIN MAY BE MADE UNLESS THE CORPORATION HAS RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION THAT SUCH
TRANSFER DOES NOT REQUIRE SUCH REGISTRATION.
(g) Registration Rights Agreement. On the date hereof, each of
the Company and EIS is executing and delivering the Registration Rights
Agreement, covering the resale by EIS of the Common Stock issuable hereunder
upon conversion of the Preferred Stock, exercise of the Warrant, issuance of the
Subsequent Common Stock and the issuance of any Common Stock hereinafter
acquired by EIS or any affiliate thereof.
SECTION 2. Subsequent Funding. (a) Subsequent Issuance of
Securities. On the Subsequent Closing Date, if the Subsequent Funding shall
occur, the Company shall issue and sell to EIS, and EIS shall purchase from the
Company, $2,000,000 of the Subsequent Common Stock, in accordance with Section
2(b) below, subject to the conditions contained herein.
(b) Subsequent Common Stock. (i) On the Subsequent Closing
Date, the Company shall issue and sell to EIS, and EIS shall purchase from the
Company, a number of shares of Common Stock equal to the quotient obtained by
dividing $2,000,000 by an amount equal to either (A) the price per share of
Common Stock to investors in the Third Party Placement, or (B) in the event that
the Third Party Placement shall not have been consummated on or before the last
day of the Placement Period, the average closing price of the Common Stock as
reported on its principal trading exchange for the 20 consecutive trading days
ending on the day which is two trading days prior to the Subsequent Closing Date
(the "Market Price").
(ii) In the event that the Company shall consummate
a private placement of Common Stock (or securities exchangeable, exercisable or
convertible into Common Stock) within six months after the Subsequent Closing
Date, at a price per share below the price per share of Common Stock to EIS in
respect of the Subsequent Funding, the Company shall issue a number of
additional shares of Common Stock to EIS in an amount equal to the difference
between (A) the number of shares of Common Stock purchased by EIS in the
Subsequent Funding (as determined in accordance with subsection (b)(i) above),
and (X) the quotient obtained by dividing $2,000,000 by the price to a third
party in such private placement.
(iii) Notwithstanding anything contained herein,
whether or not the Third Party Placement has been consummated, in no event shall
the purchase price of Subsequent
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Common Stock referred to in clause (i) above exceed $1.375 per share.
(c) Conditions to the Subsequent Funding. It shall be a
condition to EIS's obligation to purchase securities in the Subsequent Funding
after receiving the Company's notice, issued pursuant to Section 1(b) hereof,
that (i) each of the representations and warranties set forth in Section 3(a),
(b)(iii), (c), (d), (e), (f), (g), (h), (i) and (l) hereof shall be true and
correct in all material respects on the Initial Closing Date and the Subsequent
Closing Date; provided, that each reference to the Quarterly Report in such
Sections shall refer to the most recent quarterly report on Form 10-Q and each
report filed pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), required to be filed by the Company under
applicable law immediately prior to such Subsequent Closing Date and date of
Notice and SEC Filings shall refer to all filings required to be made by the
Company under applicable law on or prior to such dates, (ii) there shall be no
default or breach in any material respect by the Company of a material
obligation under any of the Transaction Documents or any other agreement between
the Company, on the one hand, and EIS or any of its affiliates, on the other
hand and (iii) from the date hereof until the Subsequent Closing Date the
Company shall not have experienced a Material Adverse Effect (as defined below).
SECTION 3. Representations and Warranties of the Company. The
Company hereby represents and warrants to EIS as follows:
(a) Organization. (i) The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and lease its properties, to
carry on its business as presently conducted and as proposed to be conducted by
description in the Company's draft Registration Statement on Form S-1, including
the pro forma financial statements attached thereto (collectively, the "S-1",
which is intended to be initially filed with the U.S. Securities and Exchange
Commission (the "SEC") on or about October 15, 1998 in the form attached hereto
as Exhibit E), and to consummate the transactions contemplated by the
Transaction Documents. The Company is qualified and in good standing to do
business in jurisdictions set forth on Schedule 3(a), which constitute all of
the jurisdictions in which the nature of the business conducted or the property
owned by it requires such qualification, except where the failure to so qualify
would not reasonably be expected to have a material adverse effect on the
business, prospects, properties or condition (financial or otherwise) of the
Company (a "Material Adverse Effect").
(ii) In the event that the S-1 as filed with, and declared
effective by, the SEC shall contain material differences from Exhibit E,
indicating a Material Adverse Effect or causing a breach of a representation,
warranty or covenant contained herein, which shall result in money damages to
EIS, then EIS shall submit a claim to the Company in the amount of such damages
pursuant to Section 6 hereof.
(b) Capitalization. (i) As of August 31, 1998, the authorized
capital stock of the Company consisted of (A) 30,000,000 shares of Common Stock,
par value $.01 per share, of
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which 12,750,303 were issued and outstanding and (B) 10,000,000 shares of
Preferred Stock, par value $.01 per share, none of which were issued and
outstanding.
(ii) Except as set forth in Schedule 3(b), as of the date
hereof there are no options, warrants or other rights outstanding to purchase or
otherwise acquire, or any securities exchangeable or convertible into or
exercisable for, any of the Company's authorized capital stock. Other than as
set forth on Schedule 3(b), there are no agreements, arrangements or
understandings concerning the voting, acquisition or disposition of any of the
Company's outstanding securities, and, other than as set forth in Schedule 3(b)
or in the Registration Rights Agreement, there are no agreements to register any
of the Company's outstanding securities under the U.S. federal securities acts
relating to securities that have not already been registered under the
Securities Act.
(iii) All of the outstanding shares of capital stock of the
Company have been issued in accordance with applicable state and federal laws
and regulations governing the issuance, sale and purchase of securities, all of
such shares of have duly and validly issued and are fully paid and
non-assessable, and none of such shares carries pre-emptive or similar rights.
(c) Authorization of Transaction Documents. The Company has
full corporate power and authority to execute and deliver this Agreement and
each of the other Transaction Documents, and to perform its obligations
hereunder and thereunder. The execution, delivery and performance by the Company
of the Transaction Documents (including the issuance and sale of the Securities)
have been authorized by all requisite corporate actions by the Company; and the
Transaction Documents, including the issuance and sale of the Securities, have
been duly executed and delivered by the Company and are the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms. The Securities, when issued, will be duly and validly
issued, not subject to any pre-emptive or similar rights. The transactions
contemplated hereby, to the best of the Company's knowledge, will vest in EIS
legal and valid title to the Securities.
(d) No Violation. The execution, delivery and performance by
the Company of the Transaction Documents, including the issuance and sale of the
Securities, and compliance with the provisions thereof, will not (i) violate any
provision of applicable law, statute, rule or regulation applicable to the
Company, or any ruling, writ, injunction, order, judgment or decree of any
court, arbitrator, administrative agency or other governmental body applicable
to the Company or any of its properties or assets or (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of, or
constitute (with notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, or result in the
creation of, any Encumbrance (as defined below) upon any of the properties or
assets of the Company under its Certificate of Incorporation, as amended, or
By-laws, or any material contract to which the Company is a party, except where
such violation, conflict, breach or default would not, individually or in the
aggregate, have a Material Adverse Effect. As used herein, "Encumbrance" shall
mean any liens, charges, encumbrances, equities, claims, options, proxies,
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pledges, security interests, or other similar rights of any nature, except for
such violations, conflicts, breaches or defaults which would not, individually
or in the aggregate, have a Material Adverse Effect.
(e) Approvals. Except as set forth on Schedule 3(e), no
material permit, authorization, consent or approval of or by, or any
notification of or filing with, any person or entity (governmental or otherwise)
is required in connection with the execution, delivery or performance of the
Transaction Documents, including the issuance and sale of the Securities, by the
Company. There is no approval of the Company's stockholders required under
applicable laws in connection with the execution and delivery the Transaction
Documents or the consummation of the transactions contemplated thereby,
including the issuance of the Securities.
(f) Filings, Taxes and Financial Statements. (i) The Company
has filed its annual report on Form 10-K for the year ended December 31, 1997
(the "Annual Report"), its related proxy materials and the quarterly report on
Form 10-Q for the quarter ended June 30, 1998 (the "Quarterly Report," together
with the Annual Report, including all exhibits and schedules required to be
filed in connection therewith, the "SEC Filings") with the Securities and
Exchange Commission, and any other required person or entity (governmental or
otherwise) in a timely manner and as otherwise required by applicable laws and
regulations, including the federal securities acts. The audited financial
statements of the Company for the fiscal year ended December 31, 1997 included
in the Annual Report (the "Audited Financial Statements"), and the Company's
unaudited balance sheet for the period ended June 30, 1998, together with the
accompanying statements of operations and cash flows including the notes thereto
included in the Quarterly Report (the "June Financial Statements"; collectively,
with the Audited Financial Statements, the "Financial Statements") are accurate
and complete in all material respects and fairly present the financial condition
of the Company as of the dates thereof and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be otherwise indicated in such
financial statements or the notes thereto), subject, in the case of the June
Financial Statements, to normal year-end audit adjustments (which shall not be
material in the aggregate) and the absence of footnote disclosures.
(ii) The Company has filed in a timely manner all federal,
state, local and foreign tax returns, reports and filings (collectively,
"Returns"), including income, franchise, property and other taxes, and has paid
or accrued the appropriate amounts reflected on such Returns. None of the
Returns have been audited or challenged, nor has the Company received any notice
of challenge nor have any of the amounts or other data included in the Returns
been challenged or reviewed by any governmental authority.
(iii) Except as set forth on Schedule 3(f), which sets forth a
true and accurate list and description of any employee benefit plans maintained
or sponsored by the Company or to which the Company is required to make
contributions, the Company does not maintain or sponsor, and is not required to
make contributions to or otherwise have any liability with respect
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to, any pension, profit sharing, thrift or other retirement plan, employee stock
ownership plan, deferred compensation, stock ownership, stock purchase,
performance share, bonus or other incentive plan, severance plan, health or
group insurance plan, welfare plan, or other similar plan, agreement, policy or
understanding (whether written or oral), whether or not such plan is intended to
be qualified under Section 401(a) of the Code, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, which
plan covers any employee or former employee of the Company.
(g) Absence of Changes. Except as set forth on Schedule 3(g),
since June 30, 1998, there has not been (a) any material adverse change in the
business, properties, condition (financial or otherwise), operations or
prospects of the Company; (b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the business,
properties, condition (financial or otherwise), operations or prospects of the
Company; (C) any declaration, setting aside or payment of any dividend or other
distribution or payment (whether in cash, stock or property) in respect of the
capital stock of the Company, or any redemption or other acquisition of such
stock by the Company; (d) any disposal or lapse of any trade secret, invention,
patent, trademark, trademark registration, service mark, service mark
registration, copyright, copyright registration, or any application therefor or
filing in respect thereof that had a Material Adverse Effect; (e) loss of the
services of any of the key officers or key employees of the Company that had a
Material Adverse Effect; (f) any incurrence of or entry into any liability,
mortgage, lien, commitment or transaction, including without limitation, any
borrowing (or assumption or guarantee thereof) or guarantee of a third party's
obligations, or capital expenditure (or lease in the nature of a conditional
purchase of capital equipment) in excess of $50,000; or (g) any material change
by the Company in accounting methods or principles or (h) any change in the
assets, liabilities, condition (financial or otherwise), results or operations
or prospects of the Company from those reflected on the Quarterly Report, except
changes in the ordinary course of business that have not, individually or in the
aggregate, had a Material Adverse Effect.
(h) No Liabilities. Except as set forth on Schedule 3(h),
since June 30, 1998 the Company has not incurred or suffered any liability or
obligation, matured or unmatured, contingent or otherwise, except in the
ordinary course of business that have not, individually or in the aggregate, had
a Material Adverse Effect.
(i) Properties and Assets; Etc. (i) The Company does not own
any interest in real property other than leasehold interests, and (ii) the
Company owns or has the right to use pursuant to license, sub-license, agreement
or permission all patents, trademarks, know-how and other intellectual property
(the "Proprietary Rights"), material to the business and operations of the
Company as presently conducted. Except as set forth on Schedule 3(i)(ii), or
where the absence of which would not have a Material Adverse Effect, (A) the
Company is the sole and exclusive owner of all right, title and interest in an
to all Proprietary Rights free and clear of all liens, claims, charges,
equities, rights of use, encumbrances and restrictions whatsoever, (B) the
Company does not have knowledge of any basis for any claim of infringement or
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misappropriation contesting the validity or Company's right to use any
Proprietary Rights; (C) all of such Proprietary Rights, whether foreign or
domestic, have been duly issued and have not been canceled, abandoned, or
otherwise terminated; and (D) all of the Company's patent applications,
trademark applications, service mark applications, trade name applications and
copyright applications have been duly filed.
(ii) Each of the Contracts listed as an exhibit to the
Company's Annual Report is a legal and valid agreement binding upon each of the
parties thereto and is in full force and effect except where the expiration or
termination has not, individually or in the aggregate, had a Material Adverse
Effect. To the best knowledge of the Company, there is no breach or default by
any party thereunder that had a Material Adverse Effect. Such Contracts
constitute all material agreements, arrangements or understandings required to
be included as an exhibit in such reports under Item 601 of the Securities and
Exchange Commission Regulations.
(iii) The Company has and maintains adequate and sufficient
insurance, including liability, casualty and products liability insurance,
covering risks associated with its business, properties and assets, including
insurance that is customary for companies similarly situated.
(iv) The Company, its business and properties and assets are
in compliance, in all material respects, with all applicable laws and
regulations, including without limitation, those relating to (a) health, safety
and employee relations, (b) environmental matters, including the discharge of
any hazardous or potentially hazardous materials into the environment, and (c)
the development, commercialization and sale of pharmaceutical and biotechnology
products, including all applicable regulations of the U.S. Food and Drug
Administration and comparable foreign regulatory authorities.
(j) Legal Proceedings, etc. Except as set forth on Schedule
3(j), there is no legal, administrative, arbitration or other action or
proceeding or governmental investigation pending or, to the best of the
Company's knowledge, threatened against the Company, or any director, officer or
employee of the Company, which is required to be described in the SEC Filings
and is not so described. The Company is not in violation of or default under,
any material laws, judgments, injunctions, orders or decrees of any court,
governmental department, commission, agency, instrumentality or arbitrator
applicable to its business.
(k) Disclosure. The Company's Annual Report and periodic
reports subsequently filed under Section 13 of the Exchange Act, the S-1 when
filed and the representations and warranties set forth herein and the other
Transaction Documents, when viewed collectively, do not, or will not, as
applicable, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein and therein not
misleading in light of circumstances in which they were made.
(l) Reliance on Representations. The Company hereby
acknowledges that it is relying exclusively on the representations and
warranties of EIS contained herein and in the other
8
<PAGE>
Transaction Documents, and on no other documents or assurances.
(m) Brokers or Finders. Except as set forth on Schedule 3(1),
the Company has not retained any investment banker, broker or finder in
connection with the transactions contemplated by the Transaction Documents.
SECTION 4. Representation and Warranties of EIS. EIS hereby
represents and warrants to the Company as follows:
(a) Organization. EIS is a corporation duly organized, validly
existing and in good standing under the laws of Bermuda and has all requisite
corporate power and authority to own and lease its properties, to carry on its
business as presently conducted and as proposed to be conducted and to
consummate the transactions contemplated hereby. EIS is qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted or the property owned by it requires such qualification, except where
the failure to so qualify would not reasonably be expected to have a Material
Adverse Effect.
(b) Authorization of Agreement. EIS has full legal right,
power and authority to enter into this Agreement and purchase and accept the
Securities, and perform its obligations hereunder. The execution, delivery and
performance by EIS of this Agreement (including the purchase of Securities) have
been duly authorized by all requisite corporate action by EIS, and this
Agreement and the purchase of the Securities are the valid and binding
obligations of EIS, enforceable against it in accordance with their terms.
(c) No Conflicts. The execution, delivery and performance by
EIS of this Agreement, the purchase and acceptance of the Securities, and
compliance with provisions hereof by EIS, will not (i) violate any provisions of
applicable law, statute, rule or regulation applicable to EIS or any ruling,
writ, injunction, order, judgment or decree of any court, arbitrator,
administrative agency of other governmental body applicable to EIS or any of its
properties or assets or (ii) conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute (with notice or lapse of time
or both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of, any Encumbrance upon any of
the properties or assets of EIS under the Articles of Association or by-laws of
EIS or any material contract to which EIS is a party, except where such
violation, conflict, breach or default would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) Approvals. No permit, authorization, consents or approval
of or by, or any notification of or filing with, any person or entity
(governmental or otherwise) is required in connection with the execution,
delivery or performance of this Agreement by EIS (including the purchase of the
Securities).
(e) Investment Representations. (i) EIS has not been formed
solely for the purpose of entering into the transactions described herein and is
acquiring the Securities for
9
<PAGE>
investment for its own account, not as a nominee or agent, and not with the view
to, or for sale in connection with, any distribution of any part thereof;
provided, that EIS shall be permitted to exercise or transfer such Securities as
permitted herein and under applicable law.
(ii) Nothing contained in this Section 4(e) shall limit any of
the Company's representations or warranties or limit EIS's recourse in respect
thereof.
(iii) EIS has not retained any investment banker, broker or
finder in connection with the transactions contemplated by the Transaction
Documents.
SECTION 5. Covenants of the Company. (a) Non-disclosure. From
and after the date hereof, the Company shall not disclose to any person or
entity, (i) other than its directors, officers, accountants and agents who need
to know such information in connection with the transactions described herein in
and the other Transaction Documents, and (ii) investors and potential investors
in the Third Party Placement, each of whom shall be informed of this
confidentiality provision and in respect of whose breaches the Company shall be
responsible, the content of this Agreement or any of the other Transaction
Documents or the substance of the transactions described herein, without the
prior written consent of EIS (which consent shall not be unreasonably withheld
or delayed), except to the extent required by applicable laws, regulations or
administrative or judicial processes in respect of press releases, periodic
reports or other public disclosure prepared in good faith by the Company;
provided, that the Company shall provide EIS with a reasonable opportunity to
review such releases or reports prior to release. This Section 5 shall not be
construed to prohibit disclosure of any information which has not been
previously determined to be confidential by EIS, or which shall have become
publicly disclosed (other than by breach of the Company's obligations
hereunder).
(b) Board of Directors. (i) Upon the Initial Closing Date, the
Company shall take any and all actions necessary, including, without limitation,
amending its by-laws and certificate of incorporation, to increase the size of
its board of directors by one, and the vacancy thereby created shall be filled
by a designee of EIS (the "EIS Director"), who shall be reasonably satisfactory
to the Company in character and business experience.
(ii) For as long as EIS shall own 5% or more, on a
fully diluted basis (i.e., assuming conversion of the Preferred Stock, and
exercise of the Warrant, but not the conversion, exercise or exchange of any
other similar security), the Company shall cause the EIS Director to be included
on its management slate of directors presented to stockholders at any meeting at
which directors shall be elected.
(c) Fully-diluted Stock Ownership. Notwithstanding any other
provision of this Agreement, in the event that EIS shall determine, upon written
advice from its accounting and tax consultants which shall be confirmed in
writing to the Company, that at any time it (together with its affiliates, if
applicable) holds or has the right to receive Common Stock (or securities or
rights, options or warrants exercisable, exchangeable or convertible for or into
Common Stock)
10
<PAGE>
representing in the aggregate in excess of 19.9% of the Company's outstanding
voting securities (assuming any such exercise, exchange or conversion, but not
the exercise, exchange or conversion of any other similar securities), or
otherwise be required to equity account for or consolidate its investment in the
Company, then EIS shall have the right, in its sole discretion, to convert some
amount of such holdings into non-voting securities, such that EIS shall not be
required to equity account for or consolidate its investment in the Company. In
the event that EIS shall undertake to exercise its right as described in this
Section 5(c), EIS shall retain the additional right to exchange such new class
of equity security for voting securities of the Company, at its option.
(d) Use of Proceeds. The Company shall use the proceeds of the
Initial Funding for general working capital purposes. The Company shall use at
least [omitted] of the proceeds of the Subsequent Funding solely to fund
research and development activities relating to certain intellectual property
and products relating to a combined electromagnetic/iontophoretic patch.
SECTION 6. Survival and Indemnification. (a) Survival Period.
The representations and warranties of the Company contained herein shall survive
for a period of three years from and after the date hereof.
(b) Indemnification. In addition to all rights and remedies
available to each of the parties hereto hereunder at law or in equity, the
Company or EIS, as applicable (in such capacity, an "Indemnifying Party") shall
indemnify the other party hereto, any affiliate of such other party, and their
respective stockholders, officers, directors, employees, agents,
representatives, successors and assigns (collectively, the "Indemnified
Person"), and save and hold each Indemnified Person harmless from and against
and pay on behalf of or reimburse each such Indemnified Person, as and when
incurred, for any and all loss, liability, demand, claim, action, judgment,
cause of action, cost, damage, deficiency, tax, penalty, fine or expense,
whether or not arising out of any claims by or on behalf of such Indemnified
Person or any third party, including interest, penalties, reasonable attorneys'
fees and expenses and all reasonable amounts paid in investigation, defense or
settlement of any of the foregoing (collectively, "Losses"), that any such
Indemnified Person may suffer, sustain incur or become subject to, as a result
of, in connection with, relating or incidental to or by virtue of:
(i) any misrepresentation or breach of any warranty
on the part of the Indemnifying Party under Section 3 of this Agreement; or
(ii) any nonfulfillment, default or breach of any
covenant, condition or agreement on the part of the Indemnifying Party contained
in this Agreement.
(c) Procedure. (i) If an Indemnified Person shall assert that
the Indemnifying Party has become obligated to the Indemnified Person pursuant
to Section 6(b) hereof, or if any suit, action, investigation, claim or
proceeding (each, a "Proceeding") is begun, made or instituted by a third party
as a result of which the Indemnifying Party may become obligated to
11
<PAGE>
the Indemnified Person hereunder, the Indemnified Person shall give written
notice to the Indemnifying Party.
(ii) The Indemnifying Party shall defend, contest or
otherwise protect the Indemnified Person in connection with any Proceeding at
the Indemnifying Party's sole cost and expense. The Indemnifying Party shall not
enter into any compromise or settlement of any Proceeding without the written
consent of the Indemnified Person, except if (X) there is no finding or
admission of any violation of federal, state, local, international or other
administrative order, law or ordinance, regulation or treaty, and there shall be
no effect on any other claims that may be made against the Indemnified Person,
(Y) the sole relief provided as a result of such compromise or settlement is
monetary damages that are paid in full by the Indemnifying Party, and (Z) the
Indemnified Person shall have no liability with respect to any compromise or
settlement of a Proceeding effected without its consent.
(iii) The Indemnified Person shall have the right,
but not the obligation, to participate at its own expense in the defense of any
Proceeding by counsel of its own choice, and shall make commercially reasonable
efforts to cooperate with and assist the Indemnifying Party in such defense.
(iv) In the event that the Indemnifying Party shall
fail to timely defend, contest or otherwise protect the Indemnified Person
against a Proceeding within a reasonable period after receipt of written notice
pursuant to Section 6(c)(i) hereof, the Indemnified Person shall have the right
to do so, including without limitation, the right to make any compromise or
settlement in respect of a Proceeding, and the Indemnified Person shall be
entitled to recover the entire cost thereof from the Indemnifying Party,
including, without limitation, reasonable attorney's fees and disbursements, and
reasonable amounts paid by the Indemnified Person as a result of a Proceeding,
and the Indemnifying Party shall be bound by any determination made in a
Proceeding, or compromise or settlement effected by the Indemnified Person.
(d) Maximum Recovery. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Company be liable for
indemnification under this Section 6, in an amount in excess of the sum of
[omitted] and any accrued and unpaid dividends on the Preferred Stock, in the
aggregate. No Indemnified Party shall assert any such claim unless Losses in
respect thereof incurred by any Indemnified Party, when aggregated with all
previous Losses indemnifiable hereunder, equal or exceed $50,000; thereafter,
each Indemnified Person shall be entitled to be indemnified for the full amount
of all damages previously unclaimed.
(e) Exception. Notwithstanding the foregoing, upon judicial
determination that is final and no longer appealable that the act or omission
giving rise to the indemnification set forth above resulted primarily out of or
was based primarily upon the Indemnified Person's negligence (unless such
Indemnified Person's negligence was based upon the Indemnified Person's reliance
in good faith upon any of the representations, warranties, covenants or promises
made by the Indemnifying Party herein) the Indemnifying Party shall not be
responsible
12
<PAGE>
for any Losses sought to be indemnified in connection therewith, and the
Indemnifying Party shall be entitled to recover from the Indemnified Persons all
amounts previously paid in full or partial satisfaction of such indemnity,
together with all costs and expenses (including reasonable attorney's fees) of
the Indemnifying Party reasonably incurred in connection with the Indemnified
Person's claim for indemnity, together with interest at the rate per annum
publicly announced by Morgan Guaranty Trust Company as its prime rate from the
time of payment of such amounts to the Indemnified Person until repayment to the
Indemnifying Party.
(f) Investigation. All indemnification rights hereunder shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 6(a) above,
irrespective of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Indemnified Persons or the acceptance of any
certificate or opinion.
(g) Contribution. If the indemnity provided for in this
Section 6 shall be, in whole or in part, unavailable to any Indemnified Person,
due to Section 6(b) being declared unenforceable by a court of competent
jurisdiction based upon reasons of public policy, so that Section 6(b) shall be
insufficient to hold each such Indemnified Person harmless from Losses which
would otherwise be indemnified hereunder, then the Indemnifying Party and the
Indemnified Person shall each contribute to the amount paid or payable for such
Loss in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Person on the other, but also the relative fault of the Indemnifying Party and
be in addition to any liability that the Indemnifying Party may otherwise have.
The indemnity, contribution and expense reimbursement obligations that the
Indemnifying Party has under this Section 6 shall survive the expiration of the
Transaction Documents. The parties hereto further agree that the indemnification
and reimbursement commitments set forth in this Agreement shall apply whether or
not the Indemnified Person is a formal part to any such lawsuit, claims or other
proceedings.
SECTION 7. Notices. All notices, demands and requests of any
kind to be delivered to any party in connection with this Agreement shall be in
writing and shall be deemed to have been duly given if personally or hand
delivered or if sent by an internationally-recognized overnight delivery or by
registered or certified airmail, return receipt requested and postage prepaid,
addressed as follows:
(i) if to the Company, to:
Electropharmacology, Inc.
1109 N.W. 13th Street
Gainesville, Florida 32601
Attention: Chief Executive Officer
13
<PAGE>
with a copy to:
Richard K. Kneipper
9030 Guernsey Lane
Dallas, Texas 75220
(ii) if to EIS, to:
Elan International Services, Ltd.
Flatts, Smiths Parish
Bermuda, FL04
Attention: Director
with a copy to:
Brock Silverstein McAuliffe LLC
153 East 53rd Street, 56th Floor
New York, New York 10022
Attention: David Robbins
or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 7. Any such notice or communication shall be deemed to have been
received (i) in the case of personal or hand delivery, on the date of such
delivery, (ii) in the case of an internationally-recognized overnight delivery
service, on the second business day after the date when sent and (iii) in the
case of mailing, on the fifth business day following that day on which the piece
of mail containing such communication is posted. Notice hereunder may be given
on behalf of the parties by their respective attorneys.
SECTION 8. Further Assurances. From and after the date hereof,
each of the parties hereto agree to do or cause to be done such further acts and
things and deliver or cause to be delivered to each other such additional
assignments, agreements, powers and instruments as each may reasonably require
or deem advisable to carry into effect the purposes of the Transaction Documents
or to better to assure and confirm unto each other their respective rights,
powers and remedies hereunder and thereunder.
SECTION 9. Entire Agreement. This Agreement and the other
Transaction Documents contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto.
SECTION 10. Amendments. This Agreement may not be modified or
amended, or any of the provisions hereof waived, except by written agreement of
the Company and EIS.
14
<PAGE>
SECTION 11. Counterparts and Facsimile. The Transaction
Documents may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement. Each of the Transaction
Documents may be signed and delivered to the other party by facsimile
transmission; such transmission shall be deemed a valid signature.
SECTION 12. Headings. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of the Agreement.
SECTION 13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of laws. Each of the parties hereby
irrevocably submits to the jurisdiction of any New York State or United States
Federal court sitting in the county, city and state of New York over any action
or proceeding arising out of or relating to this Agreement or the other
Transaction Documents; and each hereby waives the defense of an inconvenient
forum for the maintenance of such an action.
SECTION 14. Expenses. Each of the parties shall be responsible
for its own costs and expenses incurred in connection with the transactions
contemplated hereby and by the other Transaction Documents.
SECTION 15. Public Releases; Etc. The parties shall reasonably
agree upon the contents of any press release or releases and other public
disclosure in respect of the transactions contemplated hereby, and except as may
otherwise be required by applicable law or judicial or administrative process or
which the Company concludes in good faith is required by applicable securities
laws and regulations.
SECTION 16. Schedules, etc. All statements contained in any
exhibit or schedule delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated hereby, are an integral part of
this Agreement and shall be deemed representations and warranties hereunder.
SECTION 17. Assignments. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement,
the other Transaction Documents, and the Securities may be transferred by EIS to
affiliates and subsidiaries.
[Signature page follows]
15
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly
executed this Securities Purchase Agreement as of the date first written above.
Electropharmacology, Inc.
By: /s/ Arup Sen
---------------------------------------
Arup Sen
Chairman, President and Chief Executive
Officer
Elan International Services, Ltd.
By: /s/ Kevin Insley
---------------------------------------
Name: Kevin Insley
Title: President & CFO
16
<PAGE>
Exhibit A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES A
CONVERTIBLE PREFERRED STOCK
This Exhibit was previously filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
Amendment No. 1 dated April 2, 1999 and is incorporated by reference herein.
<PAGE>
Exhibit B
WARRANT TO ELAN INTERNATIONAL SERVICES, LTD. TO PURCHASE UP TO
1,000,000 SHARES OF EPI COMMON STOCK
This Exhibit was previously filed as Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
Amendment No. 1 dated April 2, 1999, and is incorporated by reference herein.
<PAGE>
Exhibit C
REGISTRATION RIGHTS AGREEMENT
This Exhibit was previously filed as Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
Amendment No. 1 dated April 2, 1999, and is incorporated by reference herein.
<PAGE>
Exhibit D
September 30, 1998
Elan International Services, Ltd.
102 St. James Court
Flatts Smith, FL 04
Bermuda
Re: Investment in Electropharmacology, Inc., pursuant to the Letter
Agreement dated August 27, 1998
Gentlemen and Ladies:
This opinion is being delivered to you pursuant to Section 1(d) of the
Securities Purchase Agreement dated as of the date hereof (the "Agreement"), by
and between Electropharmacology, Inc., a Delaware corporation (the "Company"),
and Elan International Services, Ltd., a Bermuda corporation ("EIS"). The
Agreement relates to a transaction pursuant to which the Company will issue and
sell to EIS, and EIS will purchase from the Company, (i) 7,500 shares of
convertible preferred stock (the "Preferred Stock"), issued in accordance with a
certificate of designations, preferences and rights (the "Certificate of
Designations"), and a warrant (the "Warrant") for the purchase of up to
1,000,000 shares (subject to adjustment) of the common stock of the Company, par
value $.01 per share (the "Common Stock"), for aggregate consideration of
$7,500,000, and (ii) within 60 days of the date hereof, a certain number of
shares of Common Stock for aggregate consideration of $2,000,000 (the
"Subsequent Common Stock"; together with the Preferred Stock and the Warrant,
the "Securities"). The Subsequent Common Stock, the Common Stock issuable upon
the exercise, conversion or exchange of any of the Securities, and any other
Common Stock acquired by EIS from time to time have the benefit of a
registration rights agreement (the "Registration Rights Agreement") between the
Company and EIS.
In connection with my preparation of this opinion, I have examined
originals, forms or copies, certified or otherwise identified to our
satisfaction, of the following documents:
1. The Agreement;
2. The Certificate of Designations;
3. The Warrant;
4. The Registration Rights Agreement;
5. Resolutions of the Board of Directors of the Company dated
August 25, 1998; and
6. The Articles of Incorporation of the Company, as amended, as
filed with the Secretary of State of the State of Delaware and
Bylaws of the Company, as amended.
<PAGE>
I have also examined originals, or copies, certified or otherwise
identified to my satisfaction, of such other documents, corporate or other
records, and other instruments, as I deem necessary or appropriate for the
purpose of rendering the opinions described herein. The documents referred to in
items (1) through (4) above will be referred to herein as the "Transaction
Documents."
In preparing this opinion, I have relied as to certain factual matters
upon certificates or documents of public officials and of the officers of the
Company. In addition, I have assumed (i) the genuineness of all signatures,
except signatures of the officers of the Company, (ii) the authenticity of all
documents submitted to us as originals, (iii) that each document submitted to me
as a copy is an authentic copy of an authentic original, (iv) that each party to
the transactions described in the Transaction Documents other than the Company
has complied with all legal requirements pertaining to its status as such status
relates to its right to enforce against the Company the Transaction Documents,
and (v) that each report, certificate or document of a public official relied
upon by me in rendering this opinion is accurate, complete and authentic, and
that all public records upon which those certificates or documents are based are
accurate and complete.
My opinion, as set forth herein, is subject to the following further
qualifications:
A. The enforceability of the Transaction Documents and all other
documents referred to in this opinion is limited by, and is
subject to, the effect of applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws, and by other
legal or equitable limitations affecting the enforceability of
creditors' rights from time to time; and
B. The enforceability of the Transaction Documents, and all other
documents referred to in this opinion (including specifically,
and without limitation, any provisions of such documents
relating to indemnification, contribution or release), is
subject to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or
at law.
Based upon the foregoing, it is my opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company has the
requisite corporate power to own its properties and to transact the
business in which it is engaged, and is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which the nature of its
business or the ownership of its property has made such qualification
necessary.
2. The Company has full corporate power and authority to execute and deliver
each of the Transaction Documents to which it is a party and to consummate
the transactions contemplated thereby. The Company has duly taken or caused
to be taken all necessary corporate actions to authorize the execution,
delivery and performance by it of the
<PAGE>
Transaction Documents, including, without limitation, the issuance of the
Securities thereunder.
3. Each of the Transaction Documents has been duly executed and delivered by
the Company and constitutes a valid, binding and enforceable obligation of
the Company.
4. Neither the execution and delivery of the Transaction documents by the
Company, nor the performance by the Company of the actions contemplated by
the Agreement to be performed by the Company prior to or at Closing will
(i) violate any existing order or decree of any court or government
instrumentality to which the Company or its properties is subject of which
I have actual knowledge, (ii) violate any provision of the Certificate of
Incorporation or Bylaws of the Company, (iii) result in the violation by
the Company, based upon existing facts of which I have actual knowledge, of
any federal or law, regulation or rule, (iv) violate or conflict with any
contract, agreement or instrument of the Company listed on Schedule A which
the Company has informed me sets forth all of the Company's material
contracts and agreements, or (v) require any consent, approval or
authorization of governmental authority or any other third party.
5. The Securities, and the Common Stock issuable upon conversion of the
Preferred Stock and exercise of the Warrant, have been duly and validly
authorized and issued, and are fully paid and non-assessable. There exist,
as of this date, authorized but unissued securities in number not less than
the number of securities which the Company would be required to issue as of
this date if the Preferred Stock were converted to Common Stock and the
Warrant was exercised as of this date. The Common Stock so required to be
issued, if issued as of this date on conversion of the Preferred Stock or
exercise of the Warrant would be fully paid and non-assessable.
6. The authorized capital stock of the Company consists of (a) 30,000,000
shares of Common Stock, 12,750,303 of which have been issued and are
outstanding, and (b) 10,000,000 shares of preferred stock, par value $.01
per share, 421,950 of which have previously been issued as Series A
Convertible Preferred Stock but which are no longer outstanding. All such
authorized and issued shares of Common Stock are fully paid and
non-assessable.
7. To the best of my knowledge, the Company is in compliance, in all material
respects, with all applicable laws, regulations and rules, and is not in
breach, in any material respect, with its existing contracts and
agreements.
The undersigned is a member of the Bar of the State of Florida and expresses no
opinion herein as to any law other then the federal laws of the United States of
America and the Delaware General Corporation Law.
<PAGE>
This opinion is solely for your benefit and is not to be quoted in
whole or in part or otherwise referred to, nor is it to be filed with or
disclosed to any governmental agency or other person, without the prior written
consent of the undersigned.
Very truly yours,
/s/ Wendy M. Mitchler
---------------------
Vice President, Legal and Finance
<PAGE>
Exhibit E
DRAFT REGISTRATION STATEMENT ON FORM S-1
IN ACCORDANCE WITH RULE 202 OF REGULATION S-T, THIS EXHIBIT E OF
EXHIBIT 10.7 IS BEING FILED IN PAPER PURSUANT TO A CONTINUING
HARDSHIP EXEMPTION
<PAGE>
SCHEDULE 3(a)
EPi Foreign Jurisdictions
-------------------------
Florida
2301 N.W. 33rd Court
Suite 102
Pompano Beach 33069
<PAGE>
SCHEDULE 3(b)
EPi Securities
--------------
Outstanding Options
See attached Schedule 3(b)-1.
1,500,000 shares are authorized and reserved for issuance pursuant to the 1993
EPi Stock Option Plan, as amended, of which 1,500,000 shares have been issued
under the Plan. An additional 378,988 options have been granted under the Plan
in excess of those shares authorized for issuance, which grants are subject to
the adoption of an amendment to the Stock Option Plan authorizing and reserving
for issuance additional shares sufficient to encompass the additional grants.
The option grants to Messrs. Saloff and Sen as of August 25, 1998 are further
governed by and subject to the respective Term Sheets governing their employment
each dated August 25, 1998. The option grant to Dr. Jayaraman as of August 19,
1998 is further governed by the Employment Agreement between Dr. Jayaraman and
EPi dated as of August 18, 1998.
Outstanding Warrants
See attached Schedule 3(b)-2.
Other Rights Outstanding to Purchase or Otherwise Acquire, Or Other Securities
Exchangeable or Convertible into or Exercisable for, EPi Common Stock
1. Shares of common stock of EPi authorized and reserved for issuance,
pursuant to the Non-Employee Directors Equity Compensation Plan, for
calendar year 1998 having a Fair Market Value (as defined in such plan)
of $7,500.
2. 6,000,000 partnership units in Gemini Health Technologies L.P. and the
right to acquire up to 2,050,000 of additional earn-out partnership
units pursuant to the Capital Contribution Agreement between EPi, EPi
HealthTech Inc. ("EPi Sub"), Gemini Biotech Ltd., the Jayaramans and
Gemini Biotech Inc. dated June 18, 1998, all of which partnership units
are exchangeable into EPi common stock pursuant to Unit Exchange
Agreement dated as of June 18, 1998 between EPi and Krishna Jayaraman,
Shashikala Jayaraman, and Gemini Health Technologies L.P.
3. Right to acquire up to 1,650,000 earn out shares of EPi common stock by
shareholders of HealthTech Development Inc. ("HTD") pursuant to the
Agreement of Merger and Plan of Reorganization among EPi, EPi Sub.,
Inc. and HTD dated June 11, 1998
<PAGE>
4. Right to acquire up to 100,000 additional shares of EPi common stock
pursuant to Letter Agreement between 20th Century Associates, Inc. and
EPi dated November 25, 1998.
Agreements Concerning the Voting, Acquisition or Disposition of EPi's
Outstanding Securities
1. Master Agreement dated as of June 28, 1998 among HTD, Gemini Biotech,
Ltd., Gemini Biotech, Inc., EPi, EPi Sub, Mr. Norton Herrick (a) David
Saloff, Murray Feldman, George Levine, and Paragon Capital Corporation
at Spear, Leeds & Kellogg, LLC (collectively, the "EPHI Group"), (b)
Arup Sen, James Kaput and Richard Kneipper (collectively, the "HTD
Group") and (c) Krishna Jayaraman and Shashikala Jayaraman
(collectively, the "Gemini Group"), as amended on August 3, 1998.
2. Letter Agreement regarding voting of EPi common stock by and between
Norton Herrick and Murray Feldman dated August 3, 1998.
Agreements to Register EPi's Outstanding Securities Under the U.S. Federal
Securities Acts
1. Registration Rights Agreement dated as of June 28, 1998 among EPi,
Norton Herrick, the EPHI Group, the HTD Group and the Gemini Group.
2. Piggy back Registration Rights granted to certain warrantholders under
those warrant agreements identified in Schedule 3(b)-2.
<PAGE>
SCHEDULE 3(b)-1
EPi Outstanding Options
9/23/98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NAME DATE PRICE # OF TERM TYPE VESTING
ISSUED SHARES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Feldman, Murray 6/28/95 $5.25 5,000 6/28/00 NSO B;F
Rausch, Tom 6/28/95 $5.25 250 6/28/00 NSO M
Robertson, Scott 6/28/95 $5.25 2,500 6/28/00 NSO M
Soffin, Glen 6/28/95 $5.25 250 6/28/00 NSO M
Stewart, Nancy 6/28/95 $5.25 500 6/28/02 ISO C
Mooibroek, Joseph 8/5/96 $5.50 207,236 8/5/06 NSO B
Saloff, David 4/14/98 $0.32 100,000 8/5/06 ISO B
Kronick, Larry 12/13/96 $2.88 15,000 12/13/98 NSO H
Sen, Arup 11/11/96 $4.75 75,000 11/10/06 ISO G
Feldman, Murray 12/13/96 $2.875 15,000 12/13/01 NSO F;A
Stewart, Nancy 12/13/96 $2.875 2,000 12/13/06 ISO A
Dabb, Richard 1/1/97 $3.06 20,000 1/1/02 NSO D
Kinney, Brian 4/14/98 $0.32 20,000 1/1/02 NSO D;J
Mayrovitz, Harvey 1/1/97 $2.75 7,500 1/1/02 NSO E
Sen, Arup 6/24/97 $1.81 25,000 6/24/07 ISO B
Feldman, Murray 12/31/97 $0.28 2,500 12/31/01 NSO F;B
Sen, Arup 1/3/98 $0.26 244,823 1/.03/98 ISO K
Mitchler, Wendy 1/12/98 $0.28 125,000 1/12/08 ISO L
Sen, Arup 2/1/98 $0.35 17,143 2/1/08 ISO B
Saloff, David 2/1/98 $0.35 34,286 2/1/08 ISO B
Occhionero, Rita 1/3/98 $0.26 10,000 1/3/98 ISO D
Saloff, David (1) 8/25/98 $0.85 200,000 8/24/08 ISO N
Sen, Arup (1) 8/25/98 $0.85 500,000 8/25/08 ISO O
Jayaraman, Krishna 8/19/98 $1.06 250,000 8/19/08 ISO P
Total per Schedule 1,878,988
</TABLE>
Vesting Formula:
A = 20% immediately; 20% after the first anniversary; 20% after the second
anniversary; 20% of remaining after the third anniversary; 20% after the
fourth anniversary
B = Vested
C = 20% after the first anniversary; 5% quarterly
D = 25% immediately; 25% after the first anniversary; 25% after the second
anniversary; 25% after the third anniversary
E = 1,500 shares immediately; 2,000 shares after the first anniversary; 2,000
shares each succeeding anniversary
F = Optionee must be a director of EPi on the date of exercise
G = 25,000 immediately; 20,000 after the first anniversary; 10,000 after each
succeeding anniversary - to be cancelled at transaction
H = 5,000 vest upon $250,000 in 2-year period international revenue,
additional 5,000 after $750,000, all 15,000 after $1,500,000
J = Optionee must be a consultant to EPi on the date of exercise
K = 50% immediately; 50% on July 1, 1998 in lieu of cash and stock
compensation
L = 25% immediately; 25% after 3 months; 25% each succeeding 3-month period
M = 100% upon execution and acceptance of related stock option agreement
N = 20% per year starting with first anniversary; to accelerate based on
following annual sales revenue: $[omission], additional 25%, $[omission],
additional 25%, $[omission], remaining 50%. Vesting to accelerate as
determined by Board of Directors based on (a) demonstration that PEMS
facilitates cell regeneration for would healing and Epi pursues product
approval or (b) receipt of earn-out warrants from ADM Tronics
O = 75,000 shares upon reorganization on 8/24/98; additional $75,000 upon
closing of Elan transaction; additional 50,000 upon annual
<PAGE>
revenue of $[omission]; additional 25,000 upon first anniversary of option
grant (8/24/99); and additional 250,000 based on milestones set by Board of
Directors.
P = 20% immediately; 25% on the first and second anniversary of grant date;
and 30% on third anniversary.
FOOTNOTES:
(1) Grant is subject to shareholder approval of increase in number of shares
authorized to be issued under the Epi Stock Option Plan. Number of shares
authorized for issuance at 9/23/98 is 1.5 MM.
<PAGE>
SCHEDULE 3(b)-2
Electropharmacology, Inc.
Outstanding Warrants
23-Sep-98
<TABLE>
<CAPTION>
WARRANTS
Issue Post Split
No. Date Issued to Pre Split Post Split Price Years
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
W-003 12/1/93 P. Saloff 13,500 8,717 $5.42 5
W-006 8/1/94 AA Pilla PhD 65,000 41,969 $5.03 5
12/5/94 L. Schlesinger 15,000 9,685 $5.03 5
6/28/95 Arsenault, J. 30,000 $4.00 5
6/28/95 Canale, T. 25,000 $5.25 4
6/28/95 H. LeVay 3,000 $5.25 5
6/28/95 M. Porter 3,000 $5.25 5
6/28/95 Z. Rose 3,000 $5.25 5
6/28/95 C. Torre 3,000 $5.25 5
12/15/95 Freidman, R. 32,500 $1.00 5 *
12/15/95 J. Markowitz 32,500 $1.00 5 *
12/15/95 Whale 40,000 $5.50 5 *
12/15/95 Shapiro (Whale) 40,000 $5.50 5 *
12/15/95 Segal (Whale) 20,000 $5.50 5 *
4/11/97 Joseph Mooibroek 25,000 $2.25 10
-------------
Subtotal Outstanding at 9/23/98 317,371
=============
* Warrantholder has certain registration notice and piggyback
registration rights
</TABLE>
<PAGE>
SCHEDULE 3(e)
List of Required Consents, Approvals, etc.
------------------------------------------
None.
<PAGE>
SCHEDULE 3(f)
Pension, Profit Sharing, Deferred Compensation, Stock Ownership, Stock
Purchase, Bonus, Severance, Health or Group Insurance, Welfare Plans
1. EPi Non-Employee Directors' Equity Compensation Plan
2. EPi Premium Only Plan effective August 1, 1995
3. EPi 1993 Stock Option Plan, as amended
4. Dental Services Agreement between EPi and Oral Health Services, Inc.
effective February 1, 1997
5. Group Life and AD&D Insurance Plan between EPi and Metropolitan Life
Insurance Company effective February 1, 1997
6. Accident and Health Insurance Policy between EPi and United HealthCare
Insurance Company effective February 1, 1997
7. Group Policy for Small Employer Enrolling Units between EPi and United
HealthCare of Florida, Inc. effective February 1, 1997
8. Disability Plan between EPi and Guarantee Life Insurance Company dated
November 1, 1996
9. EPi 401(k) Plan effective May 1, 1995
10. EPi 401(k) Plan effective January 1, 1998
Fringe Benefits Agreements
1. Vacation Policy
2. Leave of Absence Policy
3.. Holiday Policy
4. Termination Policy
Employee Agreements
1. Agreement between EPi and Jack W. Baxter dated April 23, 1997 (See
Schedule 3(j))
2. Term Sheet between EPi and David Saloff dated August 25, 1998
3. Term Sheet between EPi and Arup Sen dated August 25, 1998
4. Employment Agreement between EPi and Krishna Jayaraman dated August 18,
1998
<PAGE>
SCHEDULE 3(g)
Material Adverse Changes, Dividends, Intellectual Property Actions
and Liabilities in Excess of $50,000
See Schedule 3(g)-1 for a summary of the balance sheet impact of the
reorganization transactions entered into by EPi on August 24, 1998 (the
"Reorganization Transactions"), including the divestiture of its SofPulse assets
and certain rights under EPi's intellectual property, including the world-wide
right to manufacture and sell the SofPulse device for its current labeled
indication, pursuant to an Asset Purchase Agreement dated May 27, 1998 between
EPi, ADM Tronics Unlimited, Inc. And AA Northvale Medical Associates, Inc.; the
guarantee of a $1.3 million secured business loan to Gemini Biotech, Ltd in
connection with the acquisition of Gemini Biotech, Ltd through a newly organized
limited partnership, Gemini Health Technologies L.P.; and the merger of HTD with
and into EPi Sub, all of which resulted in a change of control and the
incurrence of a $63.654 liability to Arup Sen in order for Dr. Sen to exercise
certain options to purchase EPi Common Stock.
<PAGE>
Schedule 3(g)-1
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1998
<TABLE>
<CAPTION>
Merger Merger
---------------- -------------
Historical Historical
------------------------ -------------
ASSETS Pro Forma Pro Forma Pro Forma
EPi HTD Adjustments Combined GBLP Adjustments
---------- --------- --------------- -------------- -------- -------------
<S> <C> <C> <C> <C>
Current assets :
Cash 62,465 48 62,513 285,064
Trade accounts receivable, net 126,723 126,723 57,697
Inventory 159,043 159,043 7,528
Trade notes and other receivables 2,181 2,181 30,200
Prepaid expenses 161,962 161,962 -
---------- --------- ----------- --------- --------- ------------
Total current assets 512,374 48 - 512,422 380,488 -
---------- --------- ----------- --------- --------- ------------
Rental and other equipment, net 568,497 966 569,463 252,976
Patents & Organization Cost, net 86,088 86,088 67,034
Deposits 5,075 5,075 3,350
Acquired Developed Technology 2,000,000 (1) 2,000,000 2,000,000(2)
Investment in ADM Tronics -
========== ========= =========== ========= ========= ============
Total Assets 1,172,034 1,014 2,000,000 3,173,048 703,848 2,000,000
========== ========= =========== ========= ========= ============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Note Payable 719,276 719,276 97,185
Accounts payable 509,330 44,500 553,830 (480)
Accrued expenses 308,224 308,224 68,958
Accrued commissions 14,262 14,262 -
Accrued payroll 1,767 1,767 22,361
Customer deposits - -
Deferred Revenue 75,000 75,000
Notes payable to related parties 65,926 63,654 (4) 129,580
-
---------- --------- ----------- --------- --------- ------------
Total current liabilities 1,693,785 44,500 63,654 1,801,939 188,025 -
---------- --------- ----------- --------- --------- ------------
Long term Note Payable 90,260 90,260 932,791
Minority Interest in Limited Partnership 1,692,985 (2)
========== ========= =========== ========= ========== ============
Total Liabilities 1,784,045 44,500 63,654 1,892,199 1,120,816 1,692,985
========== ========= =========== ========= ========== ============
Commitments and contingencies
Net capital deficiency/Equity:
Convertible Preferred Stock 2,430 2,430
Common Stock 41,325 32 61,689 (1) 103,046
Additional paid-in capital 15,277,249 194,522 1,703,225 (1) 17,174,996
Deferred Compensation (67,678) (67,678)
General Partner (1%) (85,656) 87,919 (2)
Limited Partners (99%) 5,000 219,096 (2)
Deficit/Retained Earnings (15,865,337) (238,040) 171,432 (1) (15,931,945) (336,312)
---------- --------- ----------- --------- --------- -----------
Net capital deficiency/Total Equity (612,011) (43,486) 1,936,346 1,280,849 (416,967) 307,015
========== ========= =========== ========= ========= ============
Total liabilities and net capital
deficiency 172,034 1,014 2,000,000 3,173,048 703,848 2,000,000
========== ========= =========== ========= ========= ============
</TABLE>
<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Medical Device
Divestiture
---------------
Pro Forma
ASSETS Pro Froma Pro Forma Combined
Combined Adjustments (as adjusted)
------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Current assets :
Cash 347,577 135,000 (3) 482,577
Trade accounts receivable, net 184,420 184,420
Inventory 166,571 (152,233) (3) 14,338
Trade notes and other receivables 32,381 32,381
Prepaid expenses 161,962 7,500 (5) 169,462
----------- ---------- ------------
Total current assets 892,910 (9,733) 883,177
----------- ---------- ------------
Rental and other equipment, net 822,439 (613,466) (3) 208,973
Patents & Organization Cost, net 153,122 153,122
Deposits 8,425 8,425
Acquired Developed Technology 4,000,000 4,000,000
Investment in ADM Tronics - 606,667 (3) 606,667
=========== ========== ============
Total Assets 5,876,896 (16,532) 5,860,364
=========== ========== ============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Note Payable 816,461 (672,750) (3) 143,711
Accounts payable 553,350 (48,169) (3) 505,181
Accrued expenses 377,182 (21,581) (3), (5) 355,601
Accrued commissions 14,262 14,262
Accrued payroll 24,128 24,128
Customer deposits - -
Deferred Revenue 75,000 75,000
Notes payable to related parties 129,580 129,580
- -
----------- ---------- ------------
Total current liabilities 1,989,964 (742,500) 1,247,464
----------- ---------- ------------
Long term Note Payable 1,023,051 1,023,051
Minority Interest in Limited Partnership 1,692,985 1,692,985
=========== ========== ============
Total Liabilities 4,706,000 (742,500) 3,963,500
=========== ========== ============
Commitments and contingencies
Net capital deficiency/Equity:
Convertible Preferred Stock 2,430 2,430
Common Stock 103,046 3,226 (3) 106,272
Additional paid-in capital 17,174,996 96,774 (3) 17,271,770
Deferred Compensation (67,678) (67,678)
General Partner (1%) 2,263 2,263
Limited Partners (99%) 224,096 224,096
Deficit/Retained Earnings (16,268,257) 625,968 (3) (15,642,289)
----------- ---------- ------------
Net capital deficiency/Total Equity 1,170,896 725,968 1,896,864
=========== ========== ============
Total liabilities and net capital
deficiency 5,876,896 (16,532) 5,860,364
=========== ========== ============
</TABLE>
(1) To reflect the elimination of HTD equity accounts, issuance of EPI shares
and allocation of the purchase price in excess of net tangible assets
acquired, see Note 2 to the Pro Forma Condensed Combined Financial
Statements.
(2) To reflect the elimination of the GBLP equity accounts, issuance of EPI
shares and allocation of the purchase price in excess of net tangilble
assets acquired, see Note 2 to the Pro Forma Condensed Combined Financial
Statements.
(3) To reflect the sale of the Medical Device Business for $150,000 cash (net of
$15,000 registration fee) and ADM stock (2,925,000 shares) pursuant to the
Asset Purchase Agreement.
(4) To record additional liability uncurred to Arup Sen as if the change in
control occurred on June 30, 1998.
(5) To record purchase of a one-year product liability policy for discontinued
products coverage.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 3(g)-1
Pro Forma EPI after Asset Sale Pro Forma Condesned Combined Balance Sheet
December 31, 1997
(Unaudited) Merger
-------------------
Historical Historical
---------------------- ----------
ASSETS Pro Forma Pro Forma
- ------ EPi HTD Adjustments Combined GBLP
-------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Current assets :
Cash 111,496 809 112,305 454,992
Trade accounts receivable 169,404 169,404 43,090
Inventory 152,233 152,233 5,000
Trade notes and other receivables 32,748 32,748
Prepaid expenses 157,065 157,065 3,125
----------- ----------- ----------- ----------- -----------
Total current assets 622,946 809 623,755 506,207
----------- ----------- ----------- ----------- -----------
Rental and other equipment, net 713,466 1,159 714,625 195,818
Patents & Organization Cost, net 89,129 89,129 75,437
Deposits 18,001 18,001 3,350
Acquired Developed Technology 2,000,000 (1) 2,000,000
Investment in ADM Tronics --
----------- ----------- ----------- ----------- -----------
Total Assets 1,443,542 1,968 2,000,000 3,445,510 780,812
=========== =========== =========== =========== ===========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Note Payable 804,179 804,179 97,185
Accounts payable 380,313 44,500 424,813 26,818
Accrued expenses 187,933 187,933 15,408
Accrued commissions 46,181 46,181 3,748
Accrued payroll 18,385 18,385
Customer deposits 7,561 7,561
Deferred Revenue -- --
Notes payable to related parties 73,926 73,926
----------- ----------- ----------- ----------- -----------
Total current liabilities 1,518,478 44,500 -- 1,562,978 143,159
----------- ----------- ----------- ----------- -----------
Long term Note Payable -- 944,668
Minority Interest in Limited Partnership
----------- ----------- ----------- ----------- -----------
Total Liabilities 1,518,478 44,500 -- 1,562,978 1,087,827
=========== =========== =========== =========== ===========
Commitments and contingencies
Net capital deficiency/Equity:
Convertible Preferred Stock 2,430 2,430
Common Stock 40,711 32 61,689 (1) 102,432
Additional paid-in capital 15,254,912 192,522 1,703,225 (1) 17,150,659
Deferred Compensation (67,678) (67,678)
General Partner (1%) (87,919)
Limited Partners (99%) (219,096)
Deficit/Retained Earnings (15,305,311) (235,086) 235,086 (1) (15,305,311)
----------- ----------- ----------- ----------- -----------
Net capital deficiency/Total Equity (74,936) (42,532) 2,000,000 1,882,532 (307,015)
----------- ----------- ----------- ----------- -----------
Total liabilities and net capital deficiency 1,443,542 1,968 2,000,000 3,445,510 780,812
=========== =========== =========== =========== ===========
</TABLE>
<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Medical Device
Merger Divestiture
------------- -----------------------
Pro Forma
Pro Forma Pro Froma Pro Forma Combined
Adjustments Combined Adjustments (as adjusted)
---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets :
Cash 567,297 135,000 (3) 702,297
Trade accounts receivable 212,494 212,494
Inventory 157,233 (152,233) (3) 5,000
Trade notes and other receivables 32,748 32,748
Prepaid expenses 160,190 160,190
----------- ----------- ----------- -----------
Total current assets -- 1,129,962 (17,233) 1,112,729
----------- ----------- ----------- -----------
Rental and other equipment, net 910,443 (613,466) (3) 296,977
Patents & Organization Cost, net 164,566 164,566
Deposits 21,351 21,351
Acquired Developed Technology 2,000,000 (2) 4,000,000 4,000,000
Investment in ADM Tronics -- 606,667 (3) 606,667
----------- ----------- ----------- -----------
Total Assets 2,000,000 6,226,322 (24,032) 6,202,290
=========== =========== =========== ===========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Note Payable 901,364 (672,750) (3) 228,614
Accounts payable 451,631 (48,169) (3) 403,462
Accrued expenses 203,341 (29,081) (3) 174,260
Accrued commissions 49,929 49,929
Accrued payroll 18,385 18,385
Customer deposits 7,561 7,561
Deferred Revenue -- --
Notes payable to related parties 73,926 73,926
----------- ----------- ----------- -----------
Total current liabilities -- 1,706,137 (750,000) 956,137
----------- ----------- ----------- -----------
Long term Note Payable 944,668 944,668
Minority Interest in Limited Partnership 1,692,985 (2)
----------- ----------- ----------- -----------
Total Liabilities 1,692,985 2,650,805 (750,000) 1,900,805
=========== =========== =========== ===========
Commitments and contingencies
Net capital deficiency/Equity:
Convertible Preferred Stock 2,430 2,430
Common Stock 102,432 3,226 (3) 105,658
Additional paid-in capital 17,150,659 96,774 (3) 17,247,433
Deferred Compensation (67,678) (67,678)
General Partner (1%) 87,919 (2) -- --
Limited Partners (99%) 219,096 (2) -- --
Deficit/Retained Earnings (15,305,311) 625,968 (3) (14,679,343)
----------- ----------- ----------- -----------
Net capital deficiency/Total Equity 307,015 1,882,532 725,968 2,608,500
----------- ----------- ----------- -----------
Total liabilities and net capital deficiency 2,000,000 4,533,337 (24,032) 4,509,305
=========== =========== =========== ===========
</TABLE>
(1) To reflect the elimination of HTD equity accounts, issuance of EPI shares
and allocation of the purchase price in excess of net tangible assets
acquired, see Note 2.
(2) To reflect the elimination of the GBLP equity accounts, issuance of EPI
shares and allocation of the purchase price in excess of net tangilble
assets acquired, see Note 2.
(3) To reflect the sale of the Medical Device Business for $150,000 cash (net
of $15,000 registration fee) and ADM stock (2,925,000 shares) pursuant to
the Asset Purchase Agreement.
Page 1
<PAGE>
<TABLE>
<CAPTION>
Electropharmacology, Inc. Exhibit 3(g)-1
Statements of Operations Pro Forma Condesned Combined Statement of Operations
Year Ended December 31, 1997
(Unaudited) (Unaudited)
Merger
-------------------
Historical Historical
---------------------- ----------
ASSETS Pro Forma Pro Forma
- ------ EPi HTD Adjustments Combined GBLP
-------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Rentals 1,700,486 -- 1,700,486 --
Sales 700,763 -- 700,763 118,018
---------- ---------- ---------- ---------- ----------
Total revenue 2,401,249 -- -- 2,401,249 118,018
Operating expenses:
Cost of revenue 611,702 -- 611,702 92,619
Selling, general and administrative 3,177,031 89,972 133,333 (3) 3,400,336 193,169
Research and development 214,686 28,070 200,000 (1) 442,756 --
---------- ---------- ---------- ---------- ----------
Total operating expenses 4,003,419 118,042 333,333 4,454,794 285,788
---------- ---------- ---------- ---------- ----------
Loss from operations (1,602,170) (118,042) (333,333) (2,053,545) (167,770)
Other income (expense)
Interest expense (25,135) (2,198) (27,333) (71,622)
Interest and other income 9,894 124 10,018 13,033
Loss on disposal of equipment (30,506) (30,506)
---------- ---------- ---------- ---------- ----------
Total other income (expense) (45,747) (2,074) -- (47,821) (58,589)
---------- ---------- ---------- ---------- ----------
Net loss (1,647,917) (120,116) (333,333) (2,101,366) (226,359)
========== ========== ========== ========== ==========
Net loss per share - basic and diluted (0.45) (37) (0.21) [ILLEGIBLE]
========== ========== ========== ==========
Weighted average number of common shares outstanding -
basic and diluted 3,697,611 3,247 6,172,095 9,869,706 --
========== ========== ========== ==========
</TABLE>
<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Medical Device
Merger Divestiture
------------- -----------------------
Pro Forma
Pro Forma Pro Froma Pro Forma Combined
Adjustments Combined Adjustments (as adjusted)
---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Rentals 1,700,486 (1,700,486) (4) --
Sales 818,781 (700,763) (4) 118,018
----------- ----------- ----------- -----------
Total revenue -- 2,519,267 (2,401,249) 118,018
Operating expenses:
Cost of revenue 704,321 (611,702) (4) 92,619
Selling, general and administrative 133,333 (3) 3,726,838 (2,000,000) (4) 1,726,838
Research and development 250,000 (2) 692,756 692,756
----------- ----------- ----------- -----------
Total operating expenses 383,333 5,123,915 (2,611,702) 2,512,213
----------- ----------- ----------- -----------
Loss from operations (383,333) (2,604,648) 210,453 (2,394,195)
Other income (expense)
Interest expense (98,955) 25,135 (4) (73,820)
Interest and other income 23,051 23,051
Loss on disposal of equipment (30,506) (30,506)
----------- ----------- ----------- -----------
Total other income (expense) -- (106,410) 25,135 (81,275)
----------- ----------- ----------- -----------
Net loss (383,333) (2,711,058) 235,588 (2,475,470)
=========== =========== =========== ===========
Net loss per share - basic and diluted (0.27) (0.24)
=========== ===========
Weighted average number of common shares outstanding -
basic and diluted 9,869,706 322,581 10,192,287
=========== ===========
</TABLE>
(1) To record charge of $200,000 for acquired research and development from HTD
(2) To record charge of $250,000 for acquired research and development from
GBLP
(3) To record amortization of intangible assets acquired. An amortization
period of 15 years is asumed. See Note 2.
(4) To reflect the sale of the Medical Device Division as if it had occurred
on January 1, 1997
Page 1
<PAGE>
SCHEDULE 3(h)
Liabilities Incurred
--------------------
See Schedule 3(g)-1 for a listing of those liabilities incurred in connection
with the Reorganization Transactions.
<PAGE>
SCHEDULE 3(i)(ii)
Possible Limitations On or Claims Against EPi's Intellectual Property Rights
----------------------------------------------------------------------------
1. Royalties payable to Aronex Pharmaceutical in order to maintain
exclusive rights under the Aronex License Agreement with Gemini with
respect to Phosphazole class of compounds.
2. Royalities payable and development obligation with respect to the MMP
Pump protein marker for malignant cancers pursuant to the Vanderbilt
University license agreement with HTD.
3. Rights granted to ADM Tronics Unlimited, Inc. To manufacture and sell
worlwide the SofPulse product pursuant to the Asset Purchase Agreement
with EPi.
<PAGE>
SCHEDULE 3(j)
Legal Proceedings
1. Diapulse Corporation of America, Inc. ("Diapulse") v. Magnetic
Resonance Therapeutics, Inc. et al., filed in August 1994 in the
Supreme Court of the State of New York, Nassau County
2. Citizen's petition filed in February 1993 by Diapulse with the U.S.
Food and Drug Administration
3. O'Connell v. Kinetech Medical, Inc. and Electropharmacology, Inc. filed
in August 1997 in the County Court in Dallas, Texas
4. Baxter v. Electropharmacology, Inc. filed in July 1998 in the Circuit
Court of Broward County, Florida
<PAGE>
SCHEDULE 3(l)
Brokers or Finders
------------------
None.
Exhibit 10.8
Dated September 30, 1998
ELAN PHARMA INTERNATIONAL LIMITED
AND
ELECTROPHARMACOLOGY, INC.
LICENSE AGREEMENT /*/
/*/ Confidential portions of this Exhibit have been omitted and filed
separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934 as amended.
<PAGE>
CONTENTS
CLAUSE 1 PRELIMINARY
CLAUSE 2 THE LICENSE
CLAUSE 3 INTELLECTUAL PROPERTY
CLAUSE 4 DEVELOPMENT OF THE PRODUCT
CLAUSE 5 REGISTRATION OF THE PRODUCT
CLAUSE 6 MARKETING AND PROMOTION OF THE PRODUCT
CLAUSE 7 FINANCIAL PROVISIONS
CLAUSE 8 PAYMENTS, REPORTS AND AUDITS
CLAUSE 9 DURATION AND TERMINATION
CLAUSE 10 CONSEQUENCES OF TERMINATION
CLAUSE 11 REPRESENTATION, WARRANTY AND INDEMNITY
CLAUSE 12 CUTOMER COMPLAINTS AND PRODUCT RECALL
CLAUSE 13 MISCELLANEOUS PROVISIONS
SCHEDULE 1 ELAN PATENT RIGHTS
SCHEDULE 2 EXCLUDED TECHNOLOGY
SCHEDULE 3 TECHNOLOGICAL COMPETITORS
<PAGE>
THIS AGREEMENT is made on September 30, 1998.
BETWEEN:
- --------
(1) Elan PHARMA INTERNATIONAL LIMITED, a company incorporated in Ireland
having its registered office at WIL House, Shannon Business Park,
Shannon, County Clare, Ireland ("ELAN"); and
(2) ELECTROPHARMACOLOGY, INC., a company organised and existing under the
laws of the State of Delaware, having an office at 2301 NW 33rd Court,
Suite 102, Pompano Beach, Florida 33069, United States of America
(which intends shortly to change its name to Gemini Health
Technologies, Inc., "GEMINI").
RECITALS:
- ---------
A. ELAN is beneficially entitled to the use of various patents, included
in the ELAN TECHNOLOGY, which have been granted or are pending under
the International Convention in relation to the development and
production of iontophoretic transdermal devices, and
B. ELAN is knowledgeable in the development of iontophoretic transdermal
devices and has developed a unique range of device and delivery systems
designed to provide improved devices, and
C. GEMINI is desirous of entering into a licensing agreement with ELAN to
allow GEMINI develop, manufacture and have manufactured in accordance
with the terms of this Agreement and to market, sell and distribute
PRODUCTS in the TERRITORY without infringing any of the intellectual
property rights in the ELAN TECHNOLOGY held by ELAN, and
D. ELAN is prepared to license the ELAN TECHNOLOGY in the TERRITORY to
GEMINI for PHARMACEUTICAL USE in the FIELD.
NOW IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1 - PRELIMINARY
1.1 Definitions: In this Agreement unless the context otherwise requires:
AFFILIATE shall mean any corporation or entity controlling or
controlled or under common control with ELAN or GEMINI, as the case may
be. For the purposes of
<PAGE>
this Agreement, "control" shall mean the direct or indirect ownership
of more than 50% of the issued voting shares or other voting rights of
the subject entity to elect directors, or if not meeting the preceding
criteria, any entity owned or controlled by or owning or controlling at
the maximum control or ownership right permitted in the country where
such entity exists.
CFR shall mean the US Code of Federal Regulations 21, as amended from
time to time.
cGP shall mean current Good Clinical Practice, current Good
Manufacturing Practice and current Good Laboratory Practice as defined
in the FFDCA, (or applicable foreign law).
COSMETIC USE shall mean an application of the DEVICE which does not
require regulatory approval to market either (a) the DEVICE, (b) a
PRODUCT, or (c) GEMINI TECHNOLOGY, for such application in the
TERRITORY.
DERMATOLOGY shall mean the treatment of skin disorders including but
not limited to acne, alopecia, dermatitis, eczema, hyperhydrosis,
keratinisation disorders, pigmentation disorders, pruritus, psorasis,
rosacea and warts.
DEVICE shall mean any device, system, method or use which, in the
course of manufacture, use, offer for sale or sale of any such device,
or practice of any such method, in the absence of this Agreement, would
infringe the ELAN PATENTS, or constitute an unauthorised use of the
ELAN KNOW-HOW.
EFFECTIVE DATE shall mean 30th September, 1998.
ELAN shall mean Elan Pharma International Limited and any of its
AFFILIATES.
ELAN EXCLUDED TECHNOLOGY shall mean all intellectual property
including, without limitation, any inventions, discoveries, material
and data whether or not protectable by patents, trade secrets,
trademarks or copyrights in relation to (i) the iontophoretic
technology as set out in Schedule 2 which has been licensed by ELAN to
Iomed, Inc. ("IOMED") pursuant to agreements dated 14th April 1997
and/or developed pursuant to such agreements, (ii) ELAN's MEDIPAD(TM)
Drug Delivery System ambulatory pump infusion technology as described
in Schedule 2 and any improvements thereto, and (iii) the know-how as
set out in Schedule 2 which has been licensed by Asulab S.A. and/or SMH
Swiss Corporation for Microelectronics and Watchmaking Industries Ltd.
to ELAN pursuant to an agreement dated 7th March 1990.
ELAN IMPROVEMENTS shall mean any improvement or enhancement to the ELAN
TECHNOLOGY or DEVICE including its design, structure, manufacture and
use whether developed pursuant to this Agreement or otherwise.
ELAN KNOW-HOW shall mean all knowledge, information, trade secrets,
data and expertise relating to the DEVICE, and which is not generally
known to the public, and
<PAGE>
that are owned or licensed by ELAN as of the EFFECTIVE DATE and which
permit(s) disclosure of same to GEMINI, whether or not covered by or
subject to protection by any patent, copyright, design patent,
trademark, trade secret or other industrial or any intellectual
property rights.
ELAN PATENTS shall mean all patents and patent applications listed in
Schedule 1, including all continuations, continuations-in-part,
divisionals, and any patents issuing thereon, and re-issues or
re-examinations of such patents and extensions of any patents licensed
hereunder. ELAN PATENTS shall also include all patent applications
directed to ELAN IMPROVEMENTS and any patents issuing thereon. subject
to the terms of this Agreement. Extensions of patents shall include:
(a) extensions under the U.S. Patent Term Restoration Act;
(b) extension of patents under Japanese Patent Law;
(c) Supplementary Protection Certificates for members of the European
Patent Convention and other countries in the EEA and Switzerland.
ELAN TECHNOLOGY shall mean the ELAN PATENTS, and ELAN KNOW-HOW for (i)
the iontophoretic delivery of a substance to or through the skin in a
controlled manner, (ii) ELECTROMAGNETIC THERAPY and (iii) a combination
of iontophoretic delivery and ELECTROMAGNETIC THERAPY, but shall not
include the ELAN EXCLUDED TECHNOLOGY.
ELECTROMAGNETIC THERAPY shall mean the treatment of the body via
non-invasive delivery of electromagnetic pulses.
ENFORCEMENT PROCEEDINGS shall mean the proceedings referred to in
Clause 3.4.2.
EU shall mean the Member States of the European Union, as same may
change from time to time in terms of Member States.
FFDCA shall mean the US Federal Food, Drug and Cosmetic Act of 1934,
and the regulations promulgated thereunder, as may be amended from time
to time.
FIELD shall mean (i) DERMATOLOGY, (ii) WOUND CARE and (iii)
ELECTROMAGNETIC THERAPY.
FINANCIAL INVESTOR shall mean any company, individual or other entity
whose main activity is making investments in the common or preferred
stock of companies for long-term capital appreciation.
FULLY ALLOCATED COST shall include direct labour, direct materials and
supplies, variable labour, overhead and attributable administration,
quality control, quality assurance and other costs, whether incurred by
a Party, or any sub-contractor of a Party;
<PAGE>
such costs to be calculated in accordance with the generally accepted
accounting principles applicable to such Party.
GEMINI shall mean Electropharmacology, Inc. and any of its AFFILIATES.
GEMINI IMPROVEMENTS shall mean any improvements which can be usefully
applied to the GEMINI TECHNOLOGY including its formulation, design,
structure, manufacture or use.
GEMINI TECHNOLOGY shall mean any (i) drug, (ii) marker, or (iii)
mechanism, instrumentality or feature relating exclusively to
electromagnetic technology, owned by or licensed to GEMINI from a third
party or which GEMINI may use without infringing any intellectual
property right of any third party.
GEMINI TRADEMARK shall mean the trademark(s) of GEMINI to be applied to
the PRODUCT.
INITIAL PERIOD shall mean the initial period of this Agreement, as more
fully described in Clause 9.
INDEPENDENT THIRD PARTY(IES) shall mean any party(ies) other than ELAN
or GEMINI and their AFFILIATES.
IN MARKET shall mean the sale of the PRODUCT by GEMINI or its
AFFILIATES, or where applicable by a permitted sub-licensee, to an
INDEPENDENT THIRD PARTY such as a wholesaler, distributor, managed care
organisation, hospital or pharmacy and shall exclude the transfer
pricing of the PRODUCT by GEMINI to an AFFILIATE or a permitted
sub-licensee.
JOINT IMPROVEMENTS shall mean any improvement in the area of
electromagnetic technology to the GEMINI TECHNOLOGY and the ELAN
TECHNOLOGY and which was developed, created, conceived or otherwise
invented during the TERM jointly by at least one ELAN employee or agent
and at least one GEMINI employee or agent pursuant to this Agreement.
MAJOR MARKETS shall mean the United States of America, the EU and Japan
and such additional countries as may be agreed in writing by the
Parties from time to time.
NET INCOME shall mean the monetary amount or non cash consideration
payable by an INDEPENDENT THIRD PARTY to GEMINI:-
(i) for the granting of rights, whether by license, sublicense or
otherwise, by GEMINI to any INDEPENDENT THIRD PARTY relating
to the development or commercialisation of one or more of the
PRODUCTS and/or to exploit the ELAN TECHNOLOGY within the
FIELD, including license fees, royalties on sales and other
ongoing fees, and
<PAGE>
(ii) where GEMINI is not selling a PRODUCT IN MARKET, the gross
amount billed for the supply of such PRODUCT to an INDEPENDENT
THIRD PARTY for IN MARKET sale, and
(iii) where GEMINI is selling a PRODUCT IN MARKET, the NET SALES
PRICE of such PRODUCT;
but excluding in the case of each of the above:
(i) any bona fide research or development fees and payments
charged at cost by GEMINI for the ELAN TECHNOLOGY and/or a
PRODUCT to an INDEPENDENT THIRD PARTY which is a sublicensee
of the ELAN TECHNOLOGY; and
(ii) the FULLY ALLOCATED COST of manufacturing, packaging and
supplying the PRODUCT.
NET SALES PRICE shall, subject to the provision of Clause 7.2.5 of this
Agreement, mean in the case of PRODUCT sold by GEMINI or an AFFILIATE,
that sum determined by deducting from the aggregate gross IN MARKET
sales proceeds billed for the PRODUCT by GEMINI or, its AFFILIATE, as
the case may be, in accordance with generally accepted accounting
principles, the following deductions:-
(a) customs duties or other taxes (excluding income or corporation
tax), directly related to the sale of PRODUCT which are paid
by GEMINI or its AFFILIATE as the case may be;
(b) a discount from the gross sales proceeds to cover such normal
costs as are incurred by GEMINI or its AFFILIATE, as the case
may be, in respect of transport, shipping insurance, returns
or discounts directly related to the sale of PRODUCT, subject
to a cap of [omitted] of the sum of the aggregate gross IN
MARKET sales proceeds less the deductible items at (a) above.
Party shall mean GEMINI or ELAN, as the case may be. Parties shall mean
ELAN and GEMINI.
PHARMACEUTICAL USE shall mean an application of the DEVICE which
requires regulatory approval to market either (a) the DEVICE (b) the
PRODUCT, or (c) GEMINI TECHNOLOGY, for such application in the
TERRITORY. For the avoidance of doubt, PHARMACEUTICAL USE shall not
include, and GEMINI shall have no rights to, any application of the
DEVICE and/or PRODUCT for COSMETIC USE.
PRODUCT shall mean the DEVICE either on its own, or in combination with
GEMINI TECHNOLOGY.
REGULATORY APPLICATION shall mean any regulatory application or any
other
<PAGE>
application for marketing approval, which a Party, or any INDEPENDENT
THIRD PARTY on behalf of such Party, will file, including any
supplements or amendments thereto, for a PRODUCT with the RHA.
REGULATORY APPROVAL shall mean the final approval to market a PRODUCT
in any country of the TERRITORY.
RHA shall mean any relevant government health authority (or successor
agency thereof) in any country of the TERRITORY whose approval is
necessary to market a PRODUCT in the relevant country of the TERRITORY.
TECHNOLOGICAL COMPETITOR shall mean a company or corporation having a
substantial part of its business in the research, development and
manufacturing of drug delivery technologies and/or products including
but not limited to the companies listed in Schedule 3.
TERM shall mean the term of this Agreement, as set out in Clause 9.
TERRITORY shall mean all of the countries of the world.
WOUND CARE shall mean the treatment of diseases and/or bodily injuries
caused by the disruption of the normal continuity of structures of the
skin.
$ shall mean United States Dollars.
"US" or "USA" shall mean the United States of America.
1.2 Interpretation: In this Agreement:
1.2.1 the singular includes the plural and vice versa, the masculine
includes the feminine and vice versa and references to natural
persons include corporate bodies, partnerships and vice versa.
1.2.2 any reference to a Clause or Schedule, unless otherwise
specifically provided, shall be respectively to a Clause or
Schedule of this Agreement.
1.2.3 the headings of this Agreement are for ease of reference only
and shall not affect its construction or interpretation.
CLAUSE 2 - THE LICENSE
2.1 License to GEMINI:
2.1.1 Subject to the terms of this Agreement, ELAN hereby grants to
GEMINI and GEMINI hereby accepts for the TERM, a non-exclusive
license to the ELAN
<PAGE>
TECHNOLOGY to develop, manufacture, use, offer for sale and
sell PRODUCTS for PHARMACEUTICAL USE in the FIELD in the
TERRITORY. For the avoidance of doubt, the license granted
herein for PHARMACEUTICAL USE shall only entitle GEMINI to
develop, manufacture, use, offer for sale and sell PRODUCTS
which require REGULATORY APPROVAL to be marketed in the
TERRITORY.
2.1.2 For the avoidance of doubt:-
(1) GEMINI shall have no rights to the ELAN TECHNOLOGY
for (i) the systemic delivery of a pharmaceutical
compound having a therapeutic use, or (ii) the
development of any water-soluble corticosteroid
product for treating local acute inflammatory
conditions or any local anaesthesia product
incorporating lidocaine or lidocaine analogues with
or without epinephrine; and
(2) it is agreed that ELAN shall not be obliged to
license technology acquired or licensed by ELAN after
the EFFECTIVE DATE to GEMINI except as provided in
Clause 3.2.3 of this Agreement.
2.1.3. ELAN agrees that it will from time to time discuss with GEMINI
other technology licensing opportunities in the FIELD and
otherwise, but only if and to the extent that ELAN decides, in
its sole discretion, that it is desirable and appropriate to
do so.
2.2 Sub-licensing by GEMINI:
------------------------
2.2.1 GEMINI shall be entitled, subject to the prior written consent
of ELAN which shall not be unreasonably withheld or delayed,
to grant sub-licenses to package, import, use, offer for sale
and sell PRODUCTS in one or more countries of the TERRITORY,
provided that GEMINI shall grant one sub-license only per
country and GEMINI shall not grant a sub-license to a
TECHNOLOGICAL COMPETITOR of ELAN.
2.2.2 Any sub-license granted hereunder shall be in the same terms
mutatis mutandis as the terms of this Agreement insofar as
they are applicable, but excluding the right to grant a
sub-license.
2.2.3 GEMINI shall be liable to ELAN for all acts and omissions of
any sub-licensee as though such acts and omissions were by
GEMINI and GEMINI shall provide the indemnity to ELAN outlined
in Clause 11.7.
2.2.4 Where a sub-license has been granted under Clause 2.2.1, such
sub-license shall automatically terminate if this Agreement
terminates for the country or countries covered by the
sub-license.
2.2.5 GEMINI shall undertake to protect the confidentiality of the
<PAGE>
ELAN TECHNOLOGY in its dealings with permitted sub-licensees.
2.2.6 For the avoidance of doubt:-
(1) the Parties agree that any sub-license granted
pursuant to this Clause 2.2 shall not be capable of
surviving the termination of this Agreement; and
(2) GEMINI shall pay a royalty on NET INCOME on sales of
PRODUCT by permitted sub-licensees in accordance with
Clause 7 of this Agreement.
CLAUSE 3 - INTELLECTUAL PROPERTY
3.1. Ownership of ELAN Patent Rights/Know-how:
-----------------------------------------
3.1.1 ELAN shall remain the sole owner of the ELAN PATENTS and ELAN
KNOW-HOW.
3.1.2 ELAN shall be entitled to use the ELAN PATENTS, ELAN
IMPROVEMENTS, JOINT IMPROVEMENTS and ELAN KNOW-HOW, and all
technical and clinical data, generated by either Party
pursuant to this Agreement in connection with ELAN's
commercial arrangements outside of the FIELD or for COSMETIC
USE in the FIELD.
3.2 Ownership of ELAN IMPROVEMENTS, GEMINI IMPROVEMENTS and
--------------------------------------------------------
JOINT IMPROVEMENTS:
-------------------
3.2.1 The Parties agree that:
(1) ELAN IMPROVEMENTS will be owned by ELAN.
(2) GEMINI IMPROVEMENTS will be owned by GEMINI.
3.2.2 If GEMINI shall develop, or have developed, any ELAN
IMPROVEMENTS during the TERM, ELAN shall grant GEMINI the
right to use any such ELAN IMPROVEMENTS for PHARMACEUTICAL USE
in the FIELD for the TERM.
3.2.3 If ELAN shall develop, or have developed, any ELAN
IMPROVEMENTS during the TERM, ELAN shall, subject to any
contractual restrictions, grant GEMINI the right to use any
such ELAN IMPROVEMENTS for PHARMACEUTICAL USE in the FIELD for
the TERM. In the event that ELAN is obliged to pay a royalty
or any other consideration to a third party in connection with
any such ELAN IMPROVEMENTS, any such cost to ELAN
<PAGE>
shall be discharged by GEMINI as a condition of use thereof.
If GEMINI is unwilling to pay any such royalty or other
consideration, GEMINI shall have no right to use any such ELAN
IMPROVEMENTS.
3.2.4 JOINT IMPROVEMENTS will be jointly owned by GEMINI and ELAN.
GEMINI shall obtain exclusive rights to exploit the JOINT
IMPROVEMENTS for PHARMACEUTICAL USE in the FIELD for the TERM.
ELAN reserves the right to exploit the JOINT IMPROVEMENTS
outside the FIELD or for COSMETIC USE within the FIELD.
3.3 Filing and maintenance of patents:
----------------------------------
3.3.1 ELAN will be entitled, at its own expense, to file and
prosecute ELAN PATENTS and ELAN IMPROVEMENTS; to determine the
patent filing strategy in relation to same at its sole
discretion; and upon grant of any letters patent of the ELAN
PATENTS or the ELAN IMPROVEMENTS, to maintain such letters
patent in force.
ELAN shall notify GEMINI in writing of any patent applications
filed by ELAN for any ELAN IMPROVEMENTS.
3.3.2 ELAN will be entitled, at GEMINI's reasonable expense, to file
and prosecute all patent applications directed to PRODUCTS or
JOINT IMPROVEMENTS; to determine the patent filing strategy in
relation to same subject to timely notice given to GEMINI for
its input on matters relating to GEMINI TECHNOLOGY; and upon
grant of any letters patent directed to PRODUCTS or JOINT
IMPROVEMENTS, to maintain such letters patent in force. Should
it however be reasonably doubtful whether a patent may be
obtained, then ELAN may at its sole discretion decide not to
apply for a patent in one or more countries of the TERRITORY.
ELAN shall promptly notify GEMINI in writing of any patent
applications filed by ELAN for PRODUCTS or JOINT IMPROVEMENTS.
3.3.3 GEMINI will be entitled, at its own expense, to file and
prosecute any patent applications for the GEMINI TECHNOLOGY
and GEMINI IMPROVEMENTS; to determine the patent filing
strategy in relation to same at its sole discretion; and upon
grant of any letters patent for the GEMINI TECHNOLOGY or the
GEMINI IMPROVEMENTS, to maintain such letters patent in force.
3.3.4 All patent prosecution to be performed by ELAN shall be
carried out in accordance with ELAN's standard practice.
3.4 Enforcement
-----------
<PAGE>
3.4.1 GEMINI and ELAN shall promptly inform the other in writing of
any alleged infringement of which it shall become aware by a
third party of any patents within the ELAN PATENTS and provide
such other with any available evidence of infringement.
3.4.2 ELAN, at its option, shall be entitled to institute
enforcement proceedings ("ENFORCEMENT PROCEEDINGS") in respect
of any infringement or unauthorised use of the ELAN PATENTS,
the ELAN KNOW-HOW, the ELAN IMPROVEMENTS, the Joint
IMPROVEMENTS or any patents for PRODUCTS. GEMINI agrees to
provide all reasonable co-operation and assistance to ELAN in
relation to any such ENFORCEMENT PROCEEDINGS and agrees to be
named as a party in any ENFORCEMENT PROCEEDINGS instituted by
ELAN hereunder. GEMINI shall share equally in the costs of the
ENFORCEMENT PROCEEDINGS provided that ELAN reasonably believes
that the chances of succeeding in the cause of action are
greater than fifty (50%) percent. Any recovery remaining after
the deduction of reasonable expenses (including attorney's
fees and expenses) incurred in relation to such ENFORCEMENT
PROCEEDINGS shall be shared equally between ELAN and GEMINI.
3.4.3 GEMINI, at its option, shall be entitled to institute
ENFORCEMENT PROCEEDINGS in respect of any infringements of any
patents for the GEMINI TECHNOLOGY or the GEMINI IMPROVEMENTS
at its own expense and for its own benefit.
3.4.4 In the event that the intellectual property owner does not
want to institute ENFORCEMENT PROCEEDINGS, then the other
Party may enforce such rights at its own expense. The
intellectual property owner shall cooperate with the enforcing
Party and provide all reasonable assistance in relation to any
such ENFORCEMENT PROCEEDINGS. The enforcing Party must seek
written approval from the intellectual property owner, which
may not be unreasonably withheld, prior to taking action and
must keep intellectual property owner informed of the action
and may not enter into any settlement agreement without the
intellectual property owner's consent, which may not be
unreasonably withheld. Any reasonable fees and costs borne by
the intellectual property owner shall be reimbursed by the
enforcing Party. In the event that GEMINI decides to enforce
ELAN PATENTS, the ELAN KNOW-HOW, the ELAN IMPROVEMENTS, the
Joint IMPROVEMENTS or any patents for PRODUCTS in accordance
with this paragraph, any recovery remaining after the
deduction of reasonable expenses (including attorney's fees
and expenses) incurred in relation to such ENFORCEMENT
PROCEEDINGS shall constitute NET INCOME for the purpose of
this Agreement.
3.4.5 GEMINI undertakes that during the TERM, GEMINI shall not cite
or otherwise rely upon the ELAN PATENTS, the ELAN KNOW-HOW,
the ELAN IMPROVEMENTS, the Joint IMPROVEMENTS or any patents
for
<PAGE>
PRODUCTS licensed by GEMINI from ELAN pursuant to this
Agreement, against the iontophoretic technology specified in
Schedule 2 which has been licensed by ELAN to IOMED.
3.5 Defence
-------
3.5.1 In the event that a claim or proceeding is brought against
GEMINI by a third party alleging that the sale, manufacture,
use or offer for sale of devices and or methods as exclusively
claimed in the ELAN PATENTS infringes the patent rights of
such a third party in the TERRITORY, GEMINI shall promptly
advise ELAN of such threat or suit.
3.5.2. ELAN shall indemnify GEMINI against such a claim to the extent
set out in Clause 3.5.4; provided that that ELAN should have
reasonably been aware of such third party patent rights as a
result of ELAN's efforts in the preparation and prosecution of
ELAN PATENTS as of the date of execution of this Agreement.
GEMINI shall not acknowledge to the third party or to any
other person the validity of any claims of such a third party,
and shall not compromise or settle any claim or proceedings
relating thereto without the prior written consent of ELAN,
not to be unreasonably withheld or delayed. At its option,
ELAN may elect to take over the conduct of such proceedings
from GEMINI and ELAN shall indemnify GEMINI against the third
party claim subject to the provisions of this paragraph. Both
parties recognise that where ELAN should not reasonably have
had knowledge of such third party patent rights as a result of
ELAN's efforts in the preparation and prosecution of ELAN
PATENTS as of the date of execution of the Agreement, ELAN
shall not indemnify GEMINI against any such claim.
3.5.3 In the event that a claim or proceeding is brought against
GEMINI by a third party alleging that the sale, manufacture,
offer for sale or use of any device or method as exclusively
claimed in the ELAN PATENTS infringes the patent rights of
such a third party and ELAN should not reasonably have had
knowledge of such third party intellectual property rights as
a result of ELAN's efforts in the preparation and prosecution
of ELAN PATENTS as of the date of the execution of the
Agreement, GEMINI and ELAN shall meet to discuss in what
manner the said proceedings should be defended.
3.5.4 ELAN's maximum liability pursuant to Clauses 3.5.2, and 11.8
for damages and costs in relation to all third party claims
shall be a reduction by up to [omitted] of the royalty payable
by GEMINI to ELAN pursuant to Clause 7.2 of this Agreement. In
accordance with its obligations pursuant to Clause 11.9.5,
GEMINI shall favourably consider taking such action as is
reasonable, such as to cease selling the PRODUCT, to
re-engineer or modify the applicable PRODUCT so as to avoid
infringing the patent rights of a third party, or entering
into a license agreement with such third party after due
consultation with ELAN.
<PAGE>
3.5.5 ELAN shall have no liability to GEMINI whatsoever or howsoever
arising for any losses incurred by GEMINI as a result of
having to cease selling PRODUCT or having to defer the launch
of selling PRODUCT, whether as a result of a court order or
otherwise.
3.5.6 Subject to Clause 3.5.2, GEMINI shall indemnify ELAN for any
claim brought against ELAN by a third party alleging that the
manufacture, use, sale or offer for sale of the DEVICE or
PRODUCT constitutes an infringement or unauthorised use of any
such third party intellectual property right.
3.5.7 In the event that a claim or proceeding is brought against
ELAN by a third party alleging that the manufacture, offer for
sale, sale, distribution or use of PRODUCTS (excluding the
DEVICE where same is marketed on its own without any GEMINI
TECHNOLOGY), JOINT IMPROVEMENTS, GEMINI TECHNOLOGY or GEMINI
IMPROVEMENTS in the TERRITORY infringes any adversely held
patent or involves the unauthorised use of any other
intellectual property, ELAN shall promptly advise GEMINI of
such threat or suit. Subject to ELAN's obligations pursuant to
the provisions of Clause 11.8 and Clause 3.5.2, GEMINI shall
indemnify ELAN against such a claim; provided that ELAN shall
not acknowledge to the third party or to any other person the
validity of the patent rights of such a third party and shall
not compromise or settle any claim or proceedings relating
thereto without the written consent of GEMINI, which shall not
be unreasonably withheld or delayed. At its option, GEMINI may
elect to take over the conduct of such proceedings from ELAN
with counsel of GEMINI's choice. In such event GEMINI shall
keep ELAN advised of all material developments in the said
proceedings and shall not settle or compromise such
proceedings without the consent of ELAN which shall not be
unreasonably withheld or delayed.
3.6 Trademarks
----------
3.6.1 GEMINI shall market the PRODUCT in the TERRITORY under the
GEMINI TRADEMARK.
3.6.2 Any Party using the mark of the other Party must seek prior
written approval for all such uses, including but not limited
to advertising, marketing and promotional material.
CLAUSE 4 - DEVELOPMENT OF PRODUCTS
4.1 GEMINI shall be responsible for all activities and costs associated
with the further research, development, manufacture, marketing and
commercialisation of PRODUCTS utilising the ELAN TECHNOLOGY.
4.2 ELAN agrees to provide, at no cost to GEMINI, up to 100 hours of
technical support
<PAGE>
and assistance to GEMINI in connection with implementing the transfer
of the ELAN TECHNOLOGY to GEMINI and commencing further development of
the DEVICE. The Parties shall each negotiate in good faith the extent,
if any, to which ELAN shall provide further research and development
services to GEMINI in addition to such 100 hours of technical support.
In the event that ELAN provides such additional services, ELAN's
charges for this work shall be on the basis set out in Clause 7.3.
4.3 GEMINI, alone or in partnership with a permitted sub-licensee, shall
commit to performing the following activities with regard to the
development and commercialisation of PRODUCTS utilising the ELAN
TECHNOLOGY:
4.3.1. [omitted];
4.3.2. [omitted].
4.3.3. [omitted];
4.3.4. [omitted];
4.3.5. [omitted];
4.3.6. Thereafter for the term of the Agreement, GEMINI shall in good
faith use all reasonable endeavours to commercialise PRODUCTS
and shall expend a minimum of [omitted] annually in
development costs, calculated on a FULLY ALLOCATED COST basis.
4.3.7. GEMINI warrants that all REGULTORY APPLICATIONS and IDEs to be
submitted pursuant to this Clause 4.3 shall be made in good
faith and in a form and content reasonably likely to be
acceptable to the RHA in the relevant country of the MAJOR
MARKET.
4.4. Should GEMINI fail to submit any of the REGULATORY APPLICATIONS in
accordance with its obligations pursuant to Clause 4.3. within the
relevant time periods, ELAN shall be entitled, at its sole discretion
at any time thereafter, to terminate the Agreement on 30 days prior
written notice to GEMINI; provided however, that ELAN shall not be
entitled to so terminate this Agreement if (i) GEMINI's failure to file
any such REGULATORY APPLICATIONS was due to regulatory difficulties
which could not have been reasonably foreseen and which cannot be
remedied without incurring expenditure which is commercially
unreasonable, and (ii) GEMINI has expended a minimum of [omitted] in
development costs on a FULLY ALLOCATED COST basis during the relevant
time period.
<PAGE>
CLAUSE 5 - REGISTRATION OF THE PRODUCT
5.1 ELAN shall be responsible, at GEMINI's expense, for performing the
following regulatory activities:
5.1.1 compilation, filing and maintaining the REGULATORY
APPLICATIONS for the DEVICE with the RHA in the MAJOR MARKETS;
and
5.1.2 providing regulatory support to ensure timely review of the
DEVICE dossier and resolution of questions by the RHA in the
MAJOR MARKETS.
5.2 ELAN shall perform the regulatory activities described in Clause 5.1
for GEMINI in a manner as would be deemed commensurate with the
achievement of its own business aims for a similar mechanism or product
of its own. ELAN's charges for this work shall be on the basis set out
in Clause 7.3.
5.3 In the event that GEMINI or any reputable third party (which is
acceptable to ELAN and which agrees to be bound by an obligation of
confidentiality), can perform the regulatory activities as described in
Clause 5.1 to the same quality standard as ELAN but at a cost which is
at least [omitted] less than ELAN's charges and which is supported by
documentary evidence from GEMINI or such third party, and provided that
ELAN is not agreeable to matching such reduced cost, GEMINI shall be
entitled to perform itself, or have said third party perform, such
regulatory activities at the reduced cost.
5.4 GEMINI shall be responsible, at GEMINI's expense, for performing the
following regulatory activities:
5.4.1 compilation, filing and maintaining the REGULATORY
APPLICATIONS with the RHA in the TERRITORY for the GEMINI
TECHNOLOGY;
5.4.2 compilation, filing and maintaining the REGULATORY
APPLICATIONS for the PRODUCTS with the RHA in the TERRITORY;
5.4.3 compilation, filing and maintaining the REGULATORY
APPLICATIONS for the DEVICE with the RHA in all of the
countries of the TERRITORY outside of the MAJOR MARKETS; and
5.4.4 providing regulatory support to ensure timely review of the
DEVICE dossier and resolution of all questions by the RHA
pursuant to this Agreement.
5.5 ELAN shall notify GEMINI of the date of submission of any REGULATORY
APPLICATION for the DEVICE in the MAJOR MARKETS and shall also notify
GEMINI of any REGULATORY APPROVAL of such applications as soon as is
reasonably possible following said REGULATORY APPROVAL. GEMINI shall
notify ELAN of the date of submission of any REGULATORY APPLICATION for
<PAGE>
the DEVICE in any country of the TERRITORY outside of the MAJOR MARKETS
and of any REGULATORY APPLICATION for the PRODUCT in the TERRITORY and
shall also notify ELAN of any REGULATORY APPROVAL as soon as is
reasonably possible following said REGULATORY APPROVAL. GEMINI shall
notify ELAN as soon as possible of any notification received by GEMINI
from an RHA to conduct an inspection of its manufacturing or other
facilities used in the development, manufacturing, packaging, storage
or handling of a PRODUCT. Copies of all correspondence with the RHA
will be provided to ELAN.
5.6 Upon request, ELAN shall submit to GEMINI a report outlining the
regulatory status of the DEVICE in the MAJOR MARKETS. Upon request,
GEMINI shall submit to ELAN a report fully outlining the regulatory
status of (i) the DEVICE in the countries of the TERRITORY outside of
the MAJOR MARKETS and (ii) PRODUCTS in each country of the TERRITORY.
5.7 ELAN will be the holder of the REGULATORY APPROVAL for the DEVICE in
the MAJOR MARKETS. GEMINI will be the holder of the REGULATORY APPROVAL
(a) for the DEVICE in all of the countries of the TERRITORY outside of
the MAJOR MARKETS, and (b) for PRODUCTS in the TERRITORY.
5.8 GEMINI will permit ELAN, or ELAN's licensees, without charge, to have
access to, to photocopy and to cross reference all REGULATORY APPROVALS
or REGULATORY APPLICATIONS for the DEVICE and/or PRODUCTS for the
purpose of obtaining REGULATORY APPROVALS for the DEVICE for use
outside of the FIELD.
5.9 GEMINI shall indemnify and hold harmless ELAN from and against all
claims, damages, losses, liabilities and expenses to which ELAN may
become liable relating to or arising out of GEMINI's bad faith,
negligence or intentional misconduct in connection with the filing or
maintenance of the REGULATORY APPLICATIONS and REGULATORY APPROVALS for
(a) the DEVICE in all of the countries of the TERRITORY outside of the
MAJOR MARKETS, and (b) for PRODUCTS in the TERRITORY.
5.10 It is hereby acknowledged that there are inherent uncertainties
involved in the registration of pharmaceutical products with an RHA in
relation to obtaining the REGULATORY APPROVAL and such uncertainties
form part of the business risk involved in undertaking the form of
commercial collaboration outlined in this Agreement. Accordingly, ELAN
and GEMINI shall have no liability to the other as a result of any
failure of a DEVICE and/or a PRODUCT to successfully achieve REGULATORY
APPROVAL of an RHA.
CLAUSE 6 - MARKETING AND PROMOTION OF THE PRODUCT
6.1 Within 90 days after the filing of the REGULATORY APPLICATION for a
PRODUCT in each country of the TERRITORY, GEMINI will outline to ELAN
the
<PAGE>
structure of the promotional activities to be carried out by GEMINI for
the period up to the first launch of such PRODUCT and for a period of 1
year thereafter. GEMINI shall both prior to and subsequent to the
launch of a PRODUCT communicate with ELAN regarding its objectives for
and performance of such PRODUCT in each country of the TERRITORY.
6.2 GEMINI shall use all commercially reasonable efforts to market and
promote PRODUCTS throughout the TERRITORY and, in doing so, shall use
the same level of effort as with other similar products of similar
sales potential which it markets.
6.3 If requested by ELAN and to the extent permitted by law, GEMINI's
promotional materials for a PRODUCT shall include due acknowledgement
that the ELAN TECHNOLOGY is licensed from ELAN and is included in the
PRODUCT.
6.4 GEMINI shall mark or have marked all patent number(s) in respect of the
ELAN PATENTS on all PRODUCTS, or otherwise reasonably communicate to
the trade the existence of any ELAN PATENTS for the countries within
the TERRITORY in such a manner as to ensure compliance with, and
enforceability under, applicable laws.
6.5 GEMINI shall effect the first full scale national commercial launch of
a PRODUCT in each country of the TERRITORY within 90 days of the
REGULATORY APPROVAL being granted for such PRODUCT in such country.
ELAN shall not unreasonably withhold its agreement to a request by
GEMINI for an extension of the said 90 day period if there are
legitimate commercial reasons for such an extension.
6.6 The Parties shall meet to discuss the sales performance of a PRODUCT on
a quarterly basis for the first year following the initial launch of
such PRODUCT, on a semi-annual basis for the second and third years and
on an annual basis thereafter. At such meetings, GEMINI shall report on
the ongoing sales performance of PRODUCTS in the TERRITORY, including
marketing approaches, educational campaigns, promotional and
advertising materials and campaigns, sales plans and results,
performance against competitors, its objectives for the PRODUCTS and
its plans for the next year of the Agreement.
CLAUSE 7 - FINANCIAL PROVISIONS
7.1 License Royalties:
------------------
7.1.1 In consideration of the license of the ELAN PATENTS granted to
GEMINI under this Agreement, GEMINI shall pay to ELAN
(i) the sum of $7,500,000 due upon execution of this
Agreement and payable within 2 business days of the
EFFECTIVE DATE; and
(ii) a license royalty fee of [omitted] of NET INCOME
until the aggregate of such royalty fee equals
[omitted].
<PAGE>
7.1.2 Payment of the license fee royalty pursuant to Clause
7.1.1(ii) shall be made once in each calendar quarter within
45 days after the expiry of the relevant calendar quarter.
7.1.3 All payments due hereunder shall be made in US Dollars.
7.1.4 For the avoidance of doubt, the Parties confirm that the
additional license fee payable by GEMINI to ELAN in accordance
with Clause 7.2.1 (ii) shall be payable in addition to the
royalty payments to be made by GEMINI in accordance with
Clause 7.2.
7.2 Royalties:
7.2.1 In consideration of the license of the ELAN PATENTS granted to
GEMINI under this Agreement, GEMINI shall make the following
royalty payments to ELAN:
(i) a royalty of [omitted] of the NET SALES PRICE of
PRODUCTS which are sold IN MARKET by GEMINI or its
AFFILIATES, and
(ii) a royalty of [omitted] of NET INCOME on PRODUCTS
which are sold IN MARKET by INDEPENDENT THIRD
PARTIES.
7.2.2 Within 45 days of the end of each calendar quarter of this
Agreement, GEMINI shall notify ELAN of the NET SALES PRICE of
PRODUCT for that previous calendar quarter. Payments shown by
each calendar quarter report to have accrued but which have
not yet been paid shall be included in calculating the NET
SALES PRICE for that quarter.
7.2.3 Payment of the royalties on NET SALES PRICE and NET INCOME
shall be made once in each calendar quarter within 45 days
after the expiry of the relevant calendar quarter.
7.2.4 All payments due hereunder shall be made in U.S. Dollars.
7.2.5 In the event that GEMINI or any AFFILIATE of GEMINI shall sell
a PRODUCT together with other products of GEMINI to third
parties (by the method commonly known in the pharmaceutical
industry as "bundling") and the price attributable to such
PRODUCT is less than the average price of "arms length" sales
to similar customers for the reporting period in which sales
occur (such sales to be excluded from the calculation of the
average price of "arms length" sales), NET SALES PRICE for any
such sales shall be the average price of "arms length" sales
by GEMINI or an AFFILIATE of GEMINI or a permitted
sub-licensee to similar customers in the country where such
bundling occurs during the reporting period in which such
sales occur.
<PAGE>
7.3 Additional Assistance and Work:
-------------------------------
In the event that work or technical assistance beyond that contemplated
in Clause 4.2 ("ADDITIONAL WORK") is requested by GEMINI, GEMINI shall
reimburse ELAN in respect of the cost of such ADDITIONAL WORK requested
by GEMINI or required pursuant to the terms of this Agreement provided
that:-
7.3.1 ELAN's charges for such work shall be ELAN's FULLY ALLOCATED
COST plus [omitted]; and
7.3.2 payment for all ADDITIONAL WORK carried out by ELAN hereunder
shall be effected in U.S. Dollars within 30 days of the date
of receipt of the relevant invoice.
7.4 Method of calculation of royalties and fees:
--------------------------------------------
The Parties acknowledge and agree that the methods for calculating the
royalties and fees hereunder are for the purposes of the convenience of
the Parties, are freely chosen and not coerced.
CLAUSE 8 - PAYMENTS, REPORTS AND AUDITS
8.1 GEMINI shall keep true and accurate records of gross sales of each of
the PRODUCTS, the items deducted from the gross amount in calculating
the NET SALES PRICE and the NET INCOME, the NET SALES PRICE and the
royalties payable to ELAN under Clause 7. GEMINI shall deliver to ELAN
a written statement ("the STATEMENT") thereof within 45 days following
the end of each calendar quarter, (or any part thereof in the first or
last calendar quarter of this Agreement) for such calendar quarter. The
STATEMENT shall outline, on a country-by-country basis, the calculation
of the NET SALES PRICE and the NET INCOME from gross revenues during
that calendar quarter, the applicable percentage rate, and a
computation of the sums due to ELAN. The Parties' financial officers
shall agree upon the precise format of the STATEMENT.
8.2 Payments due on NET INCOME and NET SALES PRICE of the PRODUCT based on
sales amounts in a currency other than US Dollars shall first be
calculated in the foreign currency and then converted to US Dollars on
the basis of the exchange rate in effect for the purchase of US Dollars
with such foreign currency quoted in The Wall Street Journal (or
comparable publication if not quoted in The Wall Street Journal) with
respect to the sale of currency of the country of origin of such
payment for the day prior to the date on which the payment by GEMINI is
being made.
8.3 Any income or other taxes which GEMINI is required by law to pay or
withhold on
<PAGE>
behalf of ELAN with respect to royalties and any other monies payable
to ELAN under this Agreement shall be deducted from the amount of such
NET INCOME and/or NET SALES PRICE payments, royalties and other monies
due. GEMINI shall furnish ELAN with proof of such payments. Any such
tax required to be paid or withheld shall be an expense of and borne
solely by ELAN. GEMINI shall promptly provide ELAN with a certificate
or other documentary evidence to enable ELAN to support a claim for a
refund or a foreign tax credit with respect to any such tax so withheld
or deducted by GEMINI. The Parties will reasonably cooperate in
completing and filing documents required under the provisions of any
applicable tax treaty or under any other applicable law, in order to
enable GEMINI to make such payments to ELAN without any deduction or
withholding.
8.4 All payments due hereunder shall be made to the designated bank account
of ELAN in accordance with such timely written instructions as ELAN
shall from time to time provide to GEMINI.
8.5 GEMINI shall pay interest to ELAN at either the Prime Rate publicly
announced by Morgan Guaranty Trust Company of New York at its principal
office on the date (or next to occur business day, if such date is not
a business day) on which payment should have been made pursuant to the
applicable provisions of this Agreement plus 5%, or the highest
interest rate permissible under applicable law, on all late payments
under this Agreement applicable from the date on which payment should
have been made pursuant to the applicable provisions of this Agreement
until the date of payment.
8.6 Where ELAN so requests to supplement the information available to ELAN
at the meetings of the Parties under Clause 8.9, GEMINI shall provide
ELAN with annual sales reports outlining the status of each of the
PRODUCTS in the TERRITORY, including a report on the competitive
position of such PRODUCT in its relevant market segment(s).
8.7 At any time and from time to time, GEMINI shall permit ELAN or its duly
authorised representatives (reasonably acceptable to GEMINI) upon
reasonable notice and at any reasonable time during normal business
hours and subject to the confidentiality provisions as contained in
this Agreement, to have access to inspect and audit the accounts and
records of GEMINI and any other book, record, voucher, receipt or
invoice relating to the calculation of the royalty payments on NET
SALES PRICE and NET INCOME submitted to ELAN during the preceding 2
year period.
8.8 Not more than once per item of cost or expense, ELAN shall permit
GEMINI or its duly authorised representatives (reasonably acceptable to
ELAN) upon reasonable notice and at any reasonable time during normal
business hours and subject to the confidentiality provisions as
contained in this Agreement, to have access to inspect and audit the
accounts and records of ELAN, solely for the purpose of verifying the
accuracy and reasonable composition of the costs and expenses paid or
reimbursed by GEMINI to ELAN in accordance with the terms of this
Agreement during the preceding 2 year period.
<PAGE>
8.9 In the event of a discovery of a discrepancy which exceeds 5% of the
amount due or charged by a Party for any period, the reasonable cost of
such discovery (including, without limitation, audit and accounting
cost) shall be borne by the audited Party; otherwise, such cost shall
be borne by the auditing Party.
CLAUSE 9 - DURATION AND TERMINATION
9.1 This Agreement shall be deemed to have come into force on the EFFECTIVE
DATE and, subject to the rights of termination outlined in this Clauses
9, will expire on a PRODUCT by PRODUCT basis and on a country by
country basis:-
9.1.1 on the 15th anniversary of the date of the commercial launch
of the PRODUCT in the country concerned; or
9.1.2 in any country upon the expiration of the life of the last to
expire patent included in the ELAN PATENTS in such PRODUCT in
that country;
whichever date is later to occur ("the INITIAL PERIOD").
9.2 At the end of the INITIAL PERIOD, the Agreement shall continue
automatically for rolling 3 year periods thereafter, unless the
Agreement has been terminated by either of the Parties by serving 2
years written notice on the other immediately prior to the end of the
INITIAL PERIOD or any additional 3 year period provided for herein.
9.3 In addition to the rights of termination provided for elsewhere in this
Agreement, either Party will be entitled forthwith to terminate this
Agreement by written notice to the other Party if:
9.3.1 that other Party commits any material breach of any of the
provisions of this Agreement, and in the case of a breach
capable of remedy, fails to remedy the same within 60 days
after receipt of a written notice giving full particulars of
the breach and requiring it to be remedied;
9.3.2 that other Party goes into liquidation (except for the
purposes of amalgamation or reconstruction and in such manner
that the company resulting therefrom effectively agrees to be
bound by or assume the obligations imposed on that other Party
under this Agreement);
9.3.3 an encumbrancer takes possession or a receiver is appointed
over any of the property or assets of that other Party; or
9.3.4 any proceedings are filed or commenced by that other Party
under bankruptcy, insolvency or debtor relief laws or anything
analogous to any of the foregoing under the laws of any
jurisdiction occurs in relation to that other Party;
<PAGE>
9.4 For the purposes of Clause 9.3.1, a breach will be considered capable
of remedy if the Party in breach can comply with the provision in
question in all respects other than as to the time of performance
(provided that time of performance is not of the essence).
9.5 In further addition to the rights and termination provided for
elsewhere in this Agreement, ELAN shall be entitled to terminate (i)
the license granted to GEMINI under this Agreement on a PRODUCT by
PRODUCT basis for any country or countries of the TERRITORY in
accordance with Clause 9.5.1 or 9.5.2 (in which event the definition of
TERRITORY shall be amended accordingly); or (ii) this Agreement for the
ELAN TECHNOLOGY for all of the TERRITORY in accordance with Clause
9.5.3, 9.5.4, 9.5.5, 9.5.6 or 9.5.7; in the event that:-
9.5.1 GEMINI fails to file a REGULATORY APPLICATION for a PRODUCT in
any country of the MAJOR MARKETS within 18 months from filing
the REGULATORY APPLICATION for such PRODUCT in the first
country of the MAJOR MARKETS;
9.5.2 GEMINI fails to effect any one of the commercial launches
required by Clause 6 in accordance with the provisions
thereof; or
9.5.3 GEMINI fails to pay any monies due to ELAN in accordance with
this Agreement; or
9.5.4 GEMINI notifies ELAN that it does not wish to commercialise
the PRODUCT in any country of the TERRITORY; or
9.5.5 a TECHNOLOGICAL COMPETITOR of ELAN acquires more than 20% of
GEMINI's voting stock or where more than 20% of such company's
voting stock is acquired by GEMINI; or
9.5.6 a FINANCIAL INVESTOR acquires ownership or control of more
than 40% of the voting rights in GEMINI in any one transaction
or a series of related transactions and which results
immediately or at any subsequent stage in a change of
one-third or more of the board of directors of GEMINI; or
9.5.7 any company other than a TECHNOLOGICAL COMPETITOR or FINANCIAL
INVESTOR acquires ownership or control of more than 40% of the
voting rights in GEMINI in any one transaction or a series of
related transactions.
CLAUSE 10 - CONSEQUENCES OF TERMINATION
10.1 Upon exercise of those rights of termination specified in Clauses 9 or
elsewhere in this Agreement, this Agreement shall, subject to the
provisions of the Agreement which survive the termination of the
Agreement, automatically terminate forthwith
<PAGE>
and be of no further legal force or effect.
10.2 Upon termination of the Agreement by either Party, or upon termination
by ELAN of a license for the TERRITORY, or for a particular country of
the TERRITORY, under Clause 9.5, the following shall be the
consequences relating to the termination of the Agreement or the
termination of the Agreement with respect to the TERRITORY or the
particular country, as applicable:-
10.2.1 any sums that were due from GEMINI to ELAN under the
provisions of Clause 7 or otherwise howsoever prior to the
exercise of the right to terminate this Agreement as set forth
herein shall be paid in full within 30 days of termination of
this Agreement and ELAN shall not be liable to repay to GEMINI
any amount of money paid or payable by GEMINI to ELAN up to
the date of the termination of this Agreement except for any
monies that may be due from ELAN under any audit performed
pursuant to Section 8.8. within the time period specified in
Section 10.2.4;
10.2.2 all confidentiality provisions set out herein shall remain in
full force and effect for a period of 5 years from the date of
such termination;
10.2.3 all responsibilities and warranties shall insofar as are
appropriate remain in full force and effect;
10.2.4 the rights of inspection and audit shall continue in force for
a period of 12 months from the date of termination of this
Agreement;
10.2.5 ELAN shall be entitled to research, develop and commercialise
the ELAN TECHNOLOGY for its own benefit in the TERRITORY or in
the relevant country or countries of the TERRITORY;
10.2.6 each of the Parties shall be entitled to on a royalty free
basis to have access to and to separately exploit any JOINT
IMPROVEMENTS;
10.2.7 GEMINI shall transfer to ELAN or ELAN's designee without
charge, and/or permit ELAN or ELAN's designee without charge
to conduct sufficient cross-referencing to, and have
sufficient access to, any and all pending REGULATORY
APPLICATIONS or granted REGULATORY APPROVALS for the DEVICE or
any PRODUCTS for the relevant country or countries of the
TERRITORY.
10.2.8 GEMINI shall promptly make an accounting to ELAN of the
inventory of the PRODUCT which it has in the TERRITORY or for
such particular country or countries in the TERRITORY (as the
case may be), if any, as of the date of such termination and
GEMINI shall thereafter have the right for a period of six (6)
months after said expiration or termination to sell such
inventory of the PRODUCT in the TERRITORY or in such
particular country or countries in the TERRITORY (as the case
may be) or, if appropriate and legally permissible, to
<PAGE>
transport such inventory of PRODUCT for sale in another
country or countries in the TERRITORY within such six month
period; provided that such sale shall be subject to the
royalty provisions of Clause 7 and the other applicable terms
of this Agreement. Thereafter, any remaining inventory of
PRODUCT shall be disposed of by GEMINI, at GEMINI's cost, in
accordance with regulatory requirements.
CLAUSE 11 - REPRESENTATIONS, WARRANTIES AND INDEMNITY
11.1 ELAN represents to GEMINI the following:
11.1.1 ELAN is duly and validly existing in the jurisdiction of its
incorporation and each other jurisdiction in which the conduct
of its business requires such qualification, and is in
compliance with all applicable laws, rules, regulations or
orders relating to its business and assets;
11.1.2 ELAN has full corporate authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby; this Agreement has been duly executed and delivered by
ELAN and constitutes the legal and valid obligations of ELAN
and is enforceable against ELAN in accordance with its terms;
and the execution, delivery and performance of this Agreement
and the transactions contemplated hereby will not violate or
result in a default under or creation of lien or encumbrance
under ELAN's memorandum and articles of association or other
organic documents, any material agreement or instrument
binding upon or affecting ELAN or its properties or assets or
any applicable laws, rules, regulations or orders affecting
ELAN or its properties or assets;
11.1.3 ELAN is not in material default of its memorandum and articles
of association or similar organic documents, any applicable
material laws or regulations or any material contract or
agreement binding upon or affecting it or its properties or
assets and the execution, delivery and performance of this
Agreement and the transactions contemplated hereby will not
result in any such violation;
11.1.4 ELAN represents and warrants that ELAN is the sole and
exclusive owner or licensee of, or controls all right, title
and interest to the ELAN PATENTS and, to the best of ELAN's
knowledge, as of the date of this Agreement, the sole and
exclusive owner of the ELAN KNOW-HOW; ELAN has the right to
grant the licenses granted herein, and the ELAN TECHNOLOGY is
free and clear of any lien, encumbrances, security interest or
restriction on the license granted herein; and
11.1.5 ELAN represents and warrants that the execution of this
Agreement and the full performance and enjoyment of the rights
of GEMINI under this Agreement will not breach or in any way
be inconsistent with the terms and conditions of any
<PAGE>
license, contract, understanding or agreement, whether
express, implied, written or oral between ELAN and any third
party.
11.2 GEMINI represents to ELAN the following:
11.2.1 GEMINI is duly and validly existing in good standing in the
jurisdiction of its incorporation and each other jurisdiction
in which the conduct of its business requires such
qualification, and GEMINI is in compliance with all applicable
laws, rules, regulations or orders relating to its business
and assets;
11.2.2 GEMINI has full corporate authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby; this Agreement has been duly executed and delivered by
GEMINI and constitutes the legal and valid obligations of
GEMINI and is enforceable against GEMINI in accordance with
its terms; and the execution, delivery and performance of this
Agreement and the transactions contemplated hereby will not
violate or result in a default under or creation of lien or
encumbrance under GEMINI's certificate of incorporation,
by-laws or other organic documents, any material agreement or
instrument binding upon or affecting GEMINI or its properties
or assets or any applicable laws, rules, regulations or orders
affecting GEMINI or its properties or assets;
11.2.3 GEMINI is not in material default of its charter or by-laws,
any applicable laws or regulations or any material contract or
agreement binding upon or affecting it or its properties or
assets and the execution, delivery and performance of this
letter agreement and the transactions contemplated hereby will
not result in any such violation; and
11.2.4 GEMINI represents and warrants that it has not granted any
option, license, right or interest to any third party which
would conflict with the terms of this Agreement.
11.3 GEMINI represents and warrants that the PRODUCTS shall be manufactured,
packaged, distributed and sold in accordance with all applicable
regulations and requirements of the RHAs in the TERRITORY, including,
without limitation, the cGP regulations which apply to the manufacture,
storage, packaging and supply of PRODUCT. GEMINI represents and
warrants that the PRODUCTS shall not be adulterated or mis-branded as
defined by the FFDCA (or applicable foreign law) and shall not be a
product which would violate any section of such Act if introduced in
interstate commerce.
11.4 GEMINI represents and warrants that it will fully comply with all
applicable statutes, ordinances and regulations in the TERRITORY with
respect to the manufacture of the PRODUCTS including, but not limited
to, the FFDCA and regulations thereunder and cGP. GEMINI shall
manufacture or procure the manufacture of the PRODUCTS in conformity
with the REGULATORY APPROVALS and in a manner which fully complies with
all applicable United States of America and foreign statutes,
ordinances,
<PAGE>
regulations and practices.
11.5 Each of the Parties shall indemnify, defend and hold harmless the other
Party and its officers, directors, employees and agents from all
actions, losses, claims, demands, damages, costs and liabilities
(including reasonable attorneys' fees) to which the other Party is or
may become liable insofar as they arise out of any breach by the first
Party of any of its obligations or warranties under this Agreement.
11.6 GEMINI shall indemnify, defend and hold harmless ELAN and its officers,
directors, employees and agents from all actions, losses, claims,
demands, damages, costs and liabilities (including reasonable
attorneys' fees) due to third party claims to which ELAN is or may
become subject insofar as they arise out of or are alleged or claimed
to arise out of activities conducted by GEMINI in the development,
manufacture, transport, packaging, storage, handling, distribution,
promotion, marketing, offer for sale or sale of the PRODUCT, including
any product liability claim or any claim relating to a recall of a
PRODUCT.
11.7 With reference to Clause 2.2.3, GEMINI shall indemnify and hold
harmless ELAN Party and its officers, directors, employees and agents
to the extent that any claims, damages, liabilities, claims, costs or
expenses arise out of any such acts or omissions of any sub-licensee.
11.8 ELAN represents and warrants that, as of the date of this Agreement, no
third party has filed any action against ELAN alleging that the
exploitation of the ELAN PATENTS infringes any INDEPENDENT THIRD PARTY
patent in the TERRITORY.
11.9 As a condition of obtaining an indemnity in the circumstances set out
in Clauses 11.5, 11.6 and 11.7, the Party seeking an indemnity shall:
11.9.1 fully and promptly notify the other Party of any claim or
proceedings, or threatened claim or proceedings for which an
indemnity will be sought;
11.9.2 permit the indemnifying Party to take full control of such
claim or proceedings;
11.9.3 assist in the investigation and defence of such claim or
proceedings;
11.9.4 not compromise or otherwise settle any such claim or
proceedings without the prior written consent of the other
Party, which consent shall not be unreasonably withheld; and
11.9.5 take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceedings.
11.10 Subject to the provisions of Clause 9.5(1), ELAN agrees that during the
TERM, ELAN shall not directly or indirectly, utilise itself, or licence
to any third party, the ELAN TECHNOLOGY for PHARMACEUTICAL USE in the
FIELD in the TERRITORY without the prior written consent of GEMINI.
<PAGE>
11.11 Notwithstanding anything to the contrary in this Agreement, ELAN and
GEMINI shall not be liable to the other by reason of any representation
or warranty, condition or other term or any duty of common law, or
under the express terms of this Agreement, for any consequential or
incidental or punitive loss or damage (whether for loss of profits or
otherwise) and whether occasioned by the negligence of the respective
Parties, their employees or agents or otherwise.
CLAUSE 12 - CUSTOMER COMPLAINTS AND PRODUCT RECALL
12.1. GEMINI or its permitted sub-licensees shall have sole responsible for
the reporting and handling of any adverse events associated with
PRODUCTS with the RHA in each country of the TERRITORY. Furthermore, in
the event of any recall of any PRODUCT, as suggested or requested by
any governmental authority, GEMINI shall perform the recall and all
associated costs and liabilities shall be borne by GEMINI.
12.2. GEMINI shall notify ELAN promptly of any complaints from third parties
reported to GEMINI involving any serious and unexpected adverse
reactions resulting from the use any PRODUCT in the TERRITORY. ELAN
shall notify GEMINI promptly of any complaints from third parties
reported to ELAN involving any serious and unexpected adverse reactions
resulting from the use the DEVICE in the TERRITORY.
CLAUSE 13 - MISCELLANEOUS PROVISIONS
13.1 Secrecy:
--------
13.1.1 Any information, whether written or oral (oral information
shall be reduced to writing within one month by the Party
giving the oral information and the written form shall be
furnished to the other Party) pertaining to the PRODUCT that
has been or will be communicated or delivered by ELAN to
GEMINI or any of its AFFILIATES, or by GEMINI to ELAN or any
of its AFFILIATES, including, without limitation, trade
secrets, business methods, and cost, supplier, manufacturing
and customer information, shall be treated by GEMINI and ELAN,
respectively, as confidential information, and shall not be
disclosed or revealed to any INDEPENDENT THIRD PARTY
whatsoever or used in any manner except as expressly provided
for herein; provided, however, that such confidential
information shall not be subject to the restrictions and
prohibitions set forth herein to the extent that such
confidential information:-
(1) is available to the public in public literature or
otherwise, or after disclosure by one Party to the
other becomes public knowledge through no default of
the Party receiving such confidential information; or
<PAGE>
(2) was known to the Party receiving such confidential
information prior to the receipt of such confidential
information by such Party, whether received before or
after the date of this Agreement; or
(3) is obtained by the Party receiving such confidential
information from a third party not subject to a
requirement of confidentiality with respect to such
confidential information; or
(4) is required to be disclosed pursuant to: (A) any
order of a court having jurisdiction and power to
order such information to be released or made public;
or (B) any lawful action of a governmental or
regulatory agency provided that each Party shall
notify the other in writing of any disclosure of
information required hereunder prior to such
disclosure.
13.1.2 Each Party shall take in relation to the confidential
information of the other Party all such precautions as it
normally takes with its own confidential information to
prevent any improper disclosure of such confidential
information to any INDEPENDENT THIRD PARTY; provided, however,
that such confidential information may be disclosed within the
limits required to obtain any authorisation from the
applicable RHA or any governmental or regulatory agency
(including the patents and trademark office in any country of
the TERRITORY) or with the prior written consent of the other
Party, which shall not be unreasonably withheld, or as may
otherwise be required in connection with the purposes of this
Agreement.
13.1.3 Each of the Parties agrees that it will not use, directly or
indirectly, any know-how of the other Party (ELAN KNOW-HOW or
GEMINI KNOW-HOW, as the case may be), or other confidential
information disclosed to it by the other Party or obtained by
it from the other Party pursuant to this Agreement, other than
as expressly provided herein.
13.1.4 Neither Party will publicise the existence of this Agreement
in any way without the prior written consent of the other
Party, except as required pursuant to the disclosure
requirements of applicable laws and regulations. Excluding any
such required disclosures, in the event that either Party
wishes to make an announcement concerning the Agreement, that
Party will seek the consent of the other Party. The terms of
any such announcement shall be agreed in good faith.
13.2 Assignments/ Sub-contracting:
-----------------------------
13.2.1 This Agreement may not be assigned by either Party without the prior
written consent of the other Party, save that either Party may assign
this Agreement in whole or in part and delegate its duties hereunder to
its AFFILIATE or AFFILIATES without such consent provided that such
assignment or delegation has no material adverse tax implications for
the other Party.
<PAGE>
13.2.2 Either Party shall also have the right to subcontract all or any
portion of its development, manufacturing or regulatory work under this
Agreement to an INDEPENDENT THIRD PARTY; save that GEMINI may not
assign any such activities to a TECHNOLOGICAL COMPETITOR. Each Party
shall be liable to the other Party for all acts and omissions of any
sub-contractor as though such acts and omissions were by such Party.
13.3 Parties bound:
--------------
This Agreement shall be binding upon and enure for the benefit of
Parties hereto, their successors and permitted assigns.
13.4 Severability:
-------------
If any provision in this Agreement is agreed by the Parties to be, or
is deemed to be, or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto:-
13.4.1 such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the
Parties, it will be deleted, with effect from the date of such
agreement or deletion or such earlier date as the Parties may
agree; and
13.4.2 the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be impaired or affected
in any way.
13.5 Force Majeure:
--------------
Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results
from causes beyond its reasonable control, including, without
limitation, acts of God, fires, strikes, acts of war, intervention of a
government authority, or non-availability of raw materials, but any
such delay or failure shall be remedied by such Party as soon as
practicable.
13.6 Relationship of the Parties:
----------------------------
Nothing contained in this Agreement is intended or is to be construed
to constitute ELAN and GEMINI as partners or members of a joint venture
or either Party as an employee of the other. Neither Party hereto shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other Party or to bind
the other Party to any contract, agreement or undertaking with any
third party.
13.7 Amendments:
-----------
<PAGE>
No amendment, modification or addition hereto shall be effective or
binding on either Party unless set forth in writing and executed by a
duly authorised representative of both Parties.
13.8 Waiver:
-------
No waiver of any right under this Agreement shall be deemed effective
unless contained in a written document signed by the Party charged with
such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any future breach or failure to perform or of
any other right arising under this Agreement.
13.9 No effect on other agreements:
------------------------------
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between the Parties unless specifically referred to, and solely to the
extent provided, in any such other agreement.
13.10 Governing law and jurisdiction:
-------------------------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of
conflicts of laws. For the purposes of this Agreement the Parties
submit to the non-exclusive jurisdiction of the courts of the State of
New York.
13.11 Notice:
-------
13.11.1 Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telecopied to:
ELAN care of
Elan International Services, Ltd.
102 St. James's Court
Flatts
Smiths, FL04
Bermuda
Attention: President
Telephone: 1 441 292 9169
Telefax : 1 441 292 2224
GEMINI at
Electropharmacology, Inc.
2301 NW 33rd Court
<PAGE>
Suite 102
Pompano Beach
Florida 33069
United States of America
Attention: Chairman, President and Chief Executive Officer
Telephone: 954 975 9818
Telefax: 954 975 4021
or to such other address(es) and telecopier numbers as may
from time to time be notified by either Party to the other
hereunder.
13.11.2 Any notice sent by mail shall be deemed to have been delivered
within 7 working days after despatch and any notice sent by
telex or telecopy shall be deemed to have been delivered
within 24 hours of the time of the despatch. Notice of change
of address shall be effective upon receipt.
IN WITNESS of which the Parties have executed this Agreement.
<PAGE>
SCHEDULE 1
ELAN PATENTS
[omitted]
<PAGE>
SCHEDULE 2
EXCLUDED TECHNOLOGY
(i) See attached list of issued patents and pending patent applications.
(ii) MEDIPAD(TM) Drug Delivery System
MEDIPAD(TM) is a disposable single use, drug delivery device that contains a
microinfuser and integral probe to deliver drug subcutaneously.
MEDIPAD(TM) utilises controlled gas generation as the activation
mechanism for drug delivery. Activation of the MEDIPAD(TM) device
results in the generation of gas which compresses a membrane and forces
drug through the probe into the subcutaneous tissue.
(iii) See attached list of issued patents and pending patent applications.
<PAGE>
Schedule 2
List of Issued Patents and Pending Patent Applications
[34 pages omitted]
<PAGE>
SCHEDULE 3
TECHNOLOGICAL COMPETITORS
[omitted]
<PAGE>
Executed by GEMINI on September 30, 1998
By: /s/ Arup Sen
-------------------
Name: Arup Sen
Title: Chairman & CEO
Executed by ELAN on September 30, 1998
By: /s/ Liam Daniel
----------------
Name: Liam Daniel
Title: Director
