UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---- Act of 1934. For the quarterly period ended June 30, 1998.
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934. For the transition period from _____ to _____.
Commission File Number
0-27410
INTERCARDIA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 56-1924222
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code 919-558-8688
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of August 12, 1998
Common Stock, par value $.001 7,282,412 Shares
<PAGE>
INTERCARDIA, INC.
INDEX TO FORM 10-Q
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and
September 30, 1997 (unaudited) .................................... 3
Consolidated Statements of Operations for the Three Months and
Nine Months ended June 30, 1998 and 1997 (unaudited) .............. 4
Consolidated Statements of Cash Flows for the Nine Months ended
June 30, 1998 and 1997 (unaudited) ................................ 5
Notes to Unaudited Consolidated Financial Statements .............. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders ....... 16
Item 5. Other Information ......................................... 16
Item 6. Exhibits and Reports on Form 8-K .......................... 16
SIGNATURE ......................................................... 18
2
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INTERCARDIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)
June 30, September 30,
1998 1997
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 11,237 $ 18,185
Marketable securities 7,626 17,341
Accounts receivable 1,322 1,127
Prepaids and other current assets 210 241
-------- --------
Total current assets 20,395 36,894
Marketable securities 3,578 2,054
Property and equipment, net 3,272 3,594
Other assets 85 81
-------- --------
$ 27,330 $ 42,623
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,508 $ 908
Accrued expenses 1,563 13,089
Current portion of capital lease obligations 580 558
Current portion of notes payable 56 73
Note payable to Interneuron -- 11,911
Deferred revenue -- 500
-------- --------
Total current liabilities 4,707 27,039
Long-term portion of capital lease obligations 936 1,058
Long-term portion of notes payable 535 555
Convertible debenture payable to Interneuron -- 515
Stockholders' equity:
Common stock, $.001 par value per share,
40,000,000 shares authorized, 7,282,263
and 6,765,162 shares issued and outstanding
at June 30, 1998 and September 30, 1997,
respectively 7 7
Additional paid-in capital 78,619 52,243
Deferred compensation (1,635) (296)
Accumulated deficit (55,839) (38,498)
-------- --------
Total stockholders' equity 21,152 13,456
-------- --------
$ 27,330 $ 42,623
======== ========
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
3
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INTERCARDIA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-----------------------------------------------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Contract and license fee revenue $ 577 $ 523 $ 1,662 $ 3,820
-------- -------- -------- --------
Costs and expenses:
Research and development 4,760 2,697 10,896 6,970
Purchase of in-process research
and development 5,343 -- 5,343 --
General and administrative 782 1,051 2,938 2,938
-------- -------- -------- --------
Total costs and expenses 10,885 3,748 19,177 9,908
-------- -------- -------- --------
Loss from operations (10,308) (3,225) (17,515) (6,088)
Investment income, net 119 192 174 696
Minority interest -- 17 -- (447)
-------- -------- -------- --------
Net loss $(10,189) $ (3,016) $(17,341) $ (5,839)
======== ======== ======== ========
Net loss per common share:
Basic $ (1.42) $ (0.43) $ (2.46) $ (0.84)
======== ======== ======== ========
Diluted $ (1.42) $ (0.43) $ (2.46) $ (0.84)
======== ======== ======== ========
Weighted average common shares
outstanding 7,168 6,990 7,057 6,978
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
4
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INTERCARDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
June 30,
----------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net loss $(17,341) $ (5,839)
Adjustments to reconcile net loss to net cash
used in operating activities:
Purchase of in-process research and development 5,343 --
Depreciation and amortization 1,508 348
Stock-based compensation 820 126
Deferred revenue (500) --
Minority interest in net income of consolidated
subsidiary -- 447
Change in operating assets and liabilities:
Accounts receivable (195) (50)
Other assets 27 (378)
Accounts payable 1,600 (73)
Accrued expenses (11,526) 154
-------- --------
Net cash used in operating activities (20,264) (5,265)
-------- --------
Cash flows from investing activities:
Proceeds from maturities and sales
of marketable securities 20,479 9,247
Purchases of marketable securities (12,288) (13,010)
Purchases of property and equipment (1,076) (1,394)
-------- --------
Net cash provided by (used in) investing activities 7,115 (5,157)
-------- --------
Cash flows from financing activities:
Net borrowings from Interneuron 6,272 6,507
Net proceeds from issuance of stock 176 270
Proceeds from notes payable 1 6
Principal payments on notes payable (38) (2)
Proceeds from sale/leaseback transactions 380 754
Principal payments on capital lease obligations (590) (332)
-------- --------
Net cash provided by financing activities 6,201 7,203
-------- --------
Net decrease in cash and cash equivalents (6,948) (3,219)
Cash and cash equivalents at beginning of period 18,185 21,735
-------- --------
Cash and cash equivalents at end of period $ 11,237 $ 18,516
======== ========
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
5
<PAGE>
INTERCARDIA, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
The "Company" refers collectively to Intercardia, Inc. ("Intercardia") and
its majority-owned subsidiaries, CPEC, Inc., a Nevada corporation ("CPEC"),
Aeolus Pharmaceuticals, Inc., a Delaware corporation ("Aeolus"), and Renaissance
Cell Technologies, Inc., a Delaware corporation ("Renaissance"). As of June 30,
1998, Intercardia owned 80.1% of the outstanding stock of CPEC, 65.8% of the
outstanding stock of Aeolus and 79.6% of the outstanding stock of Renaissance.
Intercardia is a majority-owned subsidiary of Interneuron Pharmaceuticals, Inc.
("Interneuron"). As of June 30, 1998, Interneuron owned 61.9% of the outstanding
capital stock of Intercardia and the 19.9% of the outstanding stock of CPEC not
owned by Intercardia.
The consolidated financial statements include the accounts of Intercardia
and its subsidiaries, CPEC, Aeolus and Renaissance. All significant intercompany
activity has been eliminated. The consolidated financial statements included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The unaudited consolidated financial statements
included herein should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1997 ("Fiscal 1997")
and in the Company's other SEC filings. Results for the interim period are not
necessarily indicative of the results for any other interim period or for the
full fiscal year. The Company's financial statements have been restated to
reflect the merger of Transcell Technologies, Inc. ("Transcell") and the Company
(see Note C).
B. Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings Per Share", as of December 31, 1997. SFAS No. 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of stock options and warrants.
Earnings per share amounts for all periods presented have been restated to
conform to SFAS No. 128 requirements. Due to the antidilutive effect of the
Company's outstanding stock options and warrants, there was no effect on the
earnings per share previously disclosed as a result of adopting SFAS No. 128.
6
<PAGE>
The Company will adopt SFAS No. 130, "Reporting Comprehensive Income", for
the fiscal year ending September 30, 1999. SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. Management believes its current
disclosures will not be affected by adopting SFAS No. 130.
The Company will adopt SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", for the fiscal year ending September 30,
1999. SFAS No. 131 specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to be
disclosed. Management believes its current disclosures will not be affected by
adopting SFAS No. 131.
C. Merger
On May 8, 1998, Intercardia acquired all of the outstanding stock of
Transcell in a merger of Transcell with and into Intercardia and also acquired
certain related technology rights held by Interneuron in exchange for
Intercardia Common Stock with an aggregate market value of approximately
$14,200,000 (the "Merger"). In addition, Intercardia issued replacement stock
options and warrants to purchase approximately 260,000 shares of Intercardia
Common Stock to Transcell employees, consultants and warrant holders. The former
Transcell operation, which is now a division of Intercardia, is referred to as
Intercardia Research Laboratories ("IRL") and is conducting pharmaceutical
research and development utilizing carbohydrate-based combinatorial chemistry.
Under the terms of the Agreement and Plan of Merger between Intercardia,
Transcell and Interneuron dated March 2, 1998 (the "Merger Agreement"),
Transcell stockholders will receive Intercardia Common Stock in three
installments. The first installment of 320,151 shares was issued upon closing
the transaction on May 8, 1998 (the "Closing"). The second and third
installments will each consist of approximately $3,000,000 of Intercardia Common
Stock, as valued at each issuance date, and will be issued in August 1999 and
February 2000. In exchange for certain license and technology rights held by
Interneuron, and for Interneuron's continuing guarantee of certain of
Transcell's lease obligations, Intercardia issued to Interneuron 174,672 shares
of Intercardia Common Stock at Closing with a value of $3,000,000 and will pay
Interneuron a royalty on net sales of certain products that may result from a
research collaboration (the "Merck Collaboration") originally entered into among
Transcell, Interneuron and Merck & Co., Inc. ("Merck").
Prior to the Merger, Transcell was a majority-owned subsidiary of
Interneuron. The acquisition of Interneuron's 77.9% ownership interest in
Transcell has been treated in a manner similar to a "pooling-of-interests", as
it represented a transfer of stock between entities under common control, and
the acquisition of the non-Interneuron ownership interest has been accounted for
by using the "purchase" method of accounting. Upon Closing, the Company incurred
a charge to operations of $5,343,000 for the purchase of the non-Interneuron
portion of in-process research and development. All of Transcell's past results
of operations have been
7
<PAGE>
combined with the results of operations of the Company, and the Company's
financial statements for all periods have been restated to reflect the Merger.
D. Contract Disputes with Astra Merck
The Company's collaboration (the "Astra Merck Collaboration") with Astra
Merck Inc. ("Astra Merck") provides that Astra Merck shall be responsible for
the Company's royalty obligation to Bristol-Myers Squibb Company ("BMS") and for
the expenses incurred in development and commercialization of the twice-daily
formulation of BEXTRA(R) (bucindolol HCl), and Astra Merck committed an amount
up to $15,000,000 to be expended in connection with such development. Astra
Merck has represented to the Company that it had expended $15,000,000 as of
April 30, 1998. The Company and Astra Merck are discussing Astra Merck's
contractual responsibility to fund such expenses above $15,000,000, while Astra
Merck has continued to fund such expenses. The Company believes that in the
event Astra Merck does not fund such expenses, Astra Merck would be in breach of
the Astra Merck Collaboration and lose the U.S. marketing rights to BEXTRA. The
Astra Merck Collaboration provides for arbitration of any disputes, and Astra
Merck has notified the Company that Astra Merck intends to institute arbitration
proceedings to resolve the dispute. Under the Astra Merck Collaboration, the
parties are required to attempt to resolve disputes prior to the actual
institution of arbitration proceedings. There can be no assurance as to the cost
or results of any arbitration.
On July 1, 1998, the business of Astra Merck was combined with that of
Astra AB's wholly owned subsidiary, Astra USA, Inc. into a new limited
partnership, Astra Pharmaceuticals, L.P. ("Astra Pharmaceuticals"), and Astra
Pharmaceuticals has succeeded to the rights and obligations of Astra Merck under
the Astra Merck Collaboration. In August 1998, the Company notified Astra
Pharmaceuticals that the Company believes Astra Pharmaceuticals has breached
certain non-competition provisions of the Astra Merck Collaboration. The Company
and Astra Pharmaceuticals are in discussions to resolve the conflict or
terminate the Astra Merck Collaboration. Astra Pharmaceuticals has informed the
Company it does not believe it is in violation of the Astra Merck Collaboration.
If the Astra Merck Collaboration is terminated because of Astra Merck's breach,
the Astra Merck Collaboration provides for return of all rights, material and
information relating to BEXTRA to the Company and a payment to the Company.
E. Subsequent Event
In July 1998, Intercardia signed an agreement ("Opocrin Agreement") to
license a development compound ("OP2000") from Opocrin S.p.A., of Modena, Italy
("Opocrin"). Intercardia intends to investigate the use of OP2000 as a drug for
the treatment of inflammatory bowl disease. The license is worldwide except for
Japan and South Korea. Intercardia made a $1,000,000 payment to Opocrin, which
will be recognized as license fee expense in the Company's fourth quarter as the
compound is in the early stages of development, and will be responsible for
conducting clinical trials for OP2000. Intercardia is required to make
additional milestone payments to Opocrin upon initiation of Phase III clinical
trials, upon filing for regulatory approval, upon obtaining regulatory approval
and upon achieving specified annual sales.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Introduction
Statements in this Form 10-Q that are not descriptions of historical facts
are forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those set forth herein and in the Company's other
SEC filings, including, in particular, risks relating to future capital needs,
risks related to the Company's proposed arbitration with Astra Merck, dependence
on collaborative partners, competition, uncertainties relating to clinical
trials, the early stage of products under development, government regulations,
market acceptance and risks relating to acquisitions. The following discussion
should be read in conjunction with the unaudited consolidated financial
statements and notes thereto appearing elsewhere in this report, the audited
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for Fiscal 1997 and the Company's other SEC
filings.
The Company's strategy is to be a leader in the discovery, development and
commercialization of therapeutics for the treatment of cardiovascular,
pulmonary, infectious and other diseases. The Company's most advanced product is
BEXTRA, a compound currently in Phase III clinical trials for the treatment of
congestive heart failure.
On May 8, 1998, Intercardia acquired all of the outstanding stock of
Transcell and certain related technology owned by Interneuron in exchange for
Intercardia Common Stock with an aggregate market value of approximately
$14,200,000. In addition, Intercardia issued Intercardia replacement stock
options and warrants to purchase approximately 260,000 shares of Intercardia
Common Stock to Transcell employees, consultants and warrant holders. Under the
terms of the Merger Agreement, Transcell stockholders will receive Intercardia
Common Stock in three installments. The first installment of 320,151 shares was
issued upon the Closing. The second and third installments will each consist of
approximately $3,000,000 of Intercardia Common Stock, as valued at each issuance
date, and will be issued in August 1999 and February 2000. In exchange for
certain license and technology rights owned by Interneuron, and for
Interneuron's continuing guarantee of certain of Transcell's lease obligations,
Intercardia issued to Interneuron 174,672 shares of Intercardia Common Stock at
Closing with a value of $3,000,000 and will pay Interneuron a royalty on net
sales of certain products that may result from the Merck Collaboration. Prior to
the Merger, Transcell was a majority-owned subsidiary of Interneuron. The
acquisition of Interneuron's 77.9% ownership interest in Transcell is treated in
a manner similar to a "pooling-of-interests" as it represented a transfer of
stock between entities under common control and the acquisition of the
non-Interneuron ownership interest is accounted for by using the "purchase"
method of accounting. Upon Closing, the Company incurred a charge to operations
of $5,343,000 for the purchase of the non-Interneuron portion of in-process
research and development. All of Transcell's past results of operations have
been combined with the results of operations of the Company, and the Company's
financial statements for all periods presented have been restated to reflect the
Merger.
9
<PAGE>
In July 1998, Intercardia signed the Opocrin Agreement to license OP2000
from Opocrin. Intercardia intends to investigate the use of OP2000 as a drug for
the treatment of inflammatory bowl disease. The license is worldwide except for
Japan and South Korea. Intercardia made a $1,000,000 payment to Opocrin, which
will be recognized as license fee expense in the Company's fourth quarter as the
compound is in the early stages of development, and will be responsible for
conducting clinical trials for OP2000. Intercardia is required to make
additional milestone payments to Opocrin upon initiation of Phase III clinical
trials, upon filing for regulatory approval, upon obtaining regulatory approval
and upon achieving specified annual sales.
The Company is developing plans designed to address any "Year 2000" issues
in advance of December 31, 1999. The Company uses primarily a limited number of
third party software programs and systems in its operations, and it is currently
in the process of assessing which of those are vital to Company operations and
their Year 2000 compliance status. Any failure of such programs or systems, or
those of suppliers, service providers or collaborative partners, to resolve any
Year 2000 issues on a timely basis could result in a major system failure or
miscalculations. The Company is developing contingency plans designed to address
any failures that might occur. Although there can be no assurances, based upon
its assessments to date, the Company does not believe that it will encounter
Year 2000 problems or compliance costs that will have a material effect upon its
financial condition or results of operations.
Results of Operations
The Company incurred net losses of $10,189,000 and $17,341,000 for the
three and nine months ended June 30, 1998, respectively, versus net losses of
$3,016,000 and $5,839,000 for the three and nine months ended June 30, 1997,
respectively. As a result of the Merger, the Company's financial statements for
all periods have been restated to include the results of operations of
Transcell.
Contract and license fee revenue of $577,000 and $1,662,000 for the three
and nine months ended June 30, 1998, respectively, consisted primarily of
contract revenue payments from Merck pursuant to the Merck Collaboration and
from Astra Merck pursuant to the Astra Merck Collaboration. Contract and license
fee revenue of $523,000 and $3,820,000 for the three and nine months ended June
30, 1997, respectively, consisted primarily of contract revenue payments
received from BASF Pharma/Knoll AG ("Knoll") pursuant to the Company's
collaboration with Knoll (the "Knoll Collaboration") and from Astra Merck
pursuant to the Astra Merck Collaboration.
The Company continues to increase its R&D operations in all of its research
and development programs. R&D expenses increased by $2,063,000 (76%) to
$4,760,000 for the three months ended June 30, 1998 from $2,697,000 for the
three months ended June 30, 1997. The increase in R&D expenses for the three
months was due to increased IRL expenses of $1,387,000, increased bucindolol and
general development expenses of $366,000, increased Aeolus expenses of $133,000
and increased Renaissance expenses of $177,000.
10
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R&D expenses increased by $3,926,000 (56%) to $10,896,000 for the nine
months ended June 30, 1998 from $6,970,000 for the nine months ended June 30,
1997. The increase in R&D expenses for the nine months was due to increased IRL
expenses of approximately $1,916,000, increased bucindolol and general
development expenses of approximately $710,000, increased Aeolus R&D expenses of
approximately $807,000 and increased Renaissance R&D expenses of approximately
$493,000.
IRL R&D expenses increased by $1,387,000 (92%) to $2,898,000 for the three
months ended June 30, 1998 from $1,511,000 for the three months ended June 30,
1997. IRL R&D expenses increased $1,916,000 (48%) to $5,932,000 for the nine
months ended June 30, 1998 from $4,016,000 for the nine months ended June 30,
1997. Based on a review of Transcell's assets after the Merger, the Company
recorded a write-down of approximately $700,000 for property and equipment which
did not meet the Company's capitalization criteria. The other increases for the
three and nine months resulted from expenses related to expanded IRL operations,
including expenses of the Merck Collaboration and moving into new and larger
facilities in June 1997.
The increases in bucindolol and general development expenses for the three
and nine months were primarily due to costs related to the development of BEXTRA
for Europe and additional R&D personnel expenses. The Astra Merck Collaboration
requires Astra Merck to pay for certain expenses related to the development of
the twice-daily formulation of BEXTRA for the United States. During the nine
months ended June 30, 1998, Astra Merck paid the Company contract revenue of
$633,000 and assumed liabilities on the Company's behalf of approximately
$4,800,000. From inception of the Astra Merck Collaboration through June 30,
1998, Astra Merck had assumed liabilities totaling approximately $14,606,000 on
the Company's behalf. These additional amounts did not flow through the
Company's Statements of Operations, as they were offset against related
expenses. As of June 30, 1998, the Company's Balance Sheet included
approximately $1,029,000 of accounts receivable due from Astra Merck and
approximately $671,000 of accrued expenses related to obligations assumed by
Astra Merck. See "--Liquidity and Capital Resources".
Aeolus R&D expenses increased by $133,000 (35%) to $510,000 for the three
months ended June 30, 1998 from $377,000 for the three months ended June 30,
1997. Aeolus R&D expenses increased by $807,000 (94%) to $1,661,000 for the nine
months ended June 30, 1998 from $854,000 for the nine months ended June 30,
1997. The increases in Aeolus R&D expenses for the three and nine months were
primarily due to increases in sponsored research, contracted chemistry and
patent fees, as Aeolus has expanded its antioxidant small molecule research
program during the past year.
Renaissance R&D expenses for its liver stem cell program for the three and
nine months ended June 30, 1998 were approximately $177,000 and $493,000,
respectively. Intercardia acquired 79.6% of the outstanding capital stock of
Renaissance in September 1997.
During the three and nine months ended June 30, 1998, the Company incurred
charges to operations of $5,343,000 for the purchase of the non-Interneuron
portion of Transcell in-process research and development in the Merger discussed
above.
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General and administrative ("G&A") expenses decreased by $269,000 (26%) to
$782,000 for the three months ended June 30, 1998 from $1,051,000 for the three
months ended June 30, 1997. G&A expenses were $2,938,000 for both the nine
months ended June 30, 1998 and June 30, 1997. The decrease in G&A expenses for
the three months and the flat G&A expenses for the nine months reflect the
discontinuance of IRL's G&A operating expenses in May 1998 as a result of the
Merger, as IRL's administrative functions are handled by Intercardia's
headquarter operations.
The minority interest in the Consolidated Statement of Operations for the
three and nine months ended June 30, 1997 related to the 19.9% minority interest
of CPEC. There were no minority interest charges for the three and nine months
ended June 30, 1998.
Liquidity and Capital Resources
As of June 30, 1998, the Company had cash, cash equivalents and marketable
securities of $22,441,000, which was $15,139,000 less than the balance at
September 30, 1997, primarily due to a $10,000,000 contract payment made
pursuant to the Astra Merck Collaboration in December 1997 in conjunction with
the development of BEXTRA in the United States and the funding of the Company's
operations for the nine month period ended June 30, 1998. Accrued expenses
decreased by approximately $11,526,000 to approximately $1,563,000, primarily
because the $10,000,000 Astra Merck payment was included in accrued expenses as
of September 30, 1997.
The Company's cash, cash equivalents and marketable securities balance is
expected to continue to decrease during the remainder of the fiscal year ending
September 30, 1998 ("Fiscal 1998"), due primarily to (1) lower contract revenue
for Fiscal 1998 than Fiscal 1997, which included payments of approximately
$3,480,000 made by Knoll pursuant to the Knoll Collaboration, (2) a decrease in
investment income due to lower cash and marketable securities balances, and (3)
increased expenses due to expanded operations, including costs associated with
bucindolol development, clinical trials in Europe, a full year of operations for
Renaissance, potential funding of a portion of development costs for BEXTRA in
the United States and operating expenses of IRL subsequent to completion of the
Merger in May 1998.
In connection with its acquisition of CPEC, the Company is committed to
provide certain support to the Phase III clinical trial for bucindolol, known as
the Beta-blocker Evaluation of Survival Trial (the "BEST Study"). The Astra
Merck Collaboration provides Astra Merck with U.S. marketing rights to the
twice-daily formulation of BEXTRA. The Astra Merck Collaboration provides that
Astra Merck shall be responsible for the Company's royalty obligation to BMS and
for the expenses incurred in development and commercialization of the
twice-daily formulation of BEXTRA in the United States, and Astra Merck
committed an amount up to $15,000,000 to be expended in connection with such
development. Astra Merck has represented to the Company that it had expended
$15,000,000 as of April 30, 1998. The Company and Astra Merck are discussing
Astra Merck's contractual responsibility to fund such expenses above
$15,000,000, while Astra Merck has continued to fund such expenses. The
12
<PAGE>
Company believes that in the event Astra Merck does not fund such expenses,
Astra Merck would be in breach of the Astra Merck Collaboration and lose the
U.S. marketing rights to bucindolol. The Astra Merck Collaboration provides for
arbitration of any disputes, and Astra Merck has notified the Company that Astra
Merck intends to institute arbitration proceedings to resolve the dispute. Under
the Astra Merck Collaboration, the parties are required to attempt to resolve
disputes prior to the actual institution of arbitration proceedings. There can
be no assurance as to the cost or results of any arbitration. The Company has
estimated that the remaining costs to complete the development of bucindolol in
the United States and prepare the New Drug Application ("NDA") for submission to
the U.S. Food and Drug Administration (the "FDA") could be $15,000,000 to
$20,000,000. In the event that the Company is required to fund such expenses, or
a portion of such expenses, its results of operations and financial position may
be materially adversely affected.
Pursuant to the Astra Merck Collaboration, the Company paid Astra Merck
$10,000,000 in December 1997 (for which the Company made an accrual as of
September 30, 1997) and agreed to pay up to $11,000,000 for one-third of product
launch costs incurred beginning when the Company files an NDA for the
twice-daily formulation of bucindolol and continuing through the first 12 months
subsequent to the first commercial sale of the formulation. In the event the
Company elects not to make these payments, the royalties payable by Astra Merck
to CPEC will be substantially reduced.
On July 1, 1998, the business of Astra Merck was combined with that of
Astra AB's wholly owned subsidiary, Astra USA, Inc. into a new limited
partnership, Astra Pharmaceuticals, who has succeeded to the rights and
obligations of Astra Merck under the Astra Merck Collaboration. In August 1998,
the Company notified Astra Pharmaceuticals that the Company believes Astra
Pharmaceuticals has breached certain non-competition provisions of the Astra
Merck Collaboration. The Company and Astra Pharmaceuticals are in discussions to
resolve the conflict or terminate the Astra Merck Collaboration. Astra
Pharmaceuticals has informed the Company it does not believe it is in violation
of the Astra Merck Collaboration. If the Astra Merck Collaboration is terminated
because of Astra Merck's breach, the Astra Merck Collaboration provides for
return of all rights, material and information relating to BEXTRA to the Company
and a payment to the Company. In such event, the Company would be responsible
for all remaining costs to develop BEXTRA in the United States.
The Company will incur additional charges to operations relating to the
acquisition of CPEC in the event that certain milestones are achieved in the
development and commercialization of bucindolol. The Company will be required to
issue to the former CPEC stockholders shares of Interneuron's common stock, upon
achieving the milestones of filing an NDA and receiving an approval letter from
the FDA to market bucindolol. In exchange for Interneuron providing such shares,
the Company will pay Interneuron the value of such shares, in either cash or
Intercardia Common Stock, at the Company's option. Each additional payment would
have minimum and maximum charges to the Company of $750,000 and $1,875,000,
respectively.
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Pursuant to the Knoll Collaboration, the Company is responsible for
approximately 40% of the development and marketing costs of bucindolol for all
countries with the exception of the United States and Japan (the "Knoll
Territory"), subject to certain maximum dollar limitations. The Company's
portion of development and clinical trials costs of the twice-daily formulation
of bucindolol for the Knoll Territory is estimated to be up to $10,000,000 and
the Company's portion of marketing costs prior to product launch is estimated to
be up to $4,000,000. Upon product launch, the Company will be responsible for
40% of the net loss in the Knoll Territory, if any, as defined. The Company is
also responsible for approximately 40% of the costs incurred to develop a
once-daily formulation of bucindolol for the Knoll Territory and approximately
67% of the once-daily development costs that have a worldwide benefit.
The Company is aware of products available or in development by its
competitors that address the diseases being targeted by the Company. In
particular, carvedilol, a non-selective beta-blocker with moderate vasodilating
properties, is owned by Hoffmann-La Roche Inc. ("Roche") and licensed in the
United States and certain other countries to SmithKline Beecham ("SKB"). In May
1997, the FDA approved the use of carvedilol as a treatment for congestive heart
failure in the United States, and SKB and Roche are currently co-promoting
carvedilol in the United States and a number of other countries. The Company is
unable to predict the impact of this product on BEXTRA, if BEXTRA is approved by
the FDA. Carvedilol's approval for marketing as a treatment for congestive heart
failure in the United States prior to BEXTRA may have adversely affected the
patient enrollment rate of the BEST Study and could provide a marketing
advantage for carvedilol. In addition, in March 1998, Germany-based Merck KGaA
announced early termination of the CIBIS II trial to test bisoprolol as a
treatment in CHF patients in Europe. Merck KGaA reported that in the trial,
which enrolled 2,647 patients, those receiving bisoprolol had a higher survival
rate than patients receiving customary treatment. Bisoprolol is a beta-1
receptor selective beta-blocker marketed for hypertension in the United States
by Wyeth-Ayerst Laboratories, a subsidiary of American Home Products
Corporation.
The Company expects to incur substantial additional costs and losses over
the next few years. The Company's working capital and capital requirements will
depend upon numerous factors, including: the progress of the development and
clinical trials of bucindolol; the status of the Astra Merck Collaboration,
including the resolution of proposed arbitration proceedings and whether the
Company assumes responsibility for all BEXTRA development costs in the United
States; the timing and cost of obtaining regulatory approvals; and the ability
of the Company to establish additional collaborative arrangements with other
companies to provide research or development funding to the Company and to
conduct clinical trials, obtain regulatory approvals, and manufacture and market
certain of the Company's products. The Company may acquire other products,
technologies or businesses that complement the Company's existing and planned
products, although the Company currently has no commitment or agreement with
respect to any such acquisitions. While the Company believes it has sufficient
cash available for currently planned expenditures through the fiscal year ending
September 30, 1999, excluding any additional bucindolol development costs the
Company may assume in connection with, or in the event of termination of, the
Astra Merck Collaboration, the Company intends to raise additional capital
through equity or debt financing prior to such time. However, there can be no
assurance such funds will be available on terms acceptable or favorable to the
Company, if at all. The
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Company may require additional financing to fund the Company's operations, to
make payments to its collaborative partners, including up to $11,000,000 in
payments for U.S. product launch expenses to Astra Merck assuming the Astra
Merck Collaboration continues, to fund any additional costs incurred in
connection with the Astra Merck Collaboration and to fund 40% of development and
marketing costs of bucindolol in the Knoll Territory pursuant to the Knoll
Collaboration with Knoll, as well as to fund new business opportunities and
growth.
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Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on May 6, 1998.
The following is a brief description of each matter voted upon at the meeting
and the number of affirmative votes and the number of negative votes cast with
respect to each matter.
(a) The stockholders approved the Agreement and Plan of Merger dated March 2,
1998 by and among Intercardia, Transcell and Interneuron with 5,609,722
shares voting for, 1,052 shares voting against and 720 shares abstained.
(b) The stockholders elected the following persons as directors of the Company:
Glenn L. Cooper, M.D.; Clayton I. Duncan; Joseph J. Ruvane, Jr.; and David
B. Sharrock. The votes for and against (withheld) each nominee were as
follows:
Votes Votes Votes
Nominee For Withheld Abstained
------- --- -------- ---------
Glenn L. Cooper, M.D. 6,349,590 1,440 0
Clayton I. Duncan 6,349,590 1,440 0
Joseph J. Ruvane, Jr. 6,349,590 1,440 0
David B. Sharrock 6,349,590 1,440 0
(c) The stockholders approved the amendments to the Intercardia, Inc. 1994
Stock Option Plan with 4,898,682 shares voting for, 710,492 shares voting
against and 2,320 shares abstained.
(d) The stockholders ratified the appointment of Coopers & Lybrand L.L.P. as
the independent auditors of the Company for the fiscal year ending
September 30, 1998 with 6,348,090 shares voting for, 1,440 shares voting
against and 1,500 shares abstained.
Item 5. Other Information
Pursuant to recently amended Rule 14a-4 promulgated under the Securities
Exchange Act of 1934, as amended, a stockholder must give the Company notice of
any proposal the stockholder intends to present at the Company's 1999 Annual
Meeting of Stockholders by February 22, 1999, or the proxies may exercise their
discretionary authority to vote on the proposal notwithstanding that the
stockholders did not receive notice of the proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.8 Intercardia, Inc. 1994 Stock Option Plan, as amended
10.27 Assignment and Assumption and Royalty Agreement effective as of
May 8, 1998 between the Company and Interneuron Pharmaceuticals,
Inc.
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10.28* Research Collaboration and License Agreement dated effective as
of June 30, 1997, as amended, by and among Interneuron
Pharmaceuticals, Inc., Transcell Technologies, Inc. and Merck &
Co., Inc.
10.29* License Agreement dated June 29, 1998 between Princeton
University and the Company
10.30 License Agreement dated April 15, 1998, effective as of June
30,1997, between Princeton University and Interneuron
Pharmaceuticals, Inc.
10.31 Lease Agreement dated September 19, 1996, as amended, between
Cedar Brook Corporate Center, L.P. and Transcell Technologies,
Inc.
10.32 Amendment 1, dated as of July 1, 1998, to Sponsored Research
Agreement between National Jewish Medical and Research Center
and Aeolus Pharmaceuticals, Inc.
11.1 Statement re computation of net loss per share
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only and
not filed.
- ---------------
*Confidential treatment requested
(b) The following Current Report on Form 8-K was filed by the Company during
the three months ended June 30, 1998.
Date Filed Description
---------- -----------
May 14, 1998 Transcell Technologies, Inc. merged into Intercardia
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERCARDIA, INC.
Date: August 14, 1998 By: /s/ Richard W. Reichow
----------------------------
Richard W. Reichow,
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
18
INTERCARDIA, INC.
1994 STOCK OPTION PLAN, AS AMENDED
1. Purpose.
The purpose of this plan (the "Plan") is to secure for INTERCARDIA, INC.
(the "Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company, the Company's parent, Interneuron Pharmaceuticals, Inc.
("Interneuron") and the Company's subsidiary corporations who are expected to
contribute to the Company's future growth and success. Those provisions of the
Plan which make express reference to Section 422 shall apply only to Incentive
Stock Options (as that term is defined in the Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code") or non-statutory options which are not intended to meet the requirements
of Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board of Directors
or a committee (the "Committee") appointed by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. The delegation of powers to the
Committee shall be consistent with applicable laws or regulations (including,
without limitation, applicable state law and Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
("Rule 16b-3")). The Committee may in its sole discretion grant options to
purchase shares of the Company's Common Stock, $.001 par value per share
("Common Stock"), and issue shares upon exercise of such options as provided in
the Plan. The Committee shall have authority, subject to the express provisions
of the Plan, to construe the respective option agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective option agreements, which
need not be identical, and to make all other determinations in the judgment of
the Committee necessary or desirable for the administration of the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director or person acting pursuant
to authority delegated by the Board of Directors shall be liable for any action
or determination under the Plan made in good faith. Subject to adjustment as
provided in Section 15 below, the aggregate number of shares of Common Stock
that may be subject to options granted to any person in a calendar year shall
not exceed 300,000 shares.
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<PAGE>
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply to the Company only at such time as
the Company's Common Stock is registered under the Exchange Act, subject to the
last sentence of Section 3(b), and then only to such persons as are required to
file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company, Interneuron, or any subsidiaries of the Company as defined in Sections
424(e) and 424(f) of the Code ("Participants") provided, that Incentive Stock
Options may only be granted to individuals who are employees of the Company
(within the meaning of Section 3401(c) of the Code). A person who has been
granted an option may, if he or she is otherwise eligible, be granted additional
options if the Committee shall so determine.
(b) Grant of Options to Reporting Persons. The selection of a director or
an officer who is a Reporting Person (as the terms "director" and "officer" are
defined for purposes of Rule 16b-3) as a recipient of an option, the timing of
the option grant, the exercise price of the option and the number of shares
subject to the option shall be determined either (i) by the Board of Directors,
(ii) by a committee of the Board of Directors that is composed solely of two or
more Non-Employee Directors having full authority to act in the matter or (iii)
pursuant to provisions for automatic grants set forth in Section 3(c) below. For
the purposes of the Plan, a director shall be deemed to be a "Non-Employee
Director" only if such person is described in Rule 16b-3(b)(3) as interpreted
from time to time.
(c) Directors' Options. Directors of the Company who are not employees
("Eligible Directors") will receive an option ("Initial Director Option") to
purchase 5,000 shares of Common Stock on the date that such person first becomes
an Eligible Director. As long as an Eligible Director is a member of the Board
of Directors, such Eligible Director will automatically be granted a stock
option ("Automatic Grant") to purchase 3,000 shares of Common Stock on the day
of each annual meeting of stockholders, except for Eligible Directors who
received an Initial Director Option since the most recent Automatic Grant. The
exercise price for each share subject to a Director Option shall be equal to the
fair market value of the Common Stock on the date of grant. Director Options
shall become exercisable in 36 equal monthly installments commencing one month
from the date the option is granted and will expire the earlier of 10 years
after the date of grant or 90 days after the termination of the director's
service on the Board.
4. Stock Subject to Plan.
The stock subject to options granted under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. Subject to adjustment as
provided in Section 15 below, the maximum number of shares of Common Stock of
the Company which may be issued
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<PAGE>
and sold under the Plan is 2,500,000. If an option granted under the Plan shall
expire, terminate or is cancelled for any reason without having been exercised
in full, the unpurchased shares subject to such option shall again be available
for subsequent option grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors or the
Committee at the time of grant of such option; provided, however, that in the
case of an Incentive Stock Option, the exercise price shall not be less than
100% of the Fair Market Value (as hereinafter defined) of such stock, at the
time of grant of such option, or less than 110% of such Fair Market Value in the
case of options described in Section 11(b). "Fair Market Value" of a share of
Common Stock of the Company as of a specified date for the purposes of the Plan
shall mean the closing price of a share of the Common Stock on the principal
securities exchange (including the Nasdaq National Market) on which such shares
are traded on the day as of which Fair Market Value is being determined, or on
the next preceding date on which such shares are traded if no shares were traded
on such day, or if the shares are not traded on a securities exchange, Fair
Market Value shall be deemed to be the average of the high bid and low asked
prices of the shares in the over-the-counter market on the day immediately
preceding the date as of which Fair Market Value is being determined or on the
next preceding date on which such high bid and low asked prices were recorded.
If the shares are not publicly traded, Fair Market Value of a share of Common
Stock (including, in the case of any repurchase of shares, any distributions
with respect thereto which would be repurchased with the shares) shall be
determined in good faith by the Board of Directors. In no case shall Fair Market
Value be determined with regard to restrictions other than restrictions which,
by their terms, will never lapse.
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or by any other means which the Board of Directors determines are consistent
with the purpose of the Plan and with applicable laws and regulations
(including, without limitation, the provisions of Rule 16b-3 and Regulation T
promulgated by the Federal Reserve Board).
7. Option Period.
Subject to earlier termination as provided in the Plan, each option and all
rights thereunder shall expire on such date as determined by the Board of
Directors or the Committee and set forth in the applicable option agreement,
provided, that such date shall not be later than
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<PAGE>
(10) ten years after the date on which the option is granted.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. No option granted to a Reporting Person for purposes of the
Exchange Act, however, shall be exercisable during the first six months after
the date of grant. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board of Directors may (i) in the agreement evidencing such option, provide for
the acceleration of the exercise date or dates of the subject option upon the
occurrence of specified events, and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option.
9. Transferability of Options.
(a) No Incentive Stock Option granted under this Plan shall be assignable
or otherwise transferable by the optionee except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder. An Incentive Stock Option may be exercised during the
lifetime of the optionee only by the optionee.
(b) Any option granted under the Plan other than an Incentive Stock Option
shall be transferable by the optionee to members of his or her family or
otherwise by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. For purposes
of the Plan, an optionee's "family members" shall be deemed to consist of his or
her spouse, parents, children, grandparents, grandchildren and any trusts
created for the benefit of such individuals. A family member to whom an option
has been transferred pursuant to this Section 9(b) shall be hereinafter referred
to as a "Permitted Transferee". An option shall be transferred to a Permitted
Transferee in accordance with the foregoing provisions by the optionee's
execution of an assignment in writing in such form approved by the Board of
Directors or the Committee. The Company shall not be required to recognize the
rights of a Permitted Transferee until such time as it receives a copy of the
assignment from the optionee.
(c) In the event an optionee dies during his employment by the Company or
any of its subsidiaries, or during the three-month period following the date of
termination of such employment, his options shall thereafter be exercisable,
during the period specified in the option agreement, by his executors,
administrators or Permitted Transferees to the full extent to which such options
were exercisable by the optionee at the time of his death during the periods set
forth in Section 10 or 11(d).
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10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock Options
and except as otherwise determined by the Committee at the date of grant of an
option, and subject to the provisions of the Plan, an optionee or his Permitted
Transferee may exercise an option at any time within three (3) months following
the termination of the optionee's employment or other relationship with the
Company or within one (1) year if such termination was due to the death or
disability of the optionee but, except in the case of the optionee's death, in
no event later than the expiration date of the option. If the termination of the
optionee's employment or other relationship with the Company is for cause or is
otherwise attributable to a breach by the optionee of an employment, consulting,
confidentiality or non-disclosure agreement, the option shall expire immediately
upon such termination. The Board or Directors shall have the power to determine
what constitutes a termination for cause or a breach of an employment,
consulting, confidentiality or non-disclosure agreement, whether an optionee has
been terminated for cause or has breached such an agreement, and the date upon
such termination for cause or breach occurs. Any such determinations shall be
final and conclusive and binding upon the optionee.
11. Incentive Stock Options
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the Plan
shall, at the time of grant, be specifically designated as such in the option
agreement covering such Incentive Stock Options.
(b) 10% Stockholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the Fair Market Value
of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from the
date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first
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time in any one calendar year for shares of Common Stock with an aggregate Fair
Market Value, as of the respective date or dates of grant, of more than
$100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-statutory
option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provisions thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within
the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors or the Committee
may, in its sole discretion, include additional provisions in option agreements
covering options granted under the Plan, including without limitation
restrictions on transfer, repurchase rights, rights of first refusal,
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; provided, that such
additional provisions shall not be inconsistent with any other term or condition
of the Plan and such additional provisions shall not cause any Incentive Stock
Option granted under the Plan to fail to qualify as an Incentive Stock Option
within the meaning of Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
6
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discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3 (if applicable).
13. General Restrictions.
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option or award, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option or
award, for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, or with covenants or
representations made by the Company in connection with any public offering of
its Common Stock, including any "lock-up" or other restriction on
transferability.
(b) Compliance With Securities Law. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
or award upon any securities exchange or automated quotation system or under any
state or federal law, or the consent or approval of any governmental or
regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a condition of, or in
connection with the issuance or purchase of shares thereunder, such option or
award may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval, or satisfaction of such
condition shall have been effected or obtained on conditions acceptable to the
Board of Directors or the Committee. Nothing herein shall be deemed to require
the Company to apply for or to obtain such listing, registration or
qualification, or to satisfy such condition.
14. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations, Reorganizations and Related
Transactions.
(a) Recapitalizations and Related Transactions. If, through or as a result
of any recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other
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similar transaction, (i) the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities of the Company, or (ii) additional shares or new or different shares
or other non-cash assets are distributed with respect to such shares of Common
Stock or other securities, an appropriate and proportionate adjustment shall be
made in (x) the maximum number and kind of shares reserved for issuance under or
otherwise referred to in the Plan, (y) the number and kind of shares or other
securities subject to any then outstanding options under the Plan, and (z) the
price for each share subject to any then outstanding options under the Plan,
without changing the aggregate purchase price as to which such options remain
exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 15 if such adjustment (i) would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3 or (ii) would be considered as
the adoption of a new plan requiring stockholder approval.
(b) Reorganization, Merger and Related Transactions. All outstanding
options under the Plan shall become fully exercisable for a period of sixty (60)
days following the occurrence of any Trigger Event, whether or not such options
are then exercisable under the provisions of the applicable agreements relating
thereto. For purposes of the Plan, a "Trigger Event" is any one of the following
events:
(i) the date on which shares of Common Stock are first purchased
pursuant to a tender offer or exchange offer (other than such an offer by
the Company, any Subsidiary, any employee benefit plan of the Company or of
any Subsidiary or any entity holding shares or other securities of the
Company for or pursuant to the terms of such plan), whether or not such
offer is approved or opposed by the Company and regardless of the number of
shares purchased pursuant to such offer;
(ii) the date the Company acquires knowledge that any person or group
deemed a person under Section 13(d)-3 of the Exchange Act (other than the
Company, Interneuron, any Subsidiary, any employee benefit plan of the
Company or of any Subsidiary or any entity holding shares of Common Stock
or other securities of the Company for or pursuant to the terms of any such
plan or any individual or entity or group or affiliate thereof which
acquired its beneficial ownership interest prior to the date the Plan was
adopted by the Board), in a transaction or series of transactions, has
become the beneficial owner, directly or indirectly (with beneficial
ownership determined as provided in Rule 13d-3, or any successor rule,
under the Exchange Act), of securities of the Company entitling the person
or group to 30% or more of all votes (without consideration of the rights
of any class or stock to elect directors by a separate class vote) to which
all stockholders of the Company would be entitled in the election of the
Board of Directors were an election held on such date;
(iii) the date, during any period of two consecutive years, when
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by
the stockholders of the Company, of each new director
8
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was approved by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period; and
(iv) the date of approval by the stockholders of the Company of an
agreement (a "reorganization agreement") providing for:
(A) The merger or consolidation of the Company with another
corporation where the stockholders of the Company, immediately prior
to the merger or consolidation, do not beneficially own, immediately
after the merger or consolidation, shares of the corporation issuing
cash or securities in the merger or consolidation entitling such
stockholders to 80% or more of all votes (without consideration of the
rights of any class of stock to elect directors by a separate class
vote) to which all stockholders of such corporation would be entitled
in the election of directors or where the members of the Board of
Directors of the Company, immediately prior to the merger or
consolidation, do not, immediately after the merger or consolidation,
constitute a majority of the Board of Directors of the corporation
issuing cash or securities in the merger or consolidation; or
(B) The sale or other disposition of all or substantially all the
assets of the Company.
(c) Board Authority to Make Adjustments. Any adjustments under this Section
15 will be made by the Board of Directors or the Committee, whose determination
as to what adjustments, if any, will be made and the extent thereof will be
final, binding and conclusive. No fractional shares will be issued under the
Plan on account of any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, Etc.
(a) General. In the event of any sale, merger, transfer or acquisition of
the Company or substantially all of the assets of the Company in which the
Company is not the surviving corporation, and provided that after the Company
shall have requested the acquiring or succeeding corporation (or an affiliate
thereof), that equivalent options shall be substituted and such successor
corporation shall have refused or failed to assume all options outstanding under
the Plan or issue substantially equivalent options, then any or all outstanding
options under the Plan shall accelerate and become exercisable in full
immediately prior to such event. The Committee will notify holders of options
under the Plan that any such options shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the options will terminate
upon expiration of such notice.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, Interneuron, or a subsidiary of the Company,
Interneuron, as the result of a merger or consolidation of the employing
corporation with the Company or a subsidiary of the Company,
9
<PAGE>
Interneuron, or as a result of the acquisition by the Company, Interneuron, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided, however, that if at any time the
approval of the stockholders of the Company is required under Section 422 of the
Code or any successor provision with respect to Incentive Stock Options, or
under Rule 16b-3, the Board of Directors may not effect such modification or
amendment without such approval; and provided, further, that the provisions of
Section 3(c) hereof shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employer Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
(b) The modification or amendment of the Plan shall not, without the
consent of an optionee, affect his or her rights under an option previously
granted to him or her. With the consent of the optionee affected, the Board of
Directors or the Committee may amend outstanding option agreements in a manner
not inconsistent with the Plan. The Board of Directors shall have the right to
amend or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3.
10
<PAGE>
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a Fair
Market Value equal to such withholding obligation as of the date that the amount
of tax to be withheld is to be determined. An optionee who has made an election
pursuant to this Section 20(a) may only satisfy his or her withholding
obligation with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an Incentive
Stock Option shall constitute an agreement by the optionee (i) to notify the
Company if any or all of such shares are disposed of by the optionee within two
years from the date the option was granted or within one year from the date the
shares were issued to the optionee pursuant to the exercise of the option, and
(ii) if required by law, to remit to the Company, at the time of and in the case
of any such disposition, an amount sufficient to satisfy the Company's federal,
state and local withholding tax obligations with respect to such disposition,
whether or not, as to both (i) and (ii), the optionee is in the employ of the
Company at the time of such disposition.
(c) Notwithstanding the foregoing, in the case of a Reporting Person whose
options have been granted in accordance with the provisions of Section 3(b)
herein, no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3.
21. Cancellation and New Grant of Options, Etc.
The Board of Directors or the Committee shall have the authority to effect,
at any time and from time to time, with the consent of the affected optionees,
(i) the cancellation of any or all outstanding options under the Plan and the
grant in substitution therefor of new options under the Plan covering the same
or different numbers of shares of Common Stock and having an option exercise
price per share which may be lower or higher than the exercise price per share
of the cancelled options or (ii) the amendment of the terms of any and all
outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become
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exercisable unless and until the Plan shall have been approved by the Company's
stockholders. If such stockholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan not
requiring stockholder approval shall become effective when adopted by the Board
of Directors; amendments requiring stockholder approval (as provided in Section
19) shall become effective when adopted by the Board of Directors, but no
Incentive Stock Option granted after the date of such amendment shall become
exercisable (to the extent that such amendment to the Plan was required to
enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the earlier of (i) the close of business on the
day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise or cancellation
of options granted under the Plan. If the date of termination is determined
under (i) above, then options outstanding on such date shall continue to have
force and effect in accordance with the provisions of the instruments evidencing
such options.
23. Governing Law.
The provisions of this Plan shall be governed and construed in accordance
with the laws of the State of Delaware without regard to the principles of
conflicts of laws.
Adopted by the Board of Directors on October 31, 1994.
As amended by the Board of Directors through December 12, 1997.
12
ASSIGNMENT AND ASSUMPTION AND
ROYALTY AGREEMENT
THIS AGREEMENT effective as of May 8, 1998, (the "Effective Date") between
Intercardia, Inc., a corporation organized and existing under the laws of
Delaware and having its principal office at 3200 East Highway 54, Cape Fear
Building, Suite 300, Research Triangle Park, North Carolina 27709
("Intercardia") and Interneuron Pharmaceuticals, Inc., a corporation organized
and existing under the laws of Delaware and having its principal office at 99
Hayden Avenue, Lexington MA 02173 ("Interneuron").
W I T N E S S E T H:
WHEREAS, in connection with an Agreement and Plan of Merger entered into on
the Effective Date (the "Merger Agreement"), Intercardia has agreed to acquire
from Interneuron all of the capital stock (the "Stock") of Transcell
Technologies, Inc. ("Transcell") owned by Interneuron under the terms and
conditions contained therein; and
WHEREAS, Interneuron has agreed to assign (the "Assignment") to Intercardia
Interneuron's rights, benefits and interests under the agreements set forth on
Appendix A hereto (the "Assigned Agreements") and to continue to guaranty
certain lease obligations of Transcell under certain conditions (the "Guaranty
Agreement") effective upon the closing of the merger (the "Merger") contemplated
by the Merger Agreement; and
WHEREAS, as consideration for the Assignment and the Guaranty Agreement,
Intercardia has agreed to pay to Interneuron royalties on Net Sales of Products
(each as defined herein), upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms,
where used in the singular or plural, shall have the respective meanings set
forth below:
I.1 "Closing Date" shall mean the closing date of the Merger.
I.2 "Common Stock" shall mean the common stock, $.001 par value, of
Intercardia.
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I.3 Defined Terms Appearing in Merck Agreement. The following terms shall have
the respective meanings set forth in the Merck Agreement:
(a) Affiliate;
(b) Calendar Quarter;
(c) Calendar Year;
(d) First Commercial Sale;
(e) Net Sales.
I.4 "Earned Payment" shall mean the $3,000,000 payment made by Intercardia in
Common Stock to Interneuron on the Closing Date.
I.5 "Fair Market Value" shall mean, on any applicable payment date, (a) the
average of the high and low sales price of the Common Stock on the five
(5) most recent trading days, ending two (2) business days immediately
prior to the applicable payment date, in which the trading volume of the
Common Stock was at least 1500 shares, or, if no such sales take place on
any such date, the average of the closing bid and asked prices of the
Common Stock on such date, in each case as officially reported on the
Nasdaq National Market or any other national securities exchange on which
the Common Stock is then listed, or (b) if the Common Stock is not then
listed or admitted to trading on the Nasdaq National Market or any other
national securities exchange, the average of the reported closing bid and
asked prices of the Common Stock on the five (5) trading days ending on
such date as shown by Nasdaq or (c) if the Common Stock is not then listed
on any exchange or shown by Nasdaq, the higher of (x) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of Intercardia as
at the last day of any month ending within 60 days preceding the date as
of which the determination is to be made or (y) the fair value thereof
determined in good faith by an independent valuation firm jointly selected
by the parties as of a date which is within 15 days of the date as of
which the determination is to be made.
I.6 "Merck" shall mean Merck & Co., Inc.
I.7 "Merck Agreement" shall mean the Research Collaboration and License
Agreement by and among Merck & Co., Inc., Transcell and Interneuron
effective as of June 30, 1997, a copy of which is attached hereto as
Appendix 1.2.
I.8 "Party" shall mean Intercardia or Interneuron.
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I.9 "Princeton License Agreement" shall mean the License Agreement between the
Trustees of Princeton University ("Princeton") and Interneuron entered
into on April 15, 1998, effective as of June 30, 1997.
I.10 "Princeton Sponsored Research Agreements" shall mean the Research
Agreements between Princeton and Interneuron dated April 29, 1997 relating
to Research Proposals titled "Construction of a Vancomycin Library" and
"Towards a Map of the Active Site of MurG."
I.11 "Product" shall mean a product defined in the Merck Agreement as a
Licensed Product.
I.12 "Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations promulgated thereunder.
I.13 "Side Agreement" shall mean the Side Agreement effective as of June 30,
1997 by and among Merck, Princeton, Interneuron and Transcell.
ARTICLE II
ASSIGNMENT AND ASSUMPTION; GUARANTY AGREEMENT
II.1 Assignment and Assumption. Interneuron hereby assigns to Intercardia all
of its rights, benefits and interests under each of the Assigned
Agreements. Intercardia hereby assumes and agrees to pay, perform,
discharge and carry out all of the obligations and liabilities of
Interneuron under each of the Assigned Agreements.
II.2 Guaranty Agreement. Interneuron hereby agrees to continue its respective
guaranties set forth on Appendix 2.2 hereof (the "Guaranties") until such
time as the respective guaranty can be terminated or transferred to
Intercardia. Intercardia hereby agrees to (i) use its best efforts to
terminate or remove Interneuron from each of the Guaranties and (ii) pay,
perform, discharge and carry out all the obligations and liabilities under
the leases subject to the Guaranties; provided, however, that promptly
after the Closing Date, Intercardia shall submit a written request to
terminate or remove Interneuron from such Guaranties and shall negotiate
in good faith to do so; further provided that, in the event that
Intercardia shall be unsuccessful in terminating or removing Interneuron
from such Guaranties at such time, Intercardia hereby covenants to submit
a similar request on an annual basis, or promptly following the closing of
any capital raising transaction of Intercardia, whichever is sooner, until
such Guaranties are terminated. Interneuron may participate in or initiate
any discussions relating to the termination of, or removal of Interneuron
from, such Guaranties.
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II.3 Consents or Approvals. To the extent that any consent or approval is
required to permit the assignment to Intercardia of any Assigned Agreement
or any agreement, commitment or other contractual right thereof,
contemplated hereunder to be assigned to Intercardia and such consent or
approval is not obtained, this Agreement shall not constitute an
assignment thereof. However, Interneuron and Intercardia shall cooperate
in any reasonable arrangements designed to provide for Intercardia all of
the benefits (and to assure that Interneuron will be effectively relieved
from related liabilities) under such agreement or commitment; provided,
however, that neither Interneuron nor Intercardia shall be required to
enter into any arrangement which, in the reasonable opinion of its
counsel, violates the provisions of any contract, law or regulation to
which such Party is a party or by which such Party is bound. Intercardia
agrees that, so long as it is a party to any such agreement or commitment
Intercardia will fully perform all of Interneuron `s obligations
thereunder which arise following the Effective Date.
ARTICLE III
EARNED PAYMENT; ROYALTIES AND REPORTS
III.1 Earned Payment and Royalties. In consideration for Interneuron's
agreements hereunder, Intercardia shall make the following payments to
Interneuron:
III.1.1 Earned Payment. Intercardia shall pay the Earned Payment to
Interneuron on the Closing Date. The Earned Payment shall be
non-refundable and shall be paid in shares of Intercardia Common
Stock calculated by dividing $3,000,000 by the Per Share Price.
The Per Share Price shall equal the Fair Market Value of
Intercardia Common Stock determined as of the Closing Date;
provided, however, that if the Fair Market Value of Intercardia
Common Stock determined as of the Closing Date is (i) less than
$15.00 then the Per Share Price shall equal $15.00 and (ii) more
than $29.00, the Per Share Price shall equal $29.00.
III.1.2 Royalties
(a) Subject to the terms and conditions of this Agreement,
Intercardia shall pay to Interneuron royalties based on
cumulative annual Net Sales of Products by Merck,
Intercardia, their Affiliates or sublicensees in the
percentages set forth below:
Cumulative Annual Net Sales Royalty
--------------------------- -------
Less than or equal to $500,000,000 1%
Greater than $500,000,000 1.5%
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(b) Royalties at the rates set forth above shall be
effective as of the date of First Commercial Sale of a
Product and shall continue until Merck, or its successor
in interest to the Merck Agreement, no longer has an
obligation to pay royalties pursuant to the Merck
Agreement, on any Product; provided, however, that
payment of royalties shall not be due until cumulative
net sales of Products equal $300,000,000 (the "Initial
Payment Event").
III.2 Reports; Payment of Royalty; Adjustments.
(a) Following the First Commercial Sale of a Product and during the
term of the Agreement, Intercardia shall furnish to Interneuron
a copy of the written report received by Intercardia under
Section 5.5 of the Merck Agreement for each Calendar Quarter of
a Calendar Year showing the sales of all Products subject to
royalties sold by Merck, Intercardia, their Affiliates and
sublicensees during the reporting period (and a reconciliation
to Net Sales) together with a report showing the royalties
accrued under this Agreement (collectively, the "Accrual
Reports"). Accrual Reports shall be due on the thirty-fifth
(35th) day following the close of each Calendar Quarter.
Royalties shown to have accrued as of the Initial Payment Event
shall be due and payable on the thirty-fifth (35th) day
following the Initial Payment Event. After the Initial Payment
Event, royalties shown to have accrued by each Accrual Report
shall be due and payable within ten (10) days after the date
that the Accrual Report for such Calendar Quarter is due.
Intercardia shall keep complete and accurate records, including
copies of any reports forwarded by Merck to Intercardia pursuant
to the Merck Agreement, in sufficient detail to enable the
royalties hereunder to be determined. Such Accrual Reports will
include information in the local currency and as converted into
United States dollars based on the average exchange rate on the
first and last day of each month (determined in accordance with
the Merck Agreement).
(b) Royalties shall be paid through the issuance by Intercardia to
Interneuron of shares (the "Royalty Shares") of Common Stock,
unless Interneuron and Intercardia agree that royalties may be
paid in cash. The number of Royalty Shares to be issued shall be
equal to the amount of royalties due hereunder divided by the
Fair Market Value determined as of each Accrual Report date.
Interneuron shall have the registration rights with respect to
the resale of the Royalty Shares as set forth in a Registration
Rights Agreement to be entered into as of the Closing Date.
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<PAGE>
III.3 Audits.
(a) Upon the request of Interneuron, Intercardia shall permit an
independent certified public accounting firm of nationally
recognized standing selected by Interneuron, to have access
during normal business hours to such of the records of
Intercardia as may be reasonably necessary to verify the
accuracy of the Accrual Reports hereunder for any year ending
not more than thirty-six (36) months prior to the date of such
request.
(b) If such accounting firm correctly concludes that additional
royalties were owed during such period, Intercardia shall pay
the additional royalties within thirty (30) days of the date
Interneuron delivers to Intercardia such accounting firm's
written report so concluding. The fees and expenses charged by
such accounting firm shall be paid by Interneuron; provided,
however, that if an error in favor of Interneuron in the payment
of royalties of more than 10% of the royalties due hereunder for
the period being reviewed is discovered, then the fees and
expenses of such accounting firm shall be borne by Intercardia.
(c) Upon the expiration of thirty-six (36) months following the end
of any year the calculation of royalties payable with respect to
such year shall be binding and conclusive upon Interneuron, and
Intercardia shall be released from any liability or
accountability with respect to royalties for such year.
III.4 Payment Exchange Rate. All calculations of royalties payable to
Interneuron under this Agreement shall be made in United States dollars.
In the case of sales outside the United States, the rate of exchange to
be used in computing the amount of currency equivalent in United States
dollars shall be calculated in accordance with Section 5.7 of the Merck
Agreement.
III.5 Tax Withholding. If laws, rules or regulations require withholding of
income taxes or other taxes imposed upon payments set forth in this
Article III, Intercardia shall make such withholding payments as
required and subtract such withholding payments from the calculation of
royalties and number of Royalty Shares issuable pursuant to this Article
III. Intercardia shall submit appropriate proof of payment of the
withholding taxes to Interneuron within a reasonable period of time.
Intercardia will use efforts consistent with its usual business
practices to ensure that any withholding taxes imposed are reduced as
far as possible under the provisions of the current or any future double
taxation treaties or agreements between foreign countries, and the
Parties shall cooperate with each other with respect thereto, with the
appropriate Party under the circumstance providing the documentation
required under such treaty or agreement to claim benefits thereunder.
III.6 Representations and Warranties of Interneuron. Interneuron represents
and warrants to Intercardia that:
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<PAGE>
(a) the Royalty Shares payable to Interneuron pursuant to the terms
hereof will be acquired for investment for its own account,
without any view to the unregistered public distribution or
resale thereof, all without prejudice, however, to the right of
Interneuron at any time lawfully to sell or otherwise to dispose
of all or any part of the Royalty Shares pursuant to
registration or any exemption therefrom under the Securities Act
and applicable state securities laws;
(b) Interneuron understands that the Royalty Shares to be received
by it pursuant to the terms hereof are characterized as
"restricted securities" under the federal securities laws
inasmuch as they will be acquired from Intercardia in a
transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain
limited circumstances;
(c) Interneuron is an "accredited investor" within the meaning of
Rule 501 of Regulation D under the Securities Act. Interneuron
has the capacity to evaluate the merits and high risks of an
investment in the Royalty Shares and is able to bear the
economic risk of this investment. Interneuron understands that
an investment in Royalty Shares is highly speculative and
involves a high degree of risk. Interneuron has been provided
access to all information requested by it in order to evaluate
the merits and risks of an investment in the Royalty Shares;
(d) Interneuron acknowledges that the certificates evidencing the
Royalty Shares shall bear a legend substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT."
The foregoing legend shall be removed by Intercardia from any
certificate at such time as the holder of the Royalty Shares
represented by the certificate delivers an opinion of counsel
reasonably satisfactory to Intercardia to the effect that such
legend is not required in order to establish compliance with any
provisions of the Securities Act, or at such time as the holder
of such Royalty Shares satisfies the requirements of Rule 144(k)
under the Securities Act (provided that Rule 144(k) as then in
effect does not differ substantially from Rule 144(k) as in
effect as of the date of this Agreement), and provided further
that Intercardia has received from the holder a written
representation that such holder satisfies the requirements of
Rule 144(k) as then in effect with respect to such Royalty
Shares;
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(e) Interneuron is a duly organized and validly existing corporation
under the laws of the State of Delaware, and has taken all
required corporate action to authorize the execution, delivery
and performance of this Agreement; it has the full corporate
right, power and authority to enter into this Agreement and to
perform all of its obligations hereunder; the execution and
delivery of this Agreement and the consummation of the
transactions contemplated herein do not violate, conflict with,
or constitute a default under its certificate of incorporation,
by-laws or the terms or provisions of any material agreement to
which it is a party or by which it is bound, or any order,
award, judgment or decree to which it is a party, except in each
case, for such violations, conflicts or defaults which would not
have a material adverse effect (a "Material Adverse Effect") on
the assets, results of operations, business or financial
condition of Interneuron and its subsidiaries, taken as a whole;
and (assuming this Agreement constitutes the valid and binding
obligation of Intercardia), upon execution and delivery, this
Agreement will constitute the legal, valid and binding
obligation of Interneuron;
(f) The Assigned Agreements were, as of their respective effective
dates and, to Interneuron's knowledge, the Assigned Agreements
are, in each case, with respect to Interneuron, in full force
and effect and enforceable against Interneuron in accordance
with their respective terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors'
rights, (b) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable
remedies, and (c) to the extent the enforceability of any
indemnification provisions contained in the Assigned Agreements
may be limited by applicable laws;
(g) Interneuron has not previously assigned, transferred, conveyed
or otherwise encumbered its right, title and interest in the
Assigned Agreements, except pursuant to the Merck Agreement;
(h) to Interneuron's knowledge, there are no claims, judgments or
settlements against or owed by Interneuron or pending or
threatened claims or litigation to which Interneuron is a party,
in each case relating to the Assigned Agreements; and
(i) Interneuron has obtained consents, if any, required in order to
assign the Assigned Agreements to Intercardia.
III.7 Representations and Warranties of Intercardia. Intercardia represents
and warrants to Interneuron that:
(a) Intercardia is a duly organized and validly existing corporation
under the laws of the State of Delaware, and has taken all
required corporate action to authorize the
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execution, delivery and performance of this Agreement; it has
the full corporate right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder; the
execution and delivery of this Agreement and the consummation of
the transactions contemplated herein do not violate, conflict
with, or constitute a default under its certificate of
incorporation, by-laws or the terms or provisions of any
material agreement to which it is a party or by which it is
bound, or any order, award, judgment or decree to which it is a
party, except in each case, for such violations, conflicts or
defaults which would not have a Material Adverse Effect on the
assets, results of operations, business or financial condition
of Intercardia and its subsidiaries, taken as a whole; and
(assuming this Agreement constitutes the valid and binding
obligation of Interneuron) upon execution and delivery, this
Agreement will constitute the legal, valid and binding
obligation of Intercardia;
(b) the Royalty Shares issuable pursuant to this Agreement have been
duly authorized and, when issued and delivered pursuant to the
terms of this Agreement will be duly and validly issued, fully
paid and non-assessable and free of any preemptive rights and of
restrictions on transfer except under applicable federal and
state securities laws; Intercardia will use its best efforts
during the term of this Agreement to maintain, authorize and
reserve for issuance a sufficient number of shares of authorized
Common Stock for the issuance of Royalty Shares pursuant to this
Agreement, including, if necessary, amending its Certificate of
Incorporation.
ARTICLE IV
TERM AND TERMINATION
IV.1 Term and Expiration. This Agreement shall be effective as of the
Effective Date and shall continue in effect until expiration of all
royalty obligations hereunder.
IV.2 Effect of Expiration or Termination. Expiration or termination of this
Agreement shall not relieve the Parties of any obligation accruing prior
to such expiration or termination. Any expiration or early termination
of this Agreement shall be without prejudice to the rights of any Party
against the other accrued or accruing under this Agreement prior to
termination, including the obligation to make royalty payments for
Product(s) sold prior to such termination.
-9-
<PAGE>
ARTICLE V
MISCELLANEOUS
V.1 Assignment. This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors and permitted assigns.
Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person who is not a Party. No assignment of
this Agreement or of any rights or obligations hereunder may be made by
Intercardia (by operation of law or otherwise) without Interneuron's
written consent. Interneuron may assign all or a portion of its benefits
pursuant to this Agreement.
V.2 Severability. In the event that any of the provisions contained in this
Agreement are held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless the
absence of the invalidated provision(s) adversely affect the substantive
rights of the parties. The Parties shall replace the invalid, illegal or
unenforceable provision(s) with valid, legal and enforceable provision(s)
which, insofar as practical, implement the purposes of this Agreement.
V.3 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered
personally, sent by facsimile (and promptly confirmed by personal delivery,
registered or certified mail or overnight courier), sent by
nationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
if to Interneuron to: Interneuron Pharmaceuticals, Inc.
99 Hayden Avenue
Lexington, MA 02173
Attention: President
Fax No.: 781-862-3859
with a copy to: Bachner, Tally, Polevoy Misher LLP
380 Madison Avenue
18th Floor
New York, NY 10017
Attention: Jill M. Cohen, Esq.
Fax No.: 212-682-5729
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<PAGE>
if to Intercardia to: Intercardia, Inc.
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
Attention: President
Fax No.: 919-544-1245
with a copy to: Wyrick Robbins Yates & Ponton LLP
4101 Lake Boone Trail
Suite 300
Raleigh, NC 27607
Attention: Larry Robbins, Esq.
Fax No.: 919-781-4865
or to such other address as the Party to whom notice is to be given may
have furnished to the other Parties in writing in accordance herewith. Any
such communication shall be deemed to have been given when delivered if
personally delivered or sent by facsimile on a business day, on the
business day after patch if sent by nationally-recognized overnight courier
and on the third business day following the date of mailing if sent by
mail.
V.4 Applicable Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware and the United States
without reference to any rules of conflict of laws.
V.5 Dispute Resolution. The Parties agree to attempt initially to solve all
claims, disputes, or controversies arising under, out of, or in connection
with this Agreement by conducting good faith negotiations. If the Parties
are unable to settle the matter between themselves, the matter shall
thereafter be resolved by alternative dispute resolution, starting with
mediation and including, if necessary, a final and binding arbitration.
Whenever a Party shall decide to institute arbitration proceedings, it
shall give written notice to that effect to the other Party. The Party
giving such notice shall refrain from instituting the arbitration
proceedings for a period of sixty (60) days following such notice. During
such period, the Parties shall make good faith efforts to amicably resolve
the dispute without arbitration. Any arbitration hereunder shall be
conducted under the rules of the American Arbitration Association. Each
such arbitration shall be conducted by a panel of three arbitrators: one
arbitrator shall be appointed by each of Interneuron and Intercardia and
the third shall be appointed by the American Arbitration Association. Any
such arbitration shall be held in Wilmington, Delaware. The arbitrators
shall have the authority to grant specific performance. Judgment upon the
award so rendered may be entered in any court having jurisdiction or
application may be made to such court for judicial acceptance of any award
and an order of enforcement, as the case may be. In no event shall a demand
for arbitration be made after the date when institution of a legal or
equitable proceeding based
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<PAGE>
on such claim, dispute or other matter in question would be barred by the
applicable statute of limitations.
V.6 Entire Agreement. This Agreement, together with the Merger Agreement and
the exhibits thereto, contains the entire understanding of the Parties with
respect to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, relating to the subject matter
hereof, heretofore made are expressly merged in and made a part of this
Agreement. This Agreement may be amended, or any term hereof modified, only
by a written instrument duly executed by all Parties hereto. To the extent
this Agreement refers to or incorporates sections of the Merck Agreement,
the consent of Interneuron shall be required in connection with the
amendment or modification of any of such sections of the Merck Agreement.
V.7 No Authority. Except as specifically set forth herein, no Party shall have
the authority to make any statements, representations or commitments of any
kind, or to take any action, which shall be binding on any other Party,
without the prior consent of such other Party.
V.8 Waiver. The waiver by a Party hereto of any right hereunder or the failure
to perform or of a breach by another Party shall not be deemed a waiver of
any other right hereunder or of any other breach or failure by said other
Party whether of a similar nature or otherwise.
V.9 Counterparts. The Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
INTERCARDIA, INC.
By: /s/ Clayton Duncan
----------------------------------------------
Name: Clayton Duncan
Title: President and Chief Executive Officer
INTERNEURON PHARMACEUTICALS, INC.
By: /s/ Glenn L. Cooper, M.D.
----------------------------------------------
Name: Glenn L. Cooper, M.D.
Title: President and Chief Executive Officer
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<PAGE>
APPENDIX A
----------
ASSIGNED AGREEMENTS
Merck Agreement
Princeton License Agreement
Princeton Sponsored Research Agreements
Side Agreement
<PAGE>
APPENDIX 1.2
------------
MERCK AGREEMENT
<PAGE>
APPENDIX 2.2
------------
GUARANTIES
Guaranty to Lease between Transcell and Cedar Brook Corporate Center, L.P.,
dated September 19, 1996.
Guaranty to Master Equipment Lease between Transcell and Phoenix Leasing
Incorporated.
EXECUTION COPY
- --------------
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by an * and [ ], have been
separately filed with the Commission.
RESEARCH COLLABORATION AND LICENSE AGREEMENT
by and among
MERCK & CO., INC.,
TRANSCELL TECHNOLOGIES, INC.
and
INTERNEURON PHARMACEUTICALS, INC.
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.....................................................1
ARTICLE II RESEARCH PROGRAM AND DRUG DEVELOPMENT PROGRAM...................7
2.1 General..............................................................7
2.2 Conduct of Research..................................................8
2.3 Additional FTE's.....................................................8
2.4 [*] Research Program.................................................8
2.5 [*] Research Program.................................................8
2.6 Joint Research Committee.............................................8
2.7 Exchange of Information..............................................9
2.8 Records and Reports.................................................10
2.9 Research Information and Inventions.................................10
2.10 Research Program Term...............................................11
2.11 Research Program Materials..........................................12
2.12 Drug Development Program............................................12
ARTICLE III LICENSE; DEVELOPMENT AND COMMERCIALIZATION.....................13
3.1 License Grant.......................................................13
3.2 Retained Rights.....................................................13
3.3 Exclusivity in Expanded Field.......................................13
3.4 Princeton Agreements................................................14
3.5 Development and Commercialization...................................14
ARTICLE IV CONFIDENTIALITY AND PUBLICATION................................15
4.1 Non-disclosure and Non-Use Obligations..............................15
4.2 Permitted Disclosure of Proprietary Information.....................15
4.3 Publication and Public Disclosures..................................16
ARTICLE V PAYMENTS; ROYALTIES AND REPORTS................................17
5.1 Commitment Fee and Option Payment...................................17
5.2 Research Program Funding............................................17
5.3 Milestone Payments..................................................18
5.4 Royalties...........................................................18
5.5 Reports; Payment of Royalty.........................................20
5.6 Audits..............................................................21
5.7 Payment Exchange Rate...............................................21
5.8 Income Tax Withholding..............................................22
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
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ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................22
6.1 Transcell Representations and Warranties............................22
6.2 Interneuron Representations and Warranties..........................23
6.3 General Disclaimer..................................................24
6.4 Merck Representations and Warranties................................24
ARTICLE VII PATENT MATTERS.................................................24
7.1 Filing, Prosecution and Maintenance of Patents......................24
7.2 Right of Other Parties to Prosecute and Maintain Patents............25
7.3 Interference, Opposition, Reexamination and Reissue.................25
7.4 Enforcement and Defense.............................................26
7.5 Patent Term Restoration.............................................27
ARTICLE VIII TERM AND TERMINATION...........................................27
8.1 Term and Expiration.................................................27
8.2 Termination by Notice...............................................27
8.3 Termination.........................................................27
8.4 Effect of Expiration or Termination.................................29
ARTICLE IX MISCELLANEOUS..................................................30
9.1 Force Majeure.......................................................30
9.2 Assignment..........................................................30
9.3 Severability........................................................30
9.4 Notices.............................................................31
9.5 Applicable Law......................................................32
9.6 Dispute Resolution..................................................32
9.7 Entire Agreement....................................................32
9.8 Headings............................................................32
9.9 Independent Contractors.............................................33
9.10 Waiver..............................................................33
9.11 Counterparts........................................................33
Schedule 1.19 -- Interneuron Patent Assets
Schedule 1.25 -- List of Major Market Countries
Attachment 1.39 -- 1993 Princeton License Agreement
Attachment 1.40 -- 1997 Princeton Research Agreement
Attachment 1.46 -- Side Agreement
Schedule 1.52 -- Transcell Patent Assets
Attachment 2.1.A -- [*] Research Program
Attachment 2.1.B -- [*] Research Program
Attachment 4.3 -- Form of Press Release
Schedule 7.1 -- Countries Where Interneuron and Transcell will File,
Prosecute and Maintain Patents
ii
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
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RESEARCH COLLABORATION AND LICENSE AGREEMENT
THIS AGREEMENT effective as of June 30, 1997, (the "Effective Date")
between Merck & Co., Inc., a corporation organized and existing under the laws
of New Jersey ("Merck"), Transcell Technologies Inc., a corporation organized
and existing under the laws of Delaware ("Transcell") and Interneuron
Pharmaceuticals, Inc., a corporation organized and existing under the laws of
Delaware ("Interneuron").
WITNESSETH:
WHEREAS, Transcell and/or Interneuron have developed or will develop
certain Transcell Know-How and Interneuron Know-How and have or will obtain
rights to certain Patent Assets (as hereinafter defined);
WHEREAS, Merck and Transcell desire to enter into a research collaboration
to discover and develop Compounds (as hereinafter defined) upon the terms and
conditions set forth herein;
WHEREAS, Merck desires to obtain a license under Transcell and Interneuron
Intellectual Property, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless specifically set forth to the contrary herein, the following terms,
whether used in the singular or plural, shall have the respective meanings set
forth below:
1.1 "Affiliate" shall mean (i) any corporation or business entity of which
fifty percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by a Party; or (ii) any
corporation or business entity which, directly or indirectly, owns, controls or
holds fifty percent (50%) (or the maximum ownership interest permitted by law)
or more of the securities or other ownership interests representing the equity,
the voting stock or, if applicable, the general partnership interest, of a
Party.
1.2 "Calendar Quarter" shall mean the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31.
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
1.3 "Calendar Year" shall mean each successive period of twelve (12) months
commencing on January 1 and ending on December 31.
1.4 "Combination Product" shall mean a Licensed Product which includes one
or more active ingredients other than Compound in combination with Compound.
1.5 "Compound" shall mean any chemical entity that is synthesized in, or
discovered in or during, the Research Program, or a derivative, homolog, or
analogue of such a chemical entity or a salt or ester thereof.
1.6 "Drug Development Program" shall mean the drug development program to
be carried out by Merck in accordance with Section 2.12.
1.7 "Effective Date" shall mean June 30, 1997.
1.8 "Expanded Field" shall mean all antibacterial agents for human or
animal use.
1.9 "Extended Research Program Term" shall have the meaning set forth in
Section 2.10.
1.10 "FDA" shall mean the United States Food and Drug Administration and
any successor agency having substantially the same functions.
1.11 "Field" shall mean all [*] and [*] analogues which are antibacterial
agents for human or animal use.
1.12 "First Commercial Sale" shall mean, with respect to any Licensed
Product, the first sale for end use or consumption of such Licensed Product in a
country after all required approvals, including marketing and pricing approvals,
have been granted by the governing health authority of such country.
1.13 "Full Time Equivalent" or "FTE" shall mean the equivalent of a
full-time scientist's work time over a twelve-month period (including normal
vacations, sick days and holidays). The portion of an FTE year devoted by a
scientist to the Research Program shall be determined by dividing the number of
days during any twelve-month period devoted by such employee to the Research
Program by the total number of working days during such twelve-month period.
1.14 "Improvement" shall mean any enhancement in the manufacture,
formulation, ingredients, preparation, presentation, means of delivery, dosage
or packaging of Compound or Licensed Product.
1.15 "Interneuron Information and Inventions" shall have the meaning as set
forth in Section 2.9.
2
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
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1.16 "Interneuron Intellectual Property" shall mean (i) Interneuron
Know-How, (ii) Interneuron Patent Assets, (iii) Interneuron Information and
Inventions, (iv) Interneuron's interest in Interneuron/Transcell Joint
Information and Inventions and (v) Interneuron's interest in Interneuron/Merck
Joint Information and Inventions.
1.17 "Interneuron Know-How" shall mean all Interneuron Information and
Inventions, and all information and materials, including but not limited to,
discoveries, Improvements, processes, formulas, data, inventions, know-how and
trade secrets, patentable or otherwise, which during the term of this Agreement
(i) are in Interneuron's possession or control or in which Interneuron has
sub-licensable rights, including its rights under the 1997 Princeton Research
Agreement, (ii) are not generally known and (iii) are necessary or useful to
Merck in connection with rights granted and activities contemplated under this
Agreement.
1.18 "Interneuron/Merck Joint Information and Inventions" shall have the
meaning as set forth in Section 2.9.
1.19 "Interneuron Patent Assets" shall mean issued patents and patent
applications (which shall be deemed to include certificates of invention and
applications for certificates of invention) presently existing or which during
the term of this Agreement are owned by Interneuron or which Interneuron through
license or otherwise acquires rights, including, but not limited to, those
listed on Schedule 1.19, which: (i) relate to a Compound and/or Licensed
Product, their uses in the Field or Expanded Field or a method of their
manufacture; or (ii) relate to Research Information and Inventions; including
all divisions, continuations, continuations-in-part, reissues, renewals,
extensions, supplementary protection certificates or the like of any such
patents and patent applications and foreign equivalents thereof.
1.20 "Interneuron/Transcell Joint Information and Inventions" shall have
the meaning as set forth in Section 2.9.
1.21 "Joint Research Committee" shall mean the committee described in
Section 2.6.
1.22 "Lead Candidate" means a Compound that is selected by the Joint
Research Committee as a lead compound for medicinal chemistry studies in
accordance with the [*] Research Program or the [*] Research Program. The
information below marked by * and [ ] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
1.23 "Licensed Product" shall mean any preparation in final form for sale
by prescription, over-the-counter or by any other method, for human or animal
use, which contains a Compound, including, without limitation, any Combination
Product.
3
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
1.24 "Licensor(s)" shall mean Interneuron and/or Transcell, as the context
indicates.
1.25 "Major Market Country" shall mean a country listed on Schedule 1.25
hereto.
1.26 "Merck Information and Inventions" shall have the meaning as set forth
in Section 2.9.
1.27 "Merck Know-How" shall mean any Merck information and materials,
including but not limited to, discoveries, Improvements, processes, formulas,
data, inventions, know-how and trade secrets, patentable or otherwise, which
during the term of this Agreement are not generally known and which arise out of
the Research Program or are necessary or useful to Transcell in the performance
of its obligations under the Research Program.
1.28 "Merck Patent Assets" shall mean issued patents and patent
applications (which shall be deemed to include certificates of invention and
applications for certificates of invention) which during the term of this
Agreement are owned by Merck or which Merck through license or otherwise
acquires rights, which: (i) relate to a Compound and/or Licensed Product or
their uses in the Field or Expanded Field; or (ii) relate to Research
Information and Inventions; including all divisions, continuations,
continuations-in-part, reissues, renewals, extensions, supplementary protection
certificates or the like of any such patents and patent applications and foreign
equivalents thereof.
1.29 "Milestone" shall have the meanings as described in Attachment 2.1.A
and Attachment 2.1.B hereto.
1.30 "[*] Research Program" shall mean the research program for the
synthesis and biological evaluation of [*] analogues and development of Licensed
Products as described in Attachment 2.1.B hereto.
1.31 "NDA" shall mean a new drug application filed with the FDA for
marketing authorization of a Licensed Product.
1.32 "Net Sales" shall mean the gross invoice price of Licensed Product
sold by Merck, its Affiliates or sublicensees (which term does not include
distributors) to the first independent third party after deducting, if not
previously deducted, from the amount invoiced:
(a) trade, cash and quantity discounts;
(b) credits and allowances on account of returned or rejected
products;
(c) rebates, chargebacks and other amounts paid on sale or dispensing
of Licensed Product;
(d) retroactive price reductions;
4
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
(e) with regard to sales in the United States, a fixed amount equal
to five percent (5%) of the amount invoiced to cover bad debt,
sales or excise taxes, transportation and insurance charges; and
with regard to sales outside the United States, a fixed amount
equal to ten percent (10%) of the amount invoiced to cover the
above and additional special transportation, custom duties, and
other governmental charges; and
(f) the inventory cost of devices or delivery systems used for
dispensing or administering Licensed Product, special packaging
of Licensed Product and diluents or similar exogenous materials
which accompany Licensed Product as it is sold.
With respect to sales of Combination Products, Net Sales shall be calculated on
the basis of the invoice price of Licensed Product(s) containing the same weight
of a Compound sold without other active ingredients. If such Licensed Product is
not sold without other active ingredients, Net Sales shall be calculated on the
basis of the invoice price of the Combination Product multiplied by a fraction,
the numerator of which shall be the inventory cost of Compound in the Licensed
Product and the denominator of which shall be the inventory cost of all of the
active ingredients in the Combination Product. Inventory cost shall be
determined in accordance with Merck's regular accounting methods.
1.33 "Option Payment" shall mean the payment described in Section 5.1 in
consideration for the rights granted in Section 3.3.
1.34 "Option Period" shall mean the option period described in Section 3.3.
1.35 "Party" shall mean Merck, Transcell or Interneuron.
1.36 "Patent Assets" shall mean the Interneuron Patent Assets and the
Transcell Patent Assets.
1.37 "Princeton" shall mean Princeton University, Princeton, New Jersey.
1.38 "Princeton Agreements" shall mean the 1993 Princeton License Agreement
and the 1997 Princeton Research Agreement, as the same may be amended from time
to time. The information below marked by * and [ ] has been omitted pursuant to
a request for confidential treatment. The omitted portion has been separately
filed with the Commission.
1.39 "1993 Princeton License Agreement" shall mean the License Agreement by
and between the Trustees of Princeton and Transcell effective as of October 14,
1993, as amended February 21, 1997 and as further amended from time to time, a
copy of which is attached hereto as Attachment 1.39.
5
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
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1.40 "1997 Princeton Research Agreement" shall mean the Research Agreement
by and between the Trustees of Princeton and Interneuron effective as of April
29, 1997, as amended from time to time, a copy of which is attached hereto as
Attachment 1.40.
1.41 "Proprietary Information" shall mean any and all scientific, clinical,
regulatory, marketing, financial and commercial information or data, whether
communicated in writing, orally or by any other means, which is provided by one
Party to the other Party in connection with this Agreement. Proprietary
Information shall include, without limitation, Merck Know-How and Transcell
Know-How.
1.42 "Research Information and Inventions" shall mean the entire right,
title and interest in all discoveries, Improvements, processes, formulas, data,
inventions, know-how and trade secrets, patentable or otherwise, arising from
the Research Program.
1.43 "Research Program" shall mean the collaborative research effort
between the parties as described in Attachments 2.1.A and 2.1.B hereto
consisting of the [*] Research Program and the [*] Research Program, as may be
amended or revised pursuant to the provisions of Section 2.6.3. References to
the Research Program shall refer only to the collaborative phase of the research
effort and shall not refer to the selection of a Safety Assessment Candidate by
Merck or to the Drug Development Program.
1.44 "Research Program Term" shall have the meaning set forth in Section
2.10.
1.45 "Safety Assessment Candidate" shall mean a Compound with a scientific
data package that is evaluated and approved by the Merck Research Management
Committee for initiation of formal toxicology studies.
1.46 "Side Agreement" shall mean the agreement entered into not later than,
and effective as of, the Effective Date by and among Merck, Transcell,
Interneuron and the Trustees of Princeton and attached hereto as Attachment
1.46.
1.47 "Territory" shall mean all of the countries in the world. The
information below marked by * and [ ] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Commission.
1.48 "Transcell Intellectual Property" shall mean (i) Transcell Know-How,
(ii) Transcell Patent Assets, (iii) Transcell Information and Inventions, (iv)
Transcell's interest in Transcell/Merck Joint Information and Inventions and (v)
Transcell's interest in Interneuron/Transcell Joint Information and Inventions.
1.49 "Transcell Information and Inventions" shall have the meaning as set
forth in Section 2.9.
6
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
1.50 "Transcell Know-How" shall mean all Transcell Information and
Inventions, and all information and materials, including but not limited to,
discoveries, Improvements, processes, formulas, data, inventions, know-how and
trade secrets, patentable or otherwise, which during the term of this Agreement
(i) are in Transcell's possession or control or in which Transcell has
sub-licensable rights, (ii) are not generally known and (iii) are necessary or
useful to Merck in connection with rights granted and activities contemplated
under this Agreement.
1.51 "Transcell/Merck Joint Information and Inventions" shall have the
meaning as set forth in Section 2.9.
1.52 "Transcell Patent Assets" shall mean issued patents and patent
applications (which shall be deemed to include certificates of invention and
applications for certificates of invention) presently existing or which during
the term of this Agreement are owned by Transcell or which Transcell through
license or otherwise acquires rights, including, but not limited to, those
listed on Schedule 1.52, which: (i) relate to a Compound and/or Licensed
Product, their uses in the Field or Expanded Field, or a method of their
manufacture; or (ii) relate to Research Information and Inventions; including
all divisions, continuations, continuations-in-part, reissues, renewals,
extensions, supplementary protection certificates or the like of any such
patents and patent applications and foreign equivalents thereof.
1.53 "Valid Patent Claim" means a claim of an issued and unexpired patent
included within the Patent Assets or the Merck Patent Assets, which has not been
revoked or held unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which has not been disclaimed, denied or
admitted to be invalid or unenforceable through reissue or disclaimer or
otherwise.
1.54 "[*] Research Program" shall mean the research program for the
synthesis and biological evaluation of [*] analogues and the development of
Licensed Products as described in Attachment 2.1.A hereto.
The information below marked by * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
ARTICLE II
RESEARCH PROGRAM AND
DRUG DEVELOPMENT PROGRAM
2.1 General. Transcell and Merck shall engage in the Research Program upon
the terms and conditions set forth in this Agreement. The activities to be
undertaken in the course of Research Program are set forth in this Article II
and in Attachment 2.1.A and Attachment
7
<PAGE>
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for confidential treatment.
The omitted portion has been separately filed with the Commission.
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2.1.B hereto which may be amended from time to time upon the mutual agreement of
the parties.
2.2 Conduct of Research. Transcell and Merck each shall conduct the
Research Program in a good scientific manner, and in compliance in all material
respects with all requirements of applicable laws, rules and regulations and all
applicable standard laboratory practices to attempt to achieve their objectives
efficiently and expeditiously. Transcell and Merck each shall proceed diligently
with the work set out in the Research Program by using their respective good
faith efforts.
2.3 Additional FTE's. In the event that the initial stage of either the [*]
Research Program or the [*] Research Program yields a Compound that satisfies
the criteria set forth in the relevant Research Program for Milestone I, Merck,
in consultation with Transcell, will determine whether an increased number of
chemistry FTE's may be required at Merck or Transcell for carrying out the
subsequent stages of such Research Program. In the event that Merck determines
that an increased number of FTE's are required at Transcell and/or Princeton,
Merck shall be responsible for the costs of such FTE's at the same rate provided
for in Section 5.2(b) of this Agreement.
2.4 [*] Research Program. The [*] Research Program shall proceed as
described in Attachment 2.1.A.
2.5 [*] Research Program. The [*] Research Program shall proceed as
described in Attachment 2.1.B.
2.6 Joint Research Committee. The parties hereby establish a joint research
committee to direct and monitor the Research Program as follows:
2.6.1 Composition of the Committee. The Research Program shall be
conducted under the direction of a joint research and development committee
(the "Joint Research Committee") comprised of three named representatives
of Merck and three named representatives of Transcell. Each of Merck and
Transcell shall appoint its respective representatives to the Joint
Research Committee, and from time to time may substitute one or more of its
representatives, in its sole discretion, effective upon notice to the other
Party of such change. It is anticipated that these representatives shall
have appropriate technical credentials and knowledge, and ongoing
familiarity with the Research Program. The Merck representatives initially
shall be John Kozarich, James Heck and a third representative to be
appointed and the Transcell representatives initially shall be Daniel
Kahne, Michael Sofia and a third representative to be appointed. Additional
representatives or consultants may from time to time, by mutual consent of
the parties, be invited to attend Joint Research Committee meetings,
subject to compliance with Section 4.1.
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2.6.2 Chairman and Vice Chairmen. The Chairman of the Joint Research
Committee shall be John Kozarich and the Vice Chairmen shall be Daniel
Kahne and Michael Sofia. The Chairman and the Vice Chairmen shall be the
primary contacts between the parties with respect to the Research Program.
Each Party shall notify the other as soon as practicable upon changing this
appointment.
2.6.3 Meetings and Decisions. The Joint Research Committee shall meet
at least once each Calendar Quarter at such locations as shall be
determined by the Joint Research Committee. Each Party shall bear its owns
expenses related to attendance of such meetings by its representatives. At
the first such meeting, which shall take place within 30 days after the
Effective Date, the Joint Research Committee shall discuss any necessary or
recommended changes in the Research Program. The Joint Research Committee
may meet by means of teleconference or video conference or other similar
communications equipment. The Joint Research Committee shall confer and
make decisions regarding the status and direction of the Research Program
and the other matters specified in the Research Program and shall also
consider, advise and make decisions regarding any technical, budgetary or
economic matters relating to the Research Program. Decisions of the Joint
Research Committee shall be made by a majority of the members. In the event
that the Joint Research Committee cannot or does not, after good faith
efforts, achieve a majority on an issue, the Chief Executive Officer of
Transcell, or his designee, acting as the duly authorized representative of
Transcell, and the Executive Vice President of Merck Research Laboratories,
acting as the duly authorized representative of Merck, shall discuss the
matter and attempt, in good faith, to reach agreement with respect to such
decision. In the event that the Chief Executive Officer of Transcell, or
his designee, and the Executive Vice President of Merck Research
Laboratories shall be unable to reach agreement, Merck shall, in its sole
discretion, make the final decision; provided, however, that (i) in the
event Merck determines that in increased number of FTE's are required to
carry out a stage of the Research Program, Merck shall be responsible for
the costs of such FTE's at the same rate provided for in Section 5.2(b) of
this Agreement and (ii) any changes to the Research Program which could
affect the provisions of Article V hereof require the written approval of
both Parties.
2.6.4 Records. The Joint Research Committee shall maintain accurate
records to document the discussions and decisions at each meeting. Meeting
minutes or summaries shall be prepared in accordance with procedures
established by the Joint Research Committee at its first meeting and shall
be distributed to all members of the Joint Research Committee after
approval of drafts by the Chairman and Vice Chairmen.
2.7 Exchange of Information. Upon execution of this Agreement, Transcell
shall disclose to Merck in writing all Transcell Know-How not previously
disclosed. During the Research Program Term or any Extended Research Program
Term, Transcell and Interneuron shall also promptly disclose to Merck in writing
on an ongoing basis all Transcell Know-How
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and Interneuron Know-How. Merck shall promptly disclose to Transcell during the
Research Program Term all Merck Know-How.
2.8 Records and Reports.
2.8.1 Records. Transcell shall maintain records in sufficient detail
and in good scientific manner appropriate for patent and regulatory
purposes, which shall be complete and accurate and shall fully and properly
reflect all work done and results achieved in the performance of the
Research Program.
2.8.2 Copies and Inspection of Records. Merck shall have the right,
during normal business hours and upon reasonable notice, to inspect and
copy all such records of Transcell referred to in Section 2.8.1. Merck
shall maintain such records and the information disclosed therein in
confidence in accordance with Section 4.1. Merck shall have the right to
arrange for its employees, agents and outside consultants to visit
Transcell at its offices and laboratories, and to visit the laboratory of
Daniel Kahne, during normal business hours and upon reasonable notice, and
to discuss the Research Program and its results in detail with the
technical personnel and consultants of Transcell.
2.8.3 Quarterly Reports. Within thirty (30) days following the end of
each Calendar Quarter during the Research Program Term, Transcell shall
provide to the Joint Research Committee a written progress report which
shall describe the work performed to date on the Research Program, evaluate
the work performed in relation to the goals of the Research Program and
provide such other information required by the Research Program or
reasonably requested by Merck or the Joint Research Committee relating to
the progress of the goals or performance of the Research Program. Upon
request, Transcell shall provide copies of the records described in Section
2.8.1. above.
2.9 Research Information and Inventions. Research Information and
Inventions developed or invented:
(a) (i) solely by employees, agents or consultants of Transcell
(other than Daniel Kahne or Suzanne Walker-Kahne) shall be owned
by Transcell; (ii) solely by employees, agents or consultants of
Princeton and subject to the 1993 Princeton License Agreement
shall be owned by Princeton, subject to Transcell's rights under
the 1993 Princeton License Agreement; and (iii) jointly by
employees, agents or consultants of Transcell (other than Daniel
Kahne or Suzanne Walker-Kahne) and Princeton and subject to the
1993 Princeton License Agreement shall be owned jointly by
Transcell and Princeton ((i), (ii) and/or (iii) individually or
collectively, "Transcell Information and Inventions");
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(b) solely by employees, agents or consultants of Princeton and
subject to the 1997 Princeton Research Agreement shall be owned
by Princeton, subject to Interneuron's rights under the 1997
Princeton Research Agreement ("Interneuron Information and
Inventions"),;
(c) solely by employees, agents or consultants of Merck shall be
owned solely by Merck ("Merck Information and Inventions");
(d) (i) jointly by employees, agents or consultants of Transcell
(other than Daniel Kahne or Suzanne Walker-Kahne) and Merck shall
be owned jointly by Transcell and Merck; and (ii) jointly by
employees, agents or consultants of Princeton and Merck and
subject to the 1993 Princeton License Agreement shall be owned
jointly by Princeton and Merck with Princeton's interest in such
Research Information and Inventions subject to Transcell's rights
under the 1993 Princeton License Agreement ((i) and/or (ii)
individually or together, "Transcell/Merck Joint Information and
Inventions");
(e) jointly by employees, agents or consultants of Princeton and
Merck and subject to the 1997 Princeton Research Agreement shall
be owned jointly by Princeton and Merck with Princeton's interest
in such Research Information and Inventions subject to
Interneuron's rights under the 1997 Princeton Research Agreement
("Interneuron/Merck Joint Information and Inventions"); and
(f) jointly by employees, agents or consultants of Princeton and
Transcell (other than Daniel Kahne or Suzanne Walker-Kahne) and
subject to the 1997 Princeton Research Agreement shall be owned
jointly by Princeton and Transcell with Princeton's interest in
such Research Information and Inventions subject to Interneuron's
rights under the 1997 Princeton Research Agreement
("Interneuron/Transcell Joint Information and Inventions").
Each Party shall promptly disclose to the other Parties the development, making,
conception or reduction to practice of Research Information and Inventions.
2.10 Research Program Term. The term of the Research Program shall commence
on the Effective Date and continue for a period of two years (the "Research
Program Term"), unless (a) Merck elects in writing to extend the Research
Program Term for one or more additional one-year terms (each, an "Extended
Research Program Term") or (b) the Research Program is terminated prior to the
end of the Research Program Term in accordance with this Agreement. If Merck
elects to extend the Research Program, Merck shall notify Transcell in writing
of such election at least 90 days before the end of the current Research Program
Term or Extended Research Program Term and, if Transcell agrees to extend the
Research Program,
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the parties shall negotiate in good faith to complete a mutually acceptable
written agreement at least 45 days prior to the expiration of the current
Research Program Term or Extended Research Program Term, which agreement will
describe the Research Program activities to be carried out by Merck and
Transcell during such Extended Research Program Term and the funding
arrangements applicable to such Extended Research Program Term.
2.11 Research Program Materials. The parties contemplate that each of them
will make compounds and/or biological materials available for purposes of the
Research Program and that additional compounds may be invented and/or
synthesized in the course of the Research Program. In respect of such compounds
and/or biological materials, the parties agree as follows:
2.11.1 Compounds or biological materials transmitted by one Party to
another pursuant to this Agreement (i) shall be distributed only to the
employees of the receiving Party who have a need to receive them to carry
out the terms of this Agreement, (ii) shall be used solely for the purposes
expressly set forth in this Agreement (iii) subject to 2.11.2, shall be
returned promptly to the transmitting Party upon such Party's request and
(iv) shall not be disclosed or distributed to any third party without the
prior written consent of the Party transmitting such compounds or
biological material.
2.11.2 Compounds that are used in the Research Program and are
determined not to be Lead Candidates shall be returned to the Party which
made such compound available. Ownership of Compounds shall be determined in
accordance with the terms of this Agreement, and all such Compounds that
are determined not to be Lead Candidates shall revert to the Party or
Parties that own(s) such Compounds. Any such Compound which is returned to
a Party pursuant to this Section 2.11.2 may not be developed, made, used or
sold by such Party, its Affiliates or licensees in the Expanded Field prior
to the First Commercial Sale in a Major Market Country of a Licensed
Product developed pursuant to this Agreement. Compounds that are determined
to be Lead Candidates shall remain available to the Parties for the
purposes of the Research Program and shall be subject to the terms of this
Agreement.
2.12 Drug Development Program. A Compound which is identified by the Joint
Research Committee as meeting the criteria in Attachment 2.1 set for Milestone
II will be reviewed by Merck's internal system for acceptance of such Compound
as a Safety Assessment Candidate. After identification of such a Safety
Assessment Candidate, Merck will be responsible for and will undertake all
preclinical development, toxicology and clinical development, including
regulatory filings, which are required for commercialization. The progress and
results of Merck's Drug Development Program, as well as such other information
reasonably requested by Transcell relating to the progress, goals or performance
of the Drug Development Program, will be reported to Transcell through
semi-annual summary reports. Merck shall also notify Transcell upon (i) the
filing of an IND with the FDA (ii) the filing of an NDA with the FDA and (iii)
the approval of an NDA by the FDA.
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ARTICLE III
LICENSE; DEVELOPMENT AND COMMERCIALIZATION
3.1 License Grant.
3.1.1 Subject to Sections 3.2 and 3.3 and the other terms and
conditions set forth herein, Transcell hereby grants to Merck an exclusive
license in the Field, including the right to grant sublicenses to Merck
Affiliates and to third parties, under Transcell Intellectual Property
solely to make, have made, use, develop, import, offer for sale and sell
Compounds and Licensed Products in the Territory. The foregoing license
includes an exclusive sub-license in the Field of Transcell's rights under
the 1993 Princeton License Agreement solely to make, have made, use,
develop, import, offer for sale and sell Compounds and Licensed Products in
the Territory.
3.1.2 Subject to Section 3.2 and 3.3 and the other terms and
conditions set forth herein, Interneuron hereby grants to Merck an
exclusive license in the Field, including the right to grant sublicenses to
Merck Affiliates and to third parties, under Interneuron Intellectual
Property solely to make, have made, use, develop, import, offer for sale
and sell Compounds and Licensed Products in the Territory. The foregoing
license includes an exclusive sub-license in the Field to Interneuron's
rights pursuant to the 1997 Princeton Research Agreement including any
license agreement entered into between Interneuron and Princeton pursuant
to the 1997 Princeton Research Agreement, solely to make, have made, use,
develop, import, offer for sale and sell Compounds and Licensed Products in
the Territory.
3.2 Retained Rights. Except as specifically set forth herein, Merck is not
granted any other license by implication or otherwise. During the Research
Program Term and any Extended Research Program Term, Transcell shall retain the
right to use Transcell Intellectual Property and Interneuron shall retain the
right to use Interneuron Intellectual Property (i) in the Field, solely for the
purposes of performing their obligations under the Research Program and (ii)
outside of the Field for any purpose, subject to Section 3.3 below. After
expiration or termination of the Research Program Term, Transcell and
Interneuron shall retain the right to use Transcell Intellectual Property and
Interneuron Intellectual Property outside of the Field for any purpose, subject
to Section 3.3 below.
3.3 Exclusivity in Expanded Field. In consideration of the Option Payment,
Transcell and Interneuron agree that, for a period of one year from and after
the Effective Date (the "Option Period"), neither Transcell nor Interneuron will
collaborate with a third party in the Expanded Field, or grant or engage in
negotiations to grant a license in the Expanded Field to any third party under
the Transcell and Interneuron Intellectual Property; provided, however, that
Transcell and Interneuron may hold introductory meetings of a general nature
with third parties during such period. During the Option Period, Merck shall
have an exclusive option to request an exclusive license under Transcell
Intellectual Property and
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Interneuron Intellectual Property in the Expanded Field upon terms to be
mutually agreed. In the event that Merck elects to exercise such option, Merck
shall so notify Transcell in writing prior to the end of the Option Period, and
the parties shall negotiate in good faith to complete a mutually acceptable
written license agreement not later than ninety (90) days after the end of the
Option Period. Such agreement will describe the activities to be carried out by
the Parties, the funding arrangements and any additional terms as agreed by the
Parties. Neither Transcell nor Interneuron will collaborate with a third party
in the Expanded Field, or grant or engage in negotiations to grant a license in
the Expanded Field to any third party under the Transcell and Interneuron
Intellectual Property during the period of such negotiations with Merck;
provided, however, that Transcell and Interneuron may hold introductory meetings
of a general nature with third parties during such period.
3.4 Princeton Agreements. (a) With respect to the 1993 Princeton License
Agreement, Merck acknowledges that it is a sublicensee of Transcell's rights
under such Agreement to the extent provided in Section 3.1 hereof, and Merck
agrees to be bound by the terms thereof to the extent set forth in the Side
Agreement. Except to the extent provided for in the Side Agreement, Merck shall
have no responsibility for payments to Princeton under the 1993 Princeton
License Agreement.
(b) With respect to the 1997 Princeton Research Agreement, Interneuron
agrees to exercise its right under such Agreement to obtain an exclusive license
to Princeton's interest in Research Information and Inventions in a timely
manner in accordance with the terms of such agreement and to use commercially
reasonable efforts to negotiate a license which is consistent with the terms of
this Agreement and which will provide the broadest possible rights to such
Research Information and Inventions. Interneuron shall promptly provide Merck
with a copy of any such license upon execution thereof, and Merck shall
automatically be deemed a sublicensee of Interneuron's rights thereunder to the
extent provided in Section 3.1 hereof. Except to the extent provided for in the
Side Agreement, Merck shall have no responsibility for payments to Princeton
under the 1997 Princeton Research Agreement and under any license agreement
entered into between Interneuron and Princeton pursuant thereto.
3.5 Development and Commercialization. Merck shall use reasonable efforts,
consistent with the usual practice followed by Merck in pursuing the
commercialization and marketing of pharmaceutical products of similar market
potential, at its own expense, to develop and commercialize a Licensed Product
on a commercially reasonable basis in such countries in the Territory where in
Merck's opinion it is commercially viable to do so; provided, that such
countries shall include the United States and at least one other Major Market
Country.
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ARTICLE IV
CONFIDENTIALITY AND PUBLICATION
4.1 Non-disclosure and Non-Use Obligations. All Proprietary Information
disclosed by one Party to any other Party hereunder shall be maintained in
confidence and shall not be disclosed to any non-party or used for any purpose
except as expressly permitted herein without the prior written consent of the
disclosing Party. The foregoing non-disclosure and non-use obligations shall not
apply to the extent that such Proprietary Information:
(a) is known by the receiving Party at the time of its receipt, and
not through a prior disclosure by the disclosing Party, as
documented by business records;
(b) is properly in the public domain;
(c) is subsequently disclosed to a receiving Party by a third party
who may lawfully do so and is not under an obligation of
confidentiality to the disclosing Party; or
(d) is developed by the receiving Party independently of Proprietary
Information received from the other Party, as documented by
research and development records.
4.2 Permitted Disclosure of Proprietary Information. Notwithstanding
Section 4.1, a Party receiving Proprietary Information of another Party may
disclose such Proprietary Information:
(a) to governmental or other regulatory agencies in order to obtain
patents subject to this Agreement, or to gain approval to conduct
clinical trials or to market Licensed Product, but such
disclosure may be only to the extent reasonably necessary to
obtain such patents or authorizations;
(b) by Merck to its permitted sublicensees, agents, consultants,
Affiliates and/or other third parties for the research and
development, manufacturing and/or marketing of the Licensed
Product (or for such parties to determine their interest in
performing such activities) in accordance with this Agreement on
the condition that such third parties agree to be bound by the
confidentiality obligations contained this Agreement, provided
that the term of confidentiality for such third parties shall be
no less than seven (7) years; or
(c) if required to be disclosed by law or court order, provided that
notice is promptly delivered to the non-disclosing Party in order
to provide an
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opportunity to challenge or limit the disclosure obligations;
provided, however, without limiting any of the foregoing, it is
understood that (i) any Party hereto, including any Affiliate,
may make reasonable disclosure of this Agreement, and the terms
hereof in any filings required by the United States Securities
and Exchange Commission, subject to review by the other Parties
of such proposed disclosure and requests for confidential
treatment for certain provisions of this Agreement, as agreed by
the Parties.
4.3 Publication and Public Disclosures. (a) Merck and Transcell each
acknowledge the other Party's interest in publishing its results to obtain
recognition within the scientific community and to advance the state of
scientific knowledge. Each Party also recognizes the mutual interest in
obtaining valid patent protection and in protecting business interests and trade
secret information. Consequently, either Party, its employees or consultants
wishing to make a publication or to make an oral disclosure shall deliver to the
other Party a copy of the proposed written publication or an outline of an oral
disclosure at least forty-five (45) days prior to submission for publication or
presentation. The reviewing Party shall have the right (a) to propose
modifications to the publication or oral disclosure for patent reasons, trade
secret reasons or business reasons or (b) to request a reasonable delay in
publication or oral disclosure in order to protect patentable information. If
the reviewing Party requests a delay, the publishing or disclosing Party shall
delay submission or presentation for a period of sixty (60) days to enable
patent applications protecting each Party's rights in such information to be
filed in accordance with Article VI below. Upon expiration of such sixty (60)
days, the publishing Party shall be free to proceed with the publication or oral
disclosure. If the reviewing Party requests modifications to the publication or
oral disclosure, the publishing Party shall edit such publication to prevent
disclosure of trade secret or proprietary business information prior to
submission of the publication or prior to oral disclosure, subject to the terms
of the Princeton Agreements and the Side Agreement. Interneuron agrees promptly
to forward to Merck for review any proposed publication or other disclosure by
Princeton (including any student thesis or dissertation) received by Interneuron
pursuant to Section 8 of the 1997 Princeton Research Agreement and which is
subject to Merck's rights hereunder and, upon Merck's request, to request that
Princeton delay such publication or presentation for a maximum of 60 days to
protect the patentability of any inventions described therein, subject to the
provisions of the Side Agreement. In addition, upon Merck's request, Interneuron
shall request that such a publication or presentation be altered, or not made,
in order to protect the patentability of any inventions described therein,
subject to Princeton's rights under the 1997 Princeton Research Agreement and
the Side Agreement.
(b) Any Party hereto, including any Affiliate of a Party, may make
disclosure of the existence of this Agreement and the terms hereof in any
filings required by the United States Securities and Exchange Commission,
provided that any such proposed disclosure shall be submitted to the other
Parties for prior review within a reasonable time in advance of the filing of
such proposed disclosure, and such other Parties may request reasonable
modifications to such proposed disclosure for patent reasons, trade secret
reasons or business reasons. The
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Parties shall use good faith efforts (i) to provide reasonable time for prior
review of proposed disclosures and (ii) to respond to requests for review of
disclosures in a timely manner. A Party which has complied with this Section
shall not be required to delay a disclosure if such delay would cause a
violation of law, regulation or court order. Upon execution of this Agreement,
the Parties may issue a press release in the form attached as Attachment 4.3.
Any additional press releases or public announcements with respect to this
Agreement or the transactions and activities contemplated herein shall be at
such time and in such manner as the Parties shall agree. Any information which
has been previously disclosed pursuant to the terms of this Section 4.3(b) shall
be subject to expedited review by the other Party prior to the subsequent
disclosure of such information. A request for expedited review shall (i) state
the proposed use of the information; (ii) include a copy of the previously
approved disclosure of the information; and (iii) state the deadline for
response.
ARTICLE V
PAYMENTS; ROYALTIES AND REPORTS
5.1 Commitment Fee and Option Payment. In consideration for Transcell's
commitment to perform its obligations under the Research Program and for access
to the Transcell Know-How and Patent Assets granted hereunder, Merck shall pay
to Transcell a non-refundable commitment fee of $1,500,000 within thirty (30)
days after the Effective Date. In consideration for the option granted in
Section 3.3 hereof, Merck shall pay to Transcell a non-refundable Option Payment
of $1,000,000 within thirty (30) days after the Effective Date.
5.2 Research Program Funding. In consideration for Transcell's performance
of its obligations under the Research Program and subject to the terms and
conditions contained herein, Merck shall pay Transcell:
(a) During the First and Second Years of the Research Program Term:
an amount equal to $750,000 per year payable in equal quarterly
installments of $187,500, for 6 FTE's: 3 FTE's at Transcell and 3
FTE's, including time spent by Daniel Kahne, at Princeton. The
first such quarterly installment shall be due within 30 days
after the Effective Date. The remaining quarterly installments
shall be due within fifteen (15) days after the end of each
Calendar Quarter, beginning October 15, 1997.
(b) For any Additional Year(s) of the Research Program Term: If the
Research Program Term is extended for a third or subsequent year
in accordance with Section 2.10 above, payments for such
additional year or years shall be negotiated annually, based upon
$200,000 per FTE at Transcell and $50,000 per FTE at Princeton.
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5.3 Milestone Payments. Subject to the terms and conditions contained in
this Agreement, Merck shall pay to Transcell the following non-refundable
milestone payments, each milestone payment is to be made no more than once with
respect to the [*] Research Program and once with respect to the [*] Research
Program:
(a) $1,500,000 [*];
(b) $3,000,000 upon [*];
(c) $4,000,000 upon [*];
(d) $6,000,000 upon the [*]; and
(e) $8,000,000 upon [*].
5.3.1 Merck shall notify Transcell in writing within thirty (30) days
after the achievement of each milestone, and such notice shall be
accompanied by payment of the appropriate milestone payment. The milestone
payments described above shall be payable only upon the initial achievement
of such milestone for each of the [*] Research Program and the [*] Research
Program and no amounts shall be due hereunder for subsequent or repeated
achievement of such milestones within a Research Program.
5.3.2 Fifty percent (50%) of each milestone payment made for the
achievement of a milestone described in (c), (d) and (e) above shall be
credited against the royalties payable by Merck under Section 5.4 for the
Compound for which such milestone was paid.
5.4 Royalties.
5.4.1 Royalties Payable By Merck. Subject to the terms and conditions
of this Agreement, for each Licensed Product Merck shall pay to Transcell
royalties on a country-by-country basis:
(a) if Merck's activities with respect to a Licensed Product or
Compound would, but for this Agreement, infringe or fall within
the scope of a Valid Patent Claim or a supplemental protection
certificate in the country of sale, then:
(i) for annual Net Sales of Licensed Products by Merck, its
Affiliates or sublicensees less than or equal to [*], an
amount equal to [*] percent [*] of such Net Sales in such
countries;
(ii) for that amount of annual Net Sales of Licensed Products by
Merck, its Affiliates or sublicensees greater than [*] and
less than
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or equal to [*], an amount equal to [*] percent [*] of such
Net Sales in such countries; and
(iii) for that amount of annual Net Sales of Licensed Products by
Merck, its Affiliates or sublicensees greater than [*], an
amount equal to [*] percent [*] of such Net Sales in such
countries; or
(b) for sales other than those covered in Subsection 5.4.1(a) above:
(i) for annual Net Sales of Licensed Products by Merck, its
Affiliates or sublicensees less than or equal to [*], an
amount equal to [*] percent [*] of such Net Sales in such
countries;
(ii) for that amount of annual Net Sales of Licensed Products by
Merck, its Affiliates or sublicensees greater than [*] and
less than or equal to [*], an amount equal to [*] percent
[*] of such Net Sales in such countries; and
(iii) for that amount of annual Net Sales of Licensed Product by
Merck, its Affiliates or sublicensees greater than [*], an
amount equal to [*] percent [*] of such Net Sales in such
countries
Royalties on each Licensed Product at the rate set forth above
shall be effective as of the date of First Commercial Sale of
Licensed Product in a country and shall continue until either (i)
the expiration of the last applicable patent on such Licensed
Product or Compound in such country in the case of sales under
Subsection 5.4.1(a) above or (ii) until the tenth (10th)
anniversary of the First Commercial Sale in such country in the
case of sales of Licensed Product under Subsection 5.4.1(b)
above, subject to the following conditions:
(x) that only one royalty shall be due with respect to the same
unit of Licensed Product;
(y) that no royalties shall be due upon the sale or other
transfer among Merck, its Affiliates or sublicensees, but in
such cases the royalty shall be due and calculated upon
Merck's or its Affiliate's or its sublicensee's Net Sales to
the first independent third party; and
(z) no royalties shall accrue on the disposition of Licensed
Product in reasonable quantities by Merck, Affiliates or its
sublicenses as samples (promotion or otherwise) or as
donations (for example, to non-profit institutions or
government agencies for a non-commercial purpose).
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5.4.2 Managed Pharmaceutical Contract. Merck may sell Licensed
Products to an independent third party (such as a retailer or wholesaler)
and may subsequently perform services relating to Licensed Products and
other products under a managed pharmaceutical benefits contract or other
similar contract. In such cases, it is agreed by the parties that Net Sales
shall be based on the invoice price to an independent retailer or
wholesaler, as set forth in the definition of Net Sales in Article I
hereof, notwithstanding that Merck may receive compensation arising from
the performance of such services.
5.4.3 Change in Sales Practices. The parties acknowledge that during
the term of this Agreement, Merck's sales practices for the marketing and
distribution of Licensed Products may change to the extent to which the
calculation of the payment for royalties on Net Sales may become
impractical or even impossible. In such event the parties agree to meet and
discuss in good faith new ways of compensating Transcell to the extent
currently contemplated under Section 5.4.1.
5.4.4 Royalties for Bulk Compound. In those cases where Merck sells
bulk Compound rather than a Licensed Product in packaged form to an
independent third party, and is unable to determine Net Sales, the royalty
obligations of this Article V shall be applicable to the bulk Compound
sold.
5.4.5 Compulsory Licenses. If a compulsory license is granted to a
Third Party with respect to Licensed Product in any country in the
Territory with a royalty rate lower than the royalty rate provided by
Section 5.4.1., then the royalty rate to be paid by Merck on Net Sales in
that country under Section 5.4.1 shall be reduced to the rate paid by the
compulsory Third Party licensee.
5.4.6 Third Party Licenses. If one or more patent licenses from a
third party or parties are required by Merck, its Affiliates and
sublicensees in order to develop, make, have made, use, sell or import
Compound or Licensed Product in a particular country, 50% of any royalties
actually paid under such third party patent licenses by Merck for sale of
such Compound or Licensed Product in a country for such Calendar Quarter
shall be creditable against the royalty payments to be paid to Transcell by
Merck with respect to the sale of such Licensed Products in such country.
5.5 Reports; Payment of Royalty. Following the First Commercial Sale of a
Licensed Product and during the term of the Agreement, Merck shall furnish to
Transcell a quarterly written report for the Calendar Quarter showing the sales
of all Licensed Products subject to royalty payments sold by Merck, its
Affiliates and its sublicensees in the Territory during the reporting period
(and a reconciliation to Net Sales) and the royalties payable under this
Agreement. Reports shall be due on the thirtieth (30th) day following the close
of each Calendar Quarter. Royalties shown to have accrued by each royalty report
shall be due and payable on the date such royalty report is due. Merck shall
keep complete and accurate records in sufficient detail to enable the royalties
payable hereunder to be determined.
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5.6 Audits.
(a) Upon the written request of Transcell and not more than once in each
Calendar Year, Merck shall permit an independent certified public accounting
firm of nationally recognized standing selected by Transcell and reasonably
acceptable to Merck, to have access during normal business hours to such of the
records of Merck as may be reasonably necessary to verify the accuracy of the
royalty reports hereunder for any year ending not more than twenty-four (24)
months prior to the date of such request. The accounting firm shall disclose to
Transcell only whether the royalty reports are correct or incorrect and the
specific details concerning any discrepancies.
(b) If such accounting firm correctly concludes that additional royalties
were owed during such period, Merck shall pay the additional royalties within
thirty (30) days of the date Transcell delivers to Merck such accounting firm's
written report so correctly concluding. The fees charged by such accounting firm
shall be paid by Transcell; provided, however, that if an error in favor of
Transcell in the payment of royalties of more than five percent (5%) of the
royalties due hereunder for the period being reviewed is discovered, then the
fees and expenses of the accounting firm shall be borne by Merck.
(c) Merck shall include in each sublicense granted by it pursuant to this
Agreement a provision requiring the sublicensee to make reports to Merck, to
keep and maintain records of sales made pursuant to such sublicense and to grant
access to such records by Transcell's independent accountant to the same extent
required of Merck under this Agreement. Upon the expiration of twenty-four (24)
months following the end of any year, the calculation of royalties payable with
respect to such year shall be binding and conclusive upon Transcell, and Merck
and its sublicensees shall be released from any liability or accountability with
respect to royalties for such year.
(d) Transcell shall treat all financial information subject to review under
this Section 5.6 or under any sublicense agreement in accordance with the
confidentiality provisions of this Agreement, and shall cause its accounting
firm to enter into an acceptable confidentiality agreement with Merck obligating
it to retain all such financial information in confidence pursuant to such
confidentiality agreement.
5.7 Payment Exchange Rate. All payments to Transcell under this Agreement
shall be made in United States dollars by bank wire transfer in immediately
available funds to such bank account in the United States designated in writing
by Transcell from time to time. In the case of sales outside the United States,
the rate of exchange to be used in computing the amount of currency equivalent
in United States dollars due Transcell shall be made at the rate of exchange
utilized by Merck in its worldwide accounting system, prevailing on the fourth
to the last business day of the Calendar Quarter to which such payments relate.
Such rate of exchange is that rate quoted by Reuters Ltd. for the spot purchase
of U.S. dollars at 7:15 a.m. Eastern Standard Time on such day.
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5.8 Income Tax Withholding. If laws, rules or regulations require
withholding of income taxes or other taxes imposed upon payments set forth in
this Article V, Merck shall make such withholding payments as required and
subtract such withholding payments from the payments set forth in this Article
V. Merck shall submit appropriate proof of payment of the withholding taxes to
Transcell within a reasonable period of time. Merck will use efforts consistent
with its usual business practices to ensure that any withholding taxes imposed
are reduced as far as possible under the provisions of the current or any future
double taxation treaties or agreements between foreign countries, and the
Parties shall cooperate with each other with respect thereto, with the
appropriate Party under the circumstance providing the documentation required
under such treaty or agreement to claim benefits thereunder.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Transcell Representations and Warranties. Transcell represents and
warrants to Merck that as of the date of this Agreement:
(a) to the best of Transcell's knowledge, without having conducted an
investigation, the Transcell Patent Assets and Transcell Know-How
are not invalid or unenforceable, in whole or in part;
(b) it has the full right, power and authority to enter into this
Agreement, to perform the Research Program and to grant the
licenses granted under Article III hereof;
(c) it has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in the
Transcell Patent Assets or Transcell Know-How;
(d) to the best of Transcell's knowledge, without having conducted an
investigation, it is the sole and exclusive owner of or licensee
under the Transcell Patent Assets and Transcell Know-How, all of
which are free and clear of any liens, charges and encumbrances,
subject to the Princeton Agreements, and, other than the rights
of Princeton and the United States pursuant to the Princeton
Agreements, no other person, corporate or other private entity,
or governmental entity or subdivision thereof, has any valid
claim of ownership with respect to the Transcell Patent Assets
and Transcell Know-How, whatsoever;
(e) to the best of Transcell's knowledge, without having conducted an
investigation, the licensed Transcell Patent Assets and Transcell
Know-How practiced as contemplated herein and the development,
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manufacture, use and sale of Compound and Licensed Products do
not infringe any patent rights owned or possessed by any third
party;
(f) there are no claims, judgments or settlements against or owed by
Transcell or pending or, to the best of Transcell's knowledge,
threatened claims or litigation relating to the Transcell Patent
Assets and Transcell Know-How;
(g) it has disclosed to Merck all relevant information known by it
regarding the Transcell Patent Assets and Transcell Know-How
reasonably related to the activities contemplated under this
Agreement; and
(h) the copy of the 1993 Princeton License Agreement and the
amendment thereto attached hereto is true, complete and correct
and there have been no further amendments to such agreement, and,
to its knowledge, such agreement is in full force and effect as
of the date hereof.
6.2 Interneuron Representations and Warranties. Interneuron represents and
warrants to Merck that as of the date of this Agreement:
(a) it has the full right, power and authority to enter into this
Agreement and subject to the 1997 Princeton Research Agreement,
to grant the licenses granted under Article III hereof;
(b) it has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in the
Interneuron Patent Assets or Interneuron Know-How;
(c) to the best of Interneuron's knowledge, without having conducted
an investigation, it has the sole and exclusive right under the
1997 Research Agreement to obtain an exclusive license under the
Interneuron Patent Assets and Interneuron Know-How, all of which
are free and clear of any liens, charges and encumbrances,
subject to the Princeton Agreements, and, other than the rights
of Princeton and the United States pursuant to the Princeton
Agreements, no other person, corporate or other private entity,
or governmental entity or subdivision thereof, has any valid
claim of ownership with respect to the Interneuron Patent Assets
and Interneuron Know-How, whatsoever;
(d) to the best of Interneuron's knowledge, without having conducted
an investigation, the licensed Interneuron Patent Assets and
Interneuron Know-How practiced as contemplated herein and the
development, manufacture, use and sale of Compound and Licensed
Products do not infringe any patent rights owned or possessed by
any third party;
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(e) there are no claims, judgments or settlements against or owed by
Interneuron or pending or, to the best of Interneuron's
knowledge, threatened claims or litigation relating to the
Interneuron Patent Assets and Interneuron Know-How;
(f) it has disclosed to Merck all relevant information known by it
regarding the Interneuron Patent Assets and Interneuron Know-How
reasonably related to the activities contemplated under this
Agreement; and
(g) the copy of the 1997 Princeton Research Agreement attached hereto
is true, complete and correct and there have been no amendments
to such agreement, and, to its knowledge, such agreement is in
full force and effect as of the date hereof.
6.3 General Disclaimer. THE PATENT ASSETS, TRANSCELL KNOW-HOW AND
INTERNEURON KNOW-HOW PROVIDED BY LICENSORS TO MERCK ARE PROVIDED "AS IS" AND
LICENSORS MAKE NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED,
WRITTEN OR ORAL, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO THE VALUE, ADEQUACY, FREEDOM FROM FAULT, OR THE QUALITY,
EFFICIENCY, SUITABILITY, CHARACTERISTICS, USEFULNESS, MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF, THE PATENT ASSETS, TRANSCELL KNOW-HOW OR
INTERNEURON KNOW-HOW, OR ANY DATA CONTAINED THEREIN.
6.4 Merck Representations and Warranties. Merck represents and warrants to
Transcell and Interneuron that as of the date of this Agreement it has the full
right, power and authority to enter into this Agreement and to perform the
Research Program.
ARTICLE VII
PATENT MATTERS
7.1 Filing, Prosecution and Maintenance of Patents. Each of Transcell and
Interneuron agrees to file, prosecute and maintain in the countries in the
Territory listed on Schedule 7.1 hereto, or such other countries as the Parties
may agree, upon appropriate consultation with Merck, the Transcell Patent Assets
and the Interneuron Patent Assets, respectively, licensed to Merck under this
Agreement; provided, however, (i) with respect to Transcell/Merck Joint
Information and Inventions or Interneuron/Merck Joint Information and
Inventions, Merck shall have the first right to file, prosecute and maintain the
patent applications and (ii) if Transcell or Interneuron elects not to file a
patent application on Transcell Information and Inventions or Interneuron
Information and Inventions, Merck shall have the right to file, prosecute and
maintain such patent application, and Transcell or
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Interneuron, as the case may be, shall cooperate fully in the filing and
prosecution of such patents. In each case, the filing Party shall give the
non-filing Parties an opportunity to review the text of the application before
filing, shall consult with the non-filing Parties with respect thereto, and
shall supply the non-filing Parties with a copy of the application as filed,
together with notice of its filing date and serial number. Each Party shall keep
the other Parties advised of the status of the actual and prospective patent
filings and upon the request of another Party, provide advance copies of any
papers related to the filing, prosecution and maintenance of such patent
filings. Each Licensor shall promptly give notice to Merck of the grant, lapse,
revocation, surrender, invalidation or abandonment of any Patent licensed or
sub-licensed to Merck by such Licensor. The Party that is the filing Party under
this Section shall be responsible for the payment of all costs and expenses
related to such filing.
7.2 Right of Other Parties to Prosecute and Maintain Patents. Any Party
having the first right to file, prosecute and maintain the patent applications
and patents referred to in Section 7.1 shall give notice to the other Parties of
any desire to cease prosecution and/or maintenance of a patent constituting part
of Patent Assets and, in such case, shall permit the other Parties, at the other
Parties' sole discretion, to continue prosecution or maintenance at its own
expense, subject to the Princeton Agreements and the Side Agreement.
7.3 Interference, Opposition, Reexamination and Reissue.
(a) A Licensor, within ten (10) days of learning of such an event, shall
inform Merck of any request for, or filing or declaration of, any interference,
opposition or reexamination relating to Patent Assets. Merck and such Licensor
thereafter shall consult and cooperate fully to determine a course of action
with respect to any such proceeding and shall agree upon the Parties' rights of
review and approval of submissions relating to such proceeding based upon the
Parties' relative interests in the relevant portion of Patent Assets.
(b) A Licensor shall not institute any opposition, reexamination, or
reissue proceeding relating to Patent Assets without the prior written consent
of Merck, which consent shall not unreasonably be withheld or delayed.
(c) In connection with any interference, opposition, reissue, or
reexamination proceeding relating to Patent Assets, Merck and Licensors will
cooperate fully and will provide each other with any information or assistance
that either reasonably may request. Licensors shall keep Merck informed of
developments in any such action or proceeding, including, to the extent
permissible, the status of any settlement negotiations and the terms of any
offer related thereto.
(d) Licensors shall bear the expense of any interference, opposition,
reexamination, or reissue proceeding relating to Patent Assets.
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7.4 Enforcement and Defense.
(a) Each Party shall promptly give the other Parties notice of either any
infringement of Patent Assets, or any misappropriation or misuse of Transcell
Know-How or Interneuron Know-How, that comes to such Party's attention. The
Parties shall thereafter consult and cooperate fully to determine a course of
action, including, without limitation, the commencement of legal action by any
or all of the Parties. However, Licensors, upon notice to Merck, shall have the
first right to initiate and prosecute such legal action at their own expense and
in the name of Transcell and/or Interneuron, as applicable, and Merck, or to
control the defense of any declaratory judgment action relating to Transcell and
Interneuron Intellectual Property. Licensors shall promptly inform Merck if both
Licensors elect not to exercise such first right, and Merck thereafter shall
have the right either to initiate and prosecute such action or to control the
defense of such declaratory judgment action in the name of Merck and, if
necessary, Transcell or Interneuron.
(b) If Licensors elect not to initiate and prosecute an infringement action
as provided in Subsection 7.4(a), and Merck elects to do so, the cost of any
agreed-upon course of action, including the costs of any legal action commenced
or the defense of any declaratory judgment, shall be borne solely by Merck.
(c) For any such legal action, in the event that any Party is unable to
initiate or prosecute such action solely in its own name, the other Parties will
join such action voluntarily and will execute and cause its Affiliates under its
control to execute all documents necessary for the Party to prosecute and
maintain such action. In connection with any such action, the Parties will
cooperate fully and will provide each other with any information or assistance
that either reasonably may request. Each Party shall keep the other informed of
developments in any such action or proceeding, including, to the extent
permissible by law, the status of any settlement negotiations and the terms of
any offer related thereto.
(d) Any recovery obtained by Merck or either Licensor shall be shared as
follows:
(i) the Party that initiated and prosecuted the action shall recoup
all of its costs and expenses incurred in connection with the
action, whether by settlement or otherwise;
(ii) the other Party then shall, to the extent possible, recover its
costs and expenses incurred in connection with the action;
(iii) if Licensors initiated and prosecuted the action, the amount of
any recovery remaining then shall be retained by Licensors; and
(iv) if Merck initiated and prosecuted the action, the amount of any
recovery remaining shall be retained by Merck except that
Licensors shall receive a portion equivalent to the royalties
they would have received on such amount.
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(e) Each Licensor shall inform Merck of any certification regarding any
Patent Assets it has received pursuant to either 21 U.S.C. ss.ss.
355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or under Canada's Patented Medicines
(Notice of Compliance) Regulations Article 5 and shall provide Merck with a copy
of such certification within five (5) days of receipt. Licensors' and Merck's
rights with respect to the initiation and prosecution of any legal action as a
result of such certification or any recovery obtained as a result of such legal
action shall be allocated as defined in Subsections 7.4(a) through (d);
provided, however, that Licensors shall exercise the first right to initiate and
prosecute any action and shall inform Merck of such decision within fifteen days
of receipt of the certification, after which time, if Licensors have not advised
Merck of their intention to initiate and prosecute such action, Merck shall have
the right to initiate and prosecute such action.
7.5 Patent Term Restoration. The Parties shall cooperate in obtaining
patent term restoration or supplemental protection certificates or their
equivalents in any country in the Territory where applicable. If elections with
respect to obtaining such patent term restoration are to be made, Merck shall
have the right to make the election and Licensors shall abide by such election.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term and Expiration. This Agreement shall be effective as of the
Effective Date and unless terminated earlier pursuant to Sections 8.2 or 8.3
below, the term of this Agreement shall continue in effect until expiration of
all royalty obligations hereunder. Upon expiration of this Agreement due to
expiration of all royalty obligations hereunder, Merck's licenses pursuant to
Section 3.1 shall become fully paid-up, perpetual licenses.
8.2 Termination by Notice. Notwithstanding anything contained herein to the
contrary, Merck shall have the right to terminate this Agreement at any time by
giving ninety (90) days advance written notice to Transcell and Interneuron. In
the event of such termination, (i) the rights and obligations hereunder,
including any payment obligations not due and owing as of the termination date
shall terminate and (ii) Merck shall have no further rights with respect to
Transcell Intellectual Property and Interneuron Intellectual Property.
8.3 Termination.
8.3.1 Termination for Cause. Any Party may terminate this Agreement by
notice to the other Parties at any time during the term of this Agreement:
(a) if another Party is in breach of its material obligations
hereunder by causes and reasons within its control and has not
cured such breach within ninety (90) days after notice requesting
cure of the breach; or
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(b) upon the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings, or upon an assignment of
a substantial portion of the assets for the benefit of creditors
by another Party; provided, however, in the case of any
involuntary bankruptcy proceeding such right to terminate shall
only become effective if the Party consents to the involuntary
bankruptcy or such proceeding is not dismissed within ninety (90)
days after the filing thereof.
8.3.2 Effect of Termination for Cause on License.
(a) In the event that either Transcell or Interneuron breaches its
material obligations hereunder and Merck notifies Transcell and
Interneuron of the termination of this Agreement under Section
8.3.1(a) or initiates arbitration against Transcell or
Interneuron for breach of this Agreement pursuant to Section 9.6,
or both, any milestone or royalty payments that Merck may be
required to pay pursuant to this Agreement and that are not
subject to Section 8.4 shall be paid by Merck instead into an
escrow account pending the resolution of the arbitration or other
agreement of the Parties. If the arbitrators determine that Merck
had the right to terminate this Agreement under Section 8.3.1(a)
due to a breach of material obligations by Transcell or
Interneuron which was not cured as set forth therein, Merck's
licenses pursuant to this Agreement shall become perpetual
licenses, and the royalty to be paid by Merck, if any, shall be
determined by the arbitrators. In addition, Licensors shall,
within one month from such determination, return or cause to be
returned to Merck all Licensed Products, Compounds, Know-How or
other substances or composition, delivered or provided by Merck,
as well as any other materials and/or documents provided by Merck
in any medium.
(b) In the event that Merck breaches its material obligations
hereunder and Licensors notify Merck of the termination of this
Agreement under Section 8.3.1(a) or initiate arbitration against
Merck for breach of this Agreement pursuant to Section 9.6, or
both, Merck shall continue to pay to Transcell any milestone or
royalty payments that Merck may be required to pay pursuant to
this Agreement pending the resolution of the arbitration or other
agreement of the Parties. If the arbitrators determine that
Licensors had the right to terminate this Agreement under Section
8.3.1(a) due to a breach of material obligations by Merck which
was not cured as set forth therein, Licensors shall be entitled
to
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any payments then due or owing under this Agreement and Merck
shall have no further rights with respect to Transcell
Intellectual Property or Interneuron Intellectual Property. Merck
shall, within one month from such determination, return or cause
to be returned to Licensors all Licensed Products, Compounds,
Know-How or other substances or composition, delivered or
provided by Licensors, as well as any other materials and/or
documents provided by Licensors in any medium.
(c) In the event Merck terminates this Agreement under Section
8.3.1(b) or this Agreement is otherwise terminated under
8.3.1(b), all rights and licenses granted pursuant to this
Agreement are, and shall otherwise be deemed to be, for purposes
of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101(35A) of the
Bankruptcy Code. The Parties agree that Merck, as a licensee of
such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Bankruptcy
Code. The Parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against Transcell
or Interneuron under the Bankruptcy Code, Merck shall be entitled
to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments
of such intellectual property upon written request therefore by
Merck. Such intellectual property and all embodiments thereof
shall be promptly delivered to Merck (i) upon any such
commencement of a bankruptcy proceeding upon written request
therefore by Merck, unless Transcell and Interneuron elect to
continue to perform all of their respective obligations under
this Agreement or (ii) if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of Transcell or
Interneuron, as the case may be, upon written request therefor by
Merck.
8.4 Effect of Expiration or Termination. Expiration or termination of this
Agreement shall not relieve the parties of any obligation accruing prior to such
expiration or termination, and Merck shall be obligated to pay and shall pay to
Transcell, within thirty (30) calendar days of such expiration or termination,
all payments and royalties due or accrued pursuant to the terms of Article V
herein. The provisions of Article IV shall survive the expiration or termination
of this Agreement and shall continue in effect for seven (7) years from the date
of expiration or termination. Any expiration or early termination of this
Agreement shall be without prejudice to the rights of any Party against the
others accrued or accruing under this Agreement prior to termination, including
the obligation to pay royalties for Licensed Product(s) or Compound sold prior
to such termination. Upon the expiration or
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termination of this Agreement other than pursuant to Section 8.3, Merck shall,
within one month from the date of termination, return or cause to be returned to
Licensors all Licensed Products, Compounds, Know-How or other substances or
composition, delivered or provided by Licensors, as well as any other materials
and/or documents provided by Licensors in any medium and Licensors shall, within
one month from the date of termination, return or cause to be returned to Merck
all Licensed Products, Compounds, Know-How or other substances or composition,
delivered or provided by Merck, as well as any other materials and/or documents
provided by Merck in any medium.. In addition, if this Agreement is terminated
by Merck pursuant to Section 8.2 for reasons other then concerns regarding the
safety of a Safety Assessment Candidate, Merck may, in its sole discretion,
offer to Licensors the right to acquire the information and data developed by
Merck for the IND or NDA with respect to such Safety Assessment Candidate upon
mutually agreeable terms and for reasonable compensation to be negotiated in
good faith.
ARTICLE IX
MISCELLANEOUS
9.1 Force Majeure. No Party shall be held liable or responsible to the
other Parties nor be deemed to have defaulted under or breached the Agreement
for failure or delay in fulfilling or performing any term of the Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party including, but not limited to, fire, flood,
embargo, war, acts of war (whether war be declared or not), insurrection, riot,
civil commotion, strike, lockout or other labor disturbance, act of God or act,
omission or delay in acting by any governmental authority or one of the other
Parties. The affected Party shall notify the other Parties of such force majeure
circumstances as soon as reasonably practical.
9.2 Assignment. The Agreement may not be assigned or otherwise transferred,
nor, except as expressly provided hereunder, may any right or obligations
hereunder be assigned or transferred, by a Party without the consent of the
other Parties; provided, however, that any Party may, without such consent,
assign the Agreement and its rights and obligations hereunder to an Affiliate or
in connection with the transfer or sale of all or substantially all of its
assets related to a Licensed Product or its business, or in the event of its
merger or consolidation or change in control or similar transaction. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement.
9.3 Severability. In the event that any of the provisions contained in this
Agreement are held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, unless the absence
of the invalidated provision(s) adversely affect the substantive rights of the
parties. The Parties shall replace the invalid, illegal or unenforceable
provision(s)
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with valid, legal and enforceable provision(s) which, insofar as practical,
implement the purposes of this Agreement.
9.4 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
sent by telecopier (and promptly confirmed by personal delivery, registered or
certified mail or overnight courier), sent by nationally-recognized overnight
courier or sent by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to Transcell, to: Transcell Technologies Inc.
8 Cedarbrook Drive
Cranbury Junction, NJ 08512
Attention: Chief Operating Officer
Telecopier No.: 609-655-6930
if to Interneuron to: Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue, Suite 340
Lexington, MA 02173
Attention: President
Telecopier No.: 617-674-2448
in either case with copies to: Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
18th Floor
New York, NY 10017
Attention: Jill M. Cohen
Telecopier No.: 212-682-5729
Lowe Price LeBlanc & Becker
99 Canal Center Plaza
Suite 300
Alexandria, VA 22314
Attention: Gilberto M. Villacorta
Telecopier No.: 703-684-1124
if to Merck, to: Merck & Co., Inc.
One Merck Drive
P.O. Box 100
Whitehouse Station, NJ 08889-0100
Attention: Office of Secretary
Telecopier No.: 908-735-1246
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with a copy to: Attention: Office of Assistant General
Counsel
Telecopier No.: 908-735-1226
or to such other address as the Party to whom notice is to be given may have
furnished to the other Parties in writing in accordance herewith. Any such
communication shall be deemed to have been given when delivered if personally
delivered or sent by telecopier on a business day, on the business day after
dispatch if sent by nationally-recognized overnight courier and on the third
business day following the date of mailing if sent by mail.
9.5 Applicable Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey and the United States
without reference to any rules of conflict of laws or renvoi.
9.6 Dispute Resolution. The Parties agree to attempt initially to solve all
claims, disputes, or controversies arising under, out of, or in connection with
this Agreement by conducting good faith negotiations. If the Parties are unable
to settle the matter between themselves, the matter shall thereafter be resolved
by alternative dispute resolution, starting with mediation and including, if
necessary, a final and binding arbitration. Whenever a Party shall decide to
institute arbitration proceedings, it shall give written notice to that effect
to the other Party. The Party giving such notice shall refrain from instituting
the arbitration proceedings for a period of sixty (60) days following such
notice. During such period, the Parties shall make good faith efforts to
amicably resolve the dispute without arbitration. Any arbitration hereunder
shall be conducted under the rules of the American Arbitration Association. Each
such arbitration shall be conducted by a panel of three arbitrators: one
arbitrator shall be appointed by each of Merck and Transcell and the third shall
be appointed by the American Arbitration Association. Any such arbitration shall
be held in New York, New York. The arbitrators shall have the authority to grant
specific performance. Judgment upon the award so rendered may be entered in any
court having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. In no
event shall a demand for arbitration be made after the date when institution of
a legal or equitable proceeding based on such claim, dispute or other matter in
question would be barred by the applicable statute of limitations.
9.7 Entire Agreement. This Agreement and the Side Agreement contain the
entire understanding of the Parties with respect to the subject matter hereof.
All express or implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of this Agreement. This
Agreement may be amended, or any term hereof modified, only by a written
instrument duly executed by all Parties hereto.
9.8 Headings. The captions to the several Articles and Sections hereof are
not a part of the Agreement, but are merely guides or labels to assist in
locating and reading the several Articles and Sections hereof.
32
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
9.9 Independent Contractors. It is expressly agreed that the Parties shall
be independent contractors and that the relationship between the Parties shall
not constitute a partnership, joint venture or agency. No Party shall have the
authority to make any statements, representations or commitments of any kind, or
to take any action, which shall be binding on the other Parties, without the
prior consent of such other Parties.
9.10 Waiver. The waiver by a Party hereto of any right hereunder or the
failure to perform or of a breach by another Party shall not be deemed a waiver
of any other right hereunder or of any other breach or failure by said other
Party whether of a similar nature or otherwise.
9.11 Counterparts. The Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
MERCK & CO., INC. TRANSCELL TECHNOLOGIES, INC.
BY: /s/ Edward M. Scolnick BY: /s/ Vincent L. Fabiano
----------------------------- -----------------------------
Name: Edward M. Scolnick Name: Vincent L. Fabiano
Title: President, Title: Executive Vice President
Merck Research Laboratories and Chief Operating Officer
INTERNEURON PHARMACEUTICALS, INC.
BY: /s/ Glenn L. Cooper
-----------------------------
Name: Glenn L. Cooper, M.D.
Title: President and CEO
33
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Schedule 1.19
Interneuron Patent Assets
- ---------------------------------- ----------------- ----------------- ---------------- ----------------- ---------------
Title of Application Docket No. Serial No. Filing Date Status Patent No.
- ---------------------------------- ----------------- ----------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
New Application Regarding [*] Unassigned Unassigned Not Yet Filed In Preparation N/A
Libraries
- ---------------------------------- ----------------- ----------------- ---------------- ----------------- ---------------
</TABLE>
<PAGE>
SCHEDULE 1.25
LIST OF MAJOR MARKET COUNTRIES
United States
United Kingdom
Germany
France
Italy
Spain
Japan
<PAGE>
ATTACHMENT 1.39
LICENSE AGREEMENT
This License Agreement (hereinafter referred to as the "License
Agreement"), effective as of October 14, 1993, is by and between The Trustees of
PRINCETON UNIVERSITY, a nonprofit, private educational institution existing in
the State of New Jersey (hereinafter referred to as "PRINCETON"), and TRANSCELL
TECHNOLOGIES, INC., a corporation duly organized and existing under the laws of
the State of Delaware and having a principal place of business at 2000 Cornwall
Road, Monmouth Junction, New Jersey 08852 (hereinafter referred to as the
"LICENSEE").
WHEREAS, PRINCETON and INTERNEURON PHARMACEUTICALS, INC. ("INTERNEURON")
entered into a Research Agreement effective July 1, 1991 (hereafter referred to
as the "Research Agreement" and attached, hereto, along with any addenda, as
Appendix I), granting INTERNEURON a first option to acquire a worldwide license,
with the right to sublicense, under any inventions and confidential information,
including any patent rights which may be obtained thereon, arising out of a
Research Program supervised by Daniel Kahne, Ph.D., as a Principal Investigator
in the Department of Chemistry at PRINCETON.
WHEREAS, INTERNEURON, on March 22, 1993, exercised the option to license
the Kahne patent application filed February 23, 1993, which is based on
inventions and confidential information arising out of the Research Program;
WHEREAS, said Research Agreement and all the rights thereunder, including
the option to license the Kahne patent application, were assigned by INTERNEURON
to LICENSEE on April 22, 1993 and LICENSEE now desires to obtain a license,
under the patent rights, upon the terms and conditions hereinafter set forth;
and
WHEREAS, LICENSEE has represented to PRINCETON, to induce PRINCETON to
enter into this License Agreement, that it shall commit itself to a thorough,
vigorous and diligent program of exploiting said inventions and confidential
information, including any patent rights which may be obtained thereon, so that
public utilization shall result therefrom.
NOW, THEREFORE, it is agreed as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
For the purposes of this License Agreement, the following words and phrases
shall have the following meanings:
1.1 "LICENSEE" shall mean TRANSCELL TECHNOLOGIES, INC., and any related
company or subsidiary of LICENSEE, the voting stock of which is at least fifty
percent (50%), directly or indirectly, owned or controlled by LICENSEE.
1.2 "Patent Rights" shall mean:
1.2.1 United States Patent Application Serial Number 08/021,391, as
set forth in Appendix II (hereinafter referred to as the "Patent Rights
Patent Application");
1.2.2 Any other United States and/or foreign patent applications
and/or patents, arising out of the Research Program as set forth in the
Research Agreement, which may, by subsequent agreement between the parties,
be added to Appendix II (hereinafter referred to as "Patent Rights Patent
Applications");
1.2.3 Any later-filed United States and/or foreign patent applications
based on the patent applications and/or patents listed in Appendix II
(including patent applications on any compounds or products made by using
the process set forth in the patent application listed in Appendix II), or
corresponding thereto, including any continuations, continuations-in-part,
divisionals, reissues, reexaminations, or extensions thereof, arising out
of the Research Program as set forth in the Research Agreement (hereinafter
referred to as the "Patent Rights Patent Application"); and
1.2.4 Any United States and/or foreign patents issuing from any of the
foregoing (hereinafter referred to as the "Patent Rights Patents").
1.3 "Licensed Product(s)" shall mean any product which:
(a) is covered in whole or in part by (i) a pending claim contained in
a Patent Rights Patent Application in the country in which the Licensed
Product(s) is made, used or sold, or (ii) a valid and unexpired claim
contained in a Patent Rights Patent in the country in which the Licensed
Product(s) is made, used or sold;
(b) is manufactured by using a process which is covered in whole or in
part by (i) a pending claim contained in a Patent Rights Patent Application
in the country in which the Licensed Process(es) is used or (ii) a valid
and unexpired claim
2
<PAGE>
contained in a Patent Rights Patent in the country in which the Licensed
Process(es) is used;
(c) is used according to a method which is covered in whole or in part
by (i) a pending claim contained in a Patent Rights Patent Application in
the country in which the Licensed Process(es) is used or (ii) a valid and
unexpired claim contained in a Patent Rights Patent in the country in which
the Licensed Process(es) is used.
1.4 "Licensed Process(es)" shall mean any process which is covered, in
whole or in part, by (i) a pending claim contained in a Patent Rights Patent
Application or (ii) a valid and unexpired claim contained in a Patent Rights
Patent.
1.5 "Net Revenues" shall mean the sum of (a) and (b) below:
(a) All amounts actually received by LICENSEE on account of billings
by LICENSEE for Licensed Product(s) sold by LICENSEE, less the sum of the
following:
(i) Discounts and free goods allowed in amounts customary in
the trade;
(ii) Sales, tariff duties and/or use taxes directly imposed and
with reference to particular sales;
(iii) Outbound transportation prepaid or allowed;
(iv) Amounts allowed or credited on returns;
(v) Actual losses incurred due to changes in foreign currency
exchange rates.
No deductions shall be made for commissions paid to individuals whether
they be with independent sales agencies or regularly employed by LICENSEE and on
its payroll, or for cost of collections.
(b) Royalties actually received by LICENSEE from its sublicensees on
account of their sales of Licensed Products which, at the time the sublicense
was entered into, had either (i) been developed by LICENSEE to the stage where
they were substantially ready for sale and marketing or (ii) were pharmaceutical
products which had entered Phase II clinical testing or (iii) were products on
which LICENSEE had expended $1,000,000 or more in direct development costs.
Net Revenues shall not include amounts received by LICENSEE as payment for
product development services or other services rendered by LICENSEE.
3
<PAGE>
1.6 "Net Ancillary Product Royalties" shall mean royalties actually
received by LICENSEE from its sublicensees on account of their sales of Licensed
Products other than the Licensed Products referred to in Paragraph 1.5.
ARTICLE 2
GRANT
2.1 PRINCETON hereby grants to LICENSEE an exclusive (even as to PRINCETON)
worldwide license under the Patent Rights and to make, have made, use, lease,
and/or sell any Licensed Products and to practice the Licensed Processes, to the
full end of the term for which the Patent Rights are granted, unless sooner
terminated as hereinafter provided, said license to include the right to
sublicense.
2.2 LICENSEE agrees that any sublicenses granted by it shall provide for
privity of contract between PRINCETON and sublicensee such that the obligations
of this License Agreement shall be binding upon the sublicensee as if it were in
the place of LICENSEE, except that each sublicensee shall pay its royalties to
LICENSEE. LICENSEE further agrees that a copy of this License Agreement shall be
attached to, and made a part of, any sublicense agreement, which shall be
forwarded to PRINCETON upon execution.
2.3 LICENSEE agrees to forward to PRINCETON annually a copy of such reports
received from any sublicensee as may be pertinent to an accounting of royalties.
2.4 LICENSEE agrees that Licensed Products leased or sold in the United
States shall be manufactured substantially in the United States.
ARTICLE 3
DUE DILIGENCE
3.1 LICENSEE shall use its best efforts to commercialize the Licensed
Products and/or Licensed Processes through a thorough, vigorous and diligent
program for exploitation of the Patent Rights.
3.2 In addition to the obligations of Paragraph 3.1, LICENSEE shall adhere
to the following milestones:
3.2.1 Within six (6) months from demonstrating the utility of the
technology described in the Patent Rights by successfully synthesizing two
complicated oligosaccharides
4
<PAGE>
on the solid phase such as a derivative of the GMI ganglioside and one
other biologically important oligosaccharide, LICENSEE shall develop and
submit to PRINCETON a business plan setting forth the amount of money,
number and kind of personnel, and time, budgeted and planned for each phase
of the development of Licensed Products and/or Licensed Processes.
3.2.2 Within three (3) months of the submission of the business plan,
LICENSEE shall meet with PRINCETON to discuss further milestones, and
LICENSEE shall establish further reasonable milestones as soon as
practicable thereafter.
3.2.3 Commencing by January 31 following the second anniversary of the
Effective Date of this License Agreement and by January 31 of each
succeeding year during which this License agreement has not been
terminated, LICENSEE shall provide to PRINCETON a written report outlining
the development plan for the technology for the following year and a brief
written summary of the developmental activities of the previous year. Such
report and summary shall include a review of the milestones established
pursuant to Paragraph 3.2.2 and may include proposed changes thereto based
on the development activities and other relevant information. LICENSEE
shall meet with PRINCETON to discuss the report and summary, and LICENSEE
shall revise the milestones, or establish new ones, as may be appropriate
following such discussions.
3.3 LICENSEE's failure to perform in accordance with Paragraph 3.1 shall
constitute a material breach or default for purposes of the termination
provisions of Paragraph 7.3.
3.4 If LICENSEE fails to meet the milestone set forth in Paragraph 3.2.1 or
any milestones established pursuant to Paragraph 3.2.2 or 3.2.3, PRINCETON and
LICENSEE shall engage in god faith negotiations to establish substitute
milestones, on the basis of the development work that has been completed to
date, the prospectus and expected time and cost for further development,
marketing potential for resulting products, and other relevant factors. Any
material failure by LICENSEE to meet milestones to which it has agreed, except
where such failure was not within LICENSEE's reasonable control, and any failure
by LICENSEE to engage in good faith negotiations relating to milestones, as
provided herein, shall constitute a material breach or default for purposes of
the termination provisions of Paragraph 7.3.
ARTICLE 4
ROYALTIES
4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay to PRINCETON, as set forth below,
5
<PAGE>
to the end of the term of the Patent Rights or until this License Agreement
shall be terminated as hereinafter provided:
4.1.1 A license issue fee of fifteen thousand dollars ($15,000), which
license issue fee shall be deemed earned and due immediately upon the
execution of this License Agreement.
4.1.2 A royalty in an amount equal to (a) four percent (4.0%) of Net
Revenues up to Five Million Dollars ($5,000,000) in any calendar year; and
(b) a royalty in an amount equal to three percent (3.0%) of Net Revenues
over Five Million Dollars, but less than Ten Million Dollars ($10,000,000),
in any calendar year; and (c) a royalty in an amount equal to two percent
(2.0%) of Net Revenues over Ten Million Dollars ($10,000,000) in any
calendar year;
4.1.3 A royalty in an amount equal to (a) fifty percent (50%) of Net
Ancillary Product Royalties where the royalty rate to LICENSEE is ten
percent (10%) or more of the sublicensees' sales or revenues; (b) a royalty
in an amount equal to forty percent (40%) of Net Ancillary Product
Royalties where the royalty rate to LICENSEE is five percent (5%) or more
but less than ten percent (10%) of the sublicensees' sales or revenues; and
(c) a royalty in an amount equal to thirty percent (30%) of Net Ancillary
Product royalties where the royalty rate to LICENSEE is less than five
percent (5%) of the sublicensees' sales or revenues.
4.1.4 Up to fifty percent (50%) of any royalties paid by LICENSEE to a
third party, in any calendar year, as a condition of utilizing the Licensed
Patents or the Licensed Processes, may be deducted from the amounts due
under Paragraphs 4.1.2 and 4.1.3.
4.1.5 In the event that LICENSEE's royalty payment to PRINCETON
hereunder for licensed operation during the calendar year 1999, and each
year thereafter in which this License Agreement is in effect and there are
any Licensed Products or Licensed Processes, falls below One Hundred
Thousand Dollars ($100,000), LICENSEE shall, with it last report for said
years, pay to PRINCETON, in addition to the royalty payments provided in
the foregoing paragraphs, an amount sufficient to attain such annual
$100,000 amount.
4.2 In addition to the foregoing royalties, LICENSEE shall pay to PRINCETON
License Maintenance Fees of Twenty-Five Thousand Dollars ($25,000) for each of
1995 and 1996 and Fifty Thousand Dollars ($50,000) for each of 1997 and 1998.
Such payments will be made with the first quarterly report for each of such
years pursuant to Paragraph 5.2.
6
<PAGE>
4.3 No multiple royalties shall be payable because the use, lease or sale
of any of the Licensed Products or the practice of the Licensed Processes is, or
shall be, covered by more than one claim contained in the Patent Rights. No
royalties shall be payable under this License Agreement with respect to any Net
Revenues or Net Ancillary Product Royalties if a royalty is also payable thereon
to PRINCETON under the License Agreement between PRINCETON and INTERNEURON
effective as of January 1, 1992.
4.4 Royalty payments shall be paid in United States dollars at Princeton,
New Jersey or at such other place as PRINCETON may reasonably designate
consistent with the laws and regulations controlling in any foreign country. Any
withholding taxes which LICENSEE shall be required by law to withhold on
remittance of the royalty payments shall be deducted from royalties paid to
PRINCETON. LICENSEE shall furnish PRINCETON with copies of official receipts for
such taxes. If any currency conversion shall be required in connection with the
payment of royalties hereunder, such conversion shall be made by using the
exchange rate at the date of remittance of said payment to LICENSEE.
ARTICLE 5
REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of account containing
all particulars that may be necessary for the purpose of showing the amount
payable to PRINCETON by way of royalty as aforesaid. Said books of account shall
be kept at LICENSEE's principal place of business and shall be maintained in
accordance with generally accepted accounting principles (GAAP). Said books and
the supporting data shall be open, upon reasonable notice to LICENSEE and no
more than twice per calendar year, for five (5) years following the end of the
calendar year to which they pertain, for inspection by the PRINCETON Internal
Audit Division and/or by an independent certified public accountant employed by
PRINCETON, to which LICENSEE has no reasonable objection, for the purpose of
verifying LICENSEE's royalty statement or compliance in other respects with this
License Agreement.
5.2 LICENSEE, within sixty (60) days after the end of each quarter of each
calendar year, shall deliver to PRINCETON true and accurate reports, giving such
particulars of the business conducted by LICENSEE during the preceding quarter
under this License Agreement as shall be pertinent to a royalty accounting
hereunder. These shall include at least the following:
(a) All Licensed Products leased or sold, by or for LICENSEE or its
sublicensees;
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<PAGE>
(b) Total amounts received for Licensed Products leased or sold by
LICENSEE;
(c) Deductions applicable as provided in the definition of Net
Revenues;
(d) Total royalties due to PRINCETON based on Net Revenues of
LICENSEE;
(e) Names and addresses of all sublicensees of Patent Rights of
LICENSEE, and the applicable royalty rates for each sublicense;
(f) Net Ancillary Product Royalties received by LICENSEE from
sublicensees where the royalty rate to LICENSEE is (i) 10% or more; (ii) 5%
or more but less than 10%; (ii) 5% or more but less than 10%; and (iii)
less than 5%;
(g) Total royalties due to PRINCETON based on Net Ancillary Product
Royalties of LICENSEE;
(h) On an annual basis, LICENSEE's annual report.
5.3 With each such report submitted, LICENSEE shall pay to PRINCETON the
royalties due and payable under this License Agreement provided that no payment
to PRINCETON shall be payable in the event that the remittance of royalties from
foreign countries to the accounts of LICENSEE in the United States shall be
blocked by exchange controls in foreign countries, which exchange controls are
beyond the control of LICENSEE. If no royalties shall be due, LICENSEE shall so
report.
ARTICLE 6
PATENT PROSECUTION
In accordance with Paragraph 11.4 of the Research Agreement, the LICENSEE,
at its own expense and utilizing the Patent Attorneys of its choice, shall have
the sole right and responsibility for the filing, prosecution, and maintenance
of any patent applications and patents contained in the Patent Rights; provided,
however, that PRINCETON shall have the right to approve LICENSEE's choice of
Patent Attorneys, said approval not to be unreasonably withheld. LICENSEE, or
its patent counsel, shall provide PRINCETON with copies of all correspondence
and documents filed with, or received from, the United States Patent and
Trademark Office or any foreign patent office or patent agent. In addition,
LICENSEE agrees that any and all official or "ribbon" copies of issued patents
shall be forwarded to, and retained by, PRINCETON.
8
<PAGE>
ARTICLE 7
TERMINATION
7.1 If LICENSEE shall become bankrupt or insolvent, or shall file a
petition in bankruptcy, or if the business of LICENSEE shall be placed in the
hands of a receiver, assignee or trustee for the benefit of creditors, whether
by the voluntary act of LICENSEE or otherwise, this License Agreement shall
automatically terminate.
7.2 Should LICENSEE fail in its payment to PRINCETON of royalties due in
accordance with the terms of this License Agreement, PRINCETON shall have the
right to serve notice upon LICENSEE, by certified mail to the address designated
in Article 14 hereof, of its intention to terminate this License Agreement
within thirty (30) days after receipt of said notice of termination unless
LICENSEE shall pay to PRINCETON, within the thirty (30) day period, all such
royalties due and payable. Upon the expiration of the thirty (30) day period, if
LICENSEE shall not have paid all such royalties due and payable, the right,
privileges and license granted hereunder shall thereupon immediately terminate.
7.3 Upon any material breach or default of this License Agreement by
LICENSEE, other than those occurrences set out in Paragraphs 7.1 and 7.2
hereinabove, which shall always take precedence in that order over any material
breach or default referred to in this Paragraph 7.3, PRINCETON shall have the
right to terminate this License Agreement and the rights, privileges and license
granted hereunder by ninety (90) days' notice to LICENSEE by certified mail to
the address designated in Article 14 hereof. Such termination shall become
effective unless LICENSEE shall have cured any such breach or default prior to
the expiration of the ninety (90) day period from receipt of the notice of
termination.
7.4 LICENSEE shall have the right to terminate this License Agreement at
any time on six (6) months' notice by certified mail to PRINCETON, in whole or
with respect to designated countries or designated Patent Rights, Licensed
Products or Licensed Processes.
7.5 Upon termination of this License Agreement for any reason, nothing
herein shall be construed to release either party from any obligation that
matured prior to the effective date of such termination. LICENSEE and/or any
sublicensee thereof may, however, after the effective date of such termination,
sell all Licensed Products, and complete Licensed Products in the process of
manufacture at the time of such termination, and sell the
9
<PAGE>
same, provided that LICENSEE shall pay to PRINCETON the royalties thereon as
required by Article 4 of this License Agreement and shall submit the reports
required by Article 5 hereof on the sales of Licensed Products.
ARTICLE 8
ARBITRATION
8.1 Except as to issues relating to the validity, enforceability, or
infringement of any patent contained in the Patent Rights licensed hereunder,
any and all claims, disputes or controversies arising under, out of, or in
connection with this License Agreement, which have not been resolved by good
faith negotiations between the parties, shall be resolved by final and binding
arbitration in Princeton, New Jersey under the rules of the American Arbitration
Association then in effect. The arbitrators shall have no power to add to,
subtract from, or modify any of the terms or conditions of this License
Agreement. Any award rendered in such arbitration may be enforced by either
party in either the state or federal courts of New Jersey, to whose jurisdiction
for such purposes, PRINCETON and LICENSEE each hereby irrevocably consents and
submits.
8.2 Any claim, dispute, or controversy concerning the validity,
enforceability, or infringement of any patent contained in the Patent Rights
licensed hereunder shall be resolved in any court having jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall arise
concerning the validity, enforceability, or infringement of any patent contained
in the Patent Rights licensed hereunder, the arbitrators shall, to the extent
possible, resolve all issues other than validity, enforceability, and
infringement; in any event, the arbitrators shall not delay the arbitration
proceeding for the purpose of obtaining or permitting either party to obtain
judicial resolution of such issues, unless an order staying the arbitration
proceeding shall be entered by a court of competent jurisdiction. Neither party
shall raise any issue concerning the validity, enforceability, or infringement
of any patent contained in the Patent Rights licensed hereunder, in any
proceeding to enforce any arbitration award hereunder, or in any proceeding
otherwise arising out of any such arbitration award.
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<PAGE>
ARTICLE 9
INFRINGEMENT AND OTHER ACTIONS
9.1 LICENSEE and PRINCETON shall promptly provide written notice, to the
other party, of any alleged infringement by a third party of the Patent Rights
and provide such other party with any available evidence of such infringement.
9.2 During the term of this Agreement, LICENSEE shall have the right, but
not the obligation, to prosecute and/or defend, at its own expense and utilizing
counsel of its choice, any infringement of, and/or challenge to, the Patent
Rights. In furtherance of such right, PRINCETON hereby agrees that LICENSEE may
join PRINCETON as a party in any such suit, without expense to PRINCETON. No
settlement, consent judgment or other voluntary final disposition of any such
suit may be entered into without the consent of PRINCETON, which consent shall
not unreasonably be withheld. LICENSEE shall indemnify PRINCETON against any
order for costs that may be made against PRINCETON in any such suit.
9.3 In the event that LICENSEE shall undertake the enforcement and/or
defense of the Patent Rights, as provided in Paragraph 9.2, LICENSEE may
withhold up to fifty percent (50%) of the royalties otherwise thereafter due
PRINCETON and apply the same toward reimbursement of its expenses, including
attorneys' fees, in connection therewith. Any recovery of damages by LICENSEE,
in any such suit, shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of LICENSEE relating to the suit, and next toward
reimbursement of PRINCETON for any royalties past due or withheld and applied
pursuant to this paragraph. The balance remaining from any such recovery shall
be divided equally between LICENSEE and PRINCETON.
9.4 If within six (6) months after receiving notice of any alleged
infringement, LICENSEE shall have been unsuccessful in persuading the alleged
infringer to desist, or shall not have brought and shall not be diligently
prosecuting an infringement action, or if LICENSEE shall notify PRINCETON, at
any time prior thereto, of its intention not to bring suit against the alleged
infringer, then, and in those events only, PRINCETON shall have the right, but
not the obligation, to prosecute, at its own expense and utilizing counsel of
its choice, any infringement of the Patent Rights, and PRINCETON may, for such
purposes, join the LICENSEE as a party plaintiff. The total cost of any such
infringement action commenced solely by PRINCETON shall be borne by PRINCETON
and PRINCETON shall keep any recovery or damages for past infringement derived
therefrom.
9.5 In any suit to enforce and/or defend the Patent Rights pursuant to this
License Agreement, the party not in control of such suit shall, at the request
and expense of the controlling
11
<PAGE>
party, cooperate in all respects and, to the extent possible, have its employees
testify when requested and make available relevant records, papers, information,
samples, specimens and the like.
ARTICLE 10
PRODUCT LIABILITY
10.1 PRINCETON, by this License Agreement, makes no representation as to
the patentability and/or breadth of the inventions contained in the Patent
Rights. PRINCETON by this License Agreement makes no representation as to
patents now held or which will be held by others in the field of the Licensed
Products or Licensed Process for a particular purpose.
10.2 LICENSEE agrees to defend, indemnify, and hold PRINCETON harmless from
and against all liability, demands, damages, expense or losses for death,
personal injury, illness or property damage arising (a) out of use by LICENSEE
or its transferees of inventions licensed or information furnished under this
License Agreement, or (b) out of any use, sale or other disposition by LICENSEE
or its transferees of products made by use of such inventions or information. As
used in this clause, "PRINCETON" includes its Trustees, Officers, Agents,
Employees and Students and "LICENSEE" includes its Affiliates, Contractors and
Sub-Contractors.
10.3 In discharge of the above, LICENSEE will maintain general liability
insurance in the amount of at least One Million Dollars ($1,000,000) per
occurrence, with an appropriate deductible, if possible of not more than $10,000
per occurrence, with such insurers and on such terms as PRINCETON approves in
writing, against damage to, or destruction of, property, and injury to, or death
of, individuals, and against such other risks as PRINCETON may reasonably
request arising out of, or in connection with, any of the Licensed Products or
Licensed Process. PRINCETON, and its officers, trustees, and employees will be
named insureds under all such insurance. Such insurance will also provide that
PRINCETON will be given notice of any modification thereof and at least ten (10)
days prior written notice of cancellation or termination and the reason
therefor. LICENSEE will furnish PRINCETON, upon request, written confirmation
issued by the insurer or an independent insurance agent confirming that
insurance is maintained in accordance with the above requirements.
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ARTICLE 11
ASSIGNMENT
11.1 LICENSEE may assign or otherwise transfer this License Agreement and
the license granted hereunder and the rights acquired by it hereunder so long as
such assignment or transfer shall be to a subsidiary or shall be accompanied by
a sale or other transfer of LICENSEE's entire business or that part of
LICENSEE's business to which the license granted hereunder relates.
11.2 LICENSEE shall give PRINCETON thirty (30) days prior written notice
within which to approve, or reasonably object to, such assignment or transfer.
If within thirty (30) days after the giving of such notice, no written objection
is received by LICENSEE, PRINCETON shall be deemed to have approved such
assignment or transfer; provided, however, PRINCETON shall not be deemed to have
approved such assignment or transfer unless such assignee or transferee shall
have agreed in writing to be bound by the terms and conditions of this License
Agreement. Upon such assignment or transfer and agreement by such assignee or
transferee, the term LICENSEE, as used herein, shall mean such assignee or
transferee. If LICENSEE shall sell or otherwise transfer its entire business or
that part of its business to which the license granted hereby relates and the
transferee shall not have agreed in writing to be bound by the terms and
conditions of this License Agreement, or new terms and conditions shall not have
agreed in writing to be bound by the terms and conditions of this License
Agreement, or new terms and conditions shall not have been reasonably agreed
upon within sixty (60) days of such sale or transfer, PRINCETON shall have the
right to terminate this License Agreement.
ARTICLE 12
NON-USE OF NAMES
LICENSEE shall not use the name of PRINCETON or any adaptation thereof or
of any faculty member, employee or student, in any advertising, promotional or
sales literature without prior written consent obtained from PRINCETON, in each
case, except that LICENSEE may state that it is licensed by PRINCETON, under one
or more of the patents and/or applications comprising the Patent Rights.
13
<PAGE>
ARTICLE 13
EXPORT CONTROLS
It is understood that PRINCETON is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended, and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency. Princeton neither represents that a license shall not be required nor
that, if required, it shall be issued.
ARTICLE 14
PAYMENTS, NOTICES
AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this License
Agreement shall be sufficiently made or given on the date of mailing if sent to
such party by certified first class mail, postage prepaid, addressed to it at
its address below or as it shall designate by written notice given to the other
party:
In the case of PRINCETON UNIVERSITY:
Jean A. Mahoney, Director
Office of Technology and Trademark Licensing
PRINCETON UNIVERSITY
5 New South Building, P.O. Box 36
Princeton, New Jersey 08544
In the case of LICENSEE:
Elizabeth Tallett - President
TRANSCELL TECHNOLOGIES, INC.
2000 Cornwall Road
Monmouth Junction, NJ 08852
14
<PAGE>
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 This License Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the State of New Jersey, except that
questions affecting the validity, enforceability, or infringement of any patent
contained in the Patent Rights shall be determined by the law of the country in
which the patent was granted.
15.2 The parties hereto acknowledge that this License Agreement sets forth
the entire agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
15.3 The provisions of this License Agreement are severable, and in the
event that any provision of this License Agreement shall be determined to be
invalid or unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
15.4 LICENSEE agrees to mark the Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to, or sold in, other countries shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.
15.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this License Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement, in duplicate, by proper persons thereunto duly authorized.
TRUSTEES OF PRINCETON UNIVERSITY
By: /s/ Allen J. Sinisgalli
-------------------------------
Name: Allen J. Sinisgalli
Title: Associate Provost for Research
and Project Administration
Date: _______________________________
TRANSCELL TECHNOLOGIES, INC.
By: /s/ Elizabeth E. Tallett
-------------------------------
Name: Elizabeth E. Tallett
Title: President
Date: 15th October 1993
16
<PAGE>
APPENDIX I
RESEARCH AGREEMENT
<PAGE>
APPENDIX II
1. United States Patent Application Serial Number 08-021,391 filed February
23, 1993, in the name of Daniel E. Kahne, entitled SINGLE-STEP FORMATION OF
MULTIPLE GLYCOSIDIC LINKAGES.
<PAGE>
[LETTERHEAD OF TRANSCELL TECHNOLOGIES, INC.]
August 2, 1993
Ms. Jo Anne McLusky, Associate Director
Office of Research & Project Administration
Fifth Floor, New South Building
P.O. Box 36
Princeton, NJ 08544-0036
Dear Ms. McLusky:
On July 25, 1993 Dr. Daniel Kahne submitted to Transcell Technologies, Inc. a
Research Proposal entitled "Rapid Synthesis of GM1 Derivatives," Proposal number
130-M173, seeking $195,154 for the period July 1, 1993 to December 31, 1993. The
proposed Sponsored Research is an extension of the Research Agreement between
the University and Transcell dated July 1, 1991.
Pursuant to the Research Agreement, Transcell is providing this written notice
of its decision to provide the requested funding. Although the Research Proposal
did not include a payment schedule, we propose to adapt the schedule set forth
in Paragraph 6.1, with the first payment of $78,062 (40% of the total project
amount) payable within 30 days of acceptance of the Research Proposal and the
balance of $117,092 due on October 30, 1993.
Thank you for your assistance in this matter.
Sincerely,
/s/ Elizabeth E. Tallett
Elizabeth E. Tallett
President and Chief Executive Officer
<PAGE>
Amendment No. 1 (the "Amendment") to License Agreement, effective as of
February 21, 1997, is by and between The Trustees of PRINCETON UNIVERSITY, a
nonprofit, private educational institution existing in the State of New Jersey
(hereinafter referred to as "PRINCETON"), and TRANSCELL TECHNOLOGIES, INC., a
corporation duly organized and existing under the laws of the State of Delaware
and having a principal place of business at 2000 Cornwall Road, Monmouth
Junction, New Jersey 08852 (hereinafter referred to as the "LICENSEE").
WHEREAS, PRINCETON and LICENSEE entered into a License Agreement effective
as of October 14, 1993 (the "License Agreement"), granting LICENSEE a worldwide
license, with the right to sublicense, under certain inventions and confidential
information, including any patent rights which may be obtained thereon, on the
terms and conditions set forth therein; and
WHEREAS, PRINCETON and LICENSEE desire to amend certain provisions of the
License Agreement, on the terms and conditions set forth herein.
NOW, THEREFORE, it is agreed as follows:
1. Section 1.5(b) of the License Agreement is hereby amended to add the
following new subsection (iv) to the end thereof:
"(iv) been developed using technology covered under the Patent Rights,
on which technology LICENSEE had expended $1,000,000 or more in
development costs"
2. Article 2 of the License Agreement is hereby amended to add the
following new Section 2.5 to the end thereof:
"2.5 Notwithstanding the provisions set forth in the preceding
sections of this Article 2, PRINCETON reserves the right to use the
invention, PRINCETON'S Patent Rights, the Licensed Products, the
Licensed Processes, the technology, associated information and
know-how for PRINCETON'S own internal educational, research and other
non-commercial purposes only, and to publish the results thereof in
accordance with the terms of Section 13 of the Research Agreement."
3. Section 4.1 of the License Agreement is hereby amended to add the
following new Section 4.1.6 to the end thereof:
"4.1.6 Notwithstanding the provisions set forth in the preceding
sections of this Section 4.1, in the event of a sublicense of Patent
Rights, the maximum royalty payable hereunder shall be 25% of the
royalties received by LICENSEE from sublicensees as a result of
sublicensees' sales of Licensed Products and Licensed
<PAGE>
Processes; provided, however, that in the event such limitation would
cause royalties payable hereunder to be less than 1.5% of the
sublicensees' net sales, then the royalty payable hereunder shall be
1.5% of the sublicensees' net sales. For example, in the event the
royalty payable from a sublicensee to LICENSEE is 5% of the
sublicensee's net sales of Licensed Products and Licensed Processes,
the royalties payable to PRINCETON hereunder shall be 1.5% (since 25%
of 5% is less than 1.5%). For purposes of this section, references to
sublicensees' net sales assume that such net sales are calculated in
the same manner as Net Sales in this Agreement."
4. Section 4.2 is hereby amended and restated in its entirety to read as
follows:
"4.2 In addition to the foregoing royalties, LICENSEE shall pay to
Princeton License Maintenance Fees of (i) two hundred thousand dollars
($200,000), payable upon execution of this Amendment and (ii) one
hundred thousand dollars ($100,000) for each year commencing October
14, 1997, through the earlier of (i) termination of the License
Agreement or (ii) the date of first commercial sale of a Licensed
Product."
5. Appendix II to the License Agreement is hereby updated and restated as
of the date of this Amendment in the form attached hereto.
6. This Amendment may be executed in counterparts, each of which
counterparts, when so executed and delivered, shall be deemed an
original and all of which counterparts, taken together, shall
constitute one and the same instrument. Unless separately defined, all
defined terms herein shall have the meaning set forth in the License
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, in
duplicate, by proper persons thereunto duly authorized.
TRUSTEES OF PRINCETON UNIVERSITY
By: /s/ Allen J. Sinisgalli
-------------------------------
Name: Allen J. Sinisgalli
Title: Associate Provost for
Research & Project Admin.
Date: 2/17/97
TRANSCELL TECHNOLOGIES, INC.
By: /s/ Glenn L. Cooper
-------------------------------
Name: Glenn L. Cooper, M.D.
Title: Acting President
Date: 2/21/97
<PAGE>
Appendix II
1. Lowe Price LeBlanc & Becker Docket No. 2645-002
United States Patent Application Serial Number 08/021,391
filed February 23, 1993, in the name of Daniel E. Kahne,
entitled SINGLE-STEP FORMATION OF MULTIPLE GLYCOSIDIC
LINKAGES.
2. Lowe Price LeBlanc & Becker Docket No. 2645-002A
United States Patent Application Serial Number 08/198,271
filed February 18, 1994, in the name of Daniel E. Kahne,
entitled SOLUTION AND SOLID PHASE FORMATION OF GLYCOSIDIC
LINKAGES.
3. Lowe Price LeBlanc & Becker Docket No. 2645-002B
United States Patent Application Serial Number 08/281,167
filed July 24, 1994, in the name of Daniel E. Kahne et al.,
entitled SOLUTION AND SOLID-PHASE GLYCOSIDIC LINKAGES.
4. Lowe Price LeBlanc & Becker Docket No. 2645-002C
United States Patent Application Serial Number (to be
assigned) filed January 9, 1997, in the name of Daniel E.
Kahne, entitled SOLUTION AND SOLID-PHASE FORMATION OF
GLYCOSIDIC LINKAGES.
5. Lowe Price LeBlanc & Becker Docket No. 2645-002D
United States Patent Application Serial Number (to be
assigned) filed January 10, 1997, in the name of Daniel E.
Kahne, entitled SOLUTION AND SOLID PHASE FORMATION OF
GLYCOSIDIC LINKAGES.
<PAGE>
ATTACHMENT 1.40
1997 PRINCETON RESEARCH AGREEMENT
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
PRINCETON UNIVERSITY
RESEARCH AGREEMENT
This Research Agreement is entered into on April 29, 1997 between the Trustees
of Princeton University, a not-for-profit, private educational institution
existing in the State of New Jersey, hereinafter referred to as "Princeton" and
Interneuron Pharmaceuticals Inc., a corporation existing under the laws of the
State of Delaware, hereinafter referred to as "Sponsor."
1. Statement of Work
Princeton, through the Department of Chemistry, has valuable experience,
skill and ability in the construction of a [*] library. Sponsor desires to
have Princeton undertake a research project in the above-named area in
accordance with the scope of work described in Exhibit A, Research
Proposal. Princeton agrees to use reasonable effort to perform the research
project described therein and hereafter referred to as the "Research."
Sponsor acknowledges that Princeton makes no expressed or implied
warranties for the research.
2. Principal Investigator
The research will be supervised by Professor Daniel Kahne. If for any
reason he is unable to continue to serve as Principal Investigator and a
successor acceptable to both Princeton and Sponsor is not available, this
Agreement shall be terminated as provided in Article 6.
3. Period of Performance
This research will be conducted during the period July 1, 1996 through June
30, 1998, but may be extended under the same terms and conditions by mutual
written agreement of the Parties. A third year of optional funding is
listed in the budget and shall be exercised by mutual agreement of the
parties.
4. Reimbursement of Costs
Princeton shall be reimbursed by Sponsor for all costs incurred in
connection with the research up to the amount of $441,246. While it is
estimated that this amount is sufficient to conduct the research, Princeton
and Sponsor may mutually agree to fund the third year of research, as
listed in the budget. Sponsor is not liable for any cost in excess of the
amount specified herein unless this Agreement is modified in writing by
both parties.
<PAGE>
5. Payment Schedule
(a) Payments shall be made to Princeton by Sponsor with the first payment
of $110,000 due within thirty (30) days from the signing of this
Agreement. The balance is due in accordance with the following
schedule:
March 31, 1997 $55,000 December 31, 1997 $55,000
June 30, 1997 $55,000 March 31, 1998 $55,000
September 30, 1997 $55,000 June 30, 1998 $56,246
(b) Checks payable to Princeton University shall reference 130-4297, and
be sent to:
Raymond J. Clark, Treasurer
P.O. Box 35
Princeton University
Princeton, New Jersey 08544
6. Termination
Performance under this Agreement may be terminated by Sponsor upon sixty
(60) days' written notice; performance may be terminated by Princeton if
circumstances beyond its control preclude continuation of the research.
Upon termination, Princeton will be reimbursed for all costs and
non-cancelable commitments incurred in the performance of the research and
not yet paid for, such reimbursement together with other payments not to
exceed the total estimated project costs specified in Article 4. The
provision of Article 7 hereof shall survive any termination of this
Agreement.
7. Intellectual Property
(a) Ownership of Inventions
(1) The term "Invention" means any patentable or potentially
patentable subject matter or discovery conceived or reduced to
practice in carrying out of the Research pursuant to this
Agreement.
(2) Any Invention developed, as part of this Research, solely by
Sponsor personnel will be the exclusive property of Sponsor which
may, to the extent permitted by law, hold all right, title and
interest in such Invention. Such Inventions, including the right,
title and interest therein, are referred to herein as
"Sponsor-owned".
(3) Any Invention developed, as part of the Research, solely by
Princeton personnel, including faculty, students and employees,
will be the exclusive property of Princeton, which may, to the
extent permitted by law, hold all right, title, and
2
<PAGE>
interest in such Invention. Such Inventions, including the right,
title and interest therein, are referred to herein as
"Princeton-owned".
(4) Any Invention developed, as part of this Research, jointly by
Sponsor and Princeton personnel, including faculty, students and
employees, will be the mutual property of both parties, which
may, to the extent permitted by law, jointly hold all right,
title and interest in such Invention. Such Inventions, including
the right, title and interest therein, are referred to herein as
"Jointly-owned".
(b) Patents
The parties agree that it is desirable to file patent applications on
discoveries and Inventions conceived or first reduced to practice
during the term of this Agreement. Sponsor acknowledges that Princeton
has an obligation to protect and transfer its technology for the
public benefit and the parties agree to cooperate to effect that end
in an expedient manner equitable to both parties.
(c) Patent Applications
(1) Princeton and Sponsor agree to cooperate fully in applying for,
obtaining, prosecuting and maintaining patents.
(2) Princeton shall promptly disclose to Sponsor, in writing, any
Princeton-owned or Jointly-owned Inventions disclosed to
Princeton. Princeton shall file and prosecute U.S. and foreign
patent applications in its name at Sponsor's request and expense,
using mutually agreed upon patent counsel, on such
Princeton-owned or Jointly-owned Inventions as may, in Sponsor's
judgment, become appropriate during the term of this Agreement
and up to twelve (12) months after its termination. All
information given to Sponsor by Princeton in accordance with this
section shall be held in confidence by Sponsor so long as such
information remains unpublished or undisclosed by Princeton. Such
patent applications and any patents resulting therefrom shall be
subject to the terms of this Agreement.
(3) Princeton shall have the opportunity to file patent applications
in its name at its own expense for those Princeton-owned or
Jointly-owned Inventions made by its personnel and for which
Sponsor does not agree, within thirty (30) days after
notification by Princeton of its intent to file a patent
application, to pay for Princeton to file said patent
application; such patent applications and any patents resulting
therefrom shall not be subject to the terms of this Agreement.
(4) Sponsor patent counsel may prepare, file and prosecute all U.S.
applications for any Jointly-owned Inventions, at Sponsor's sole
cost and expense, provided, however, that Princeton shall have
the right to review and approve the application, and be consulted
on all prosecution actions, and foreign filing decisions.
Princeton's right,
3
<PAGE>
title and interest in the Jointly-owned Inventions disclosed or
claimed in such patent applications or in any such patents shall
be subject to the terms of this Agreement.
(d) Grant of Patent Rights
(1) In consideration for its sponsorship of the research program,
Sponsor shall retain an irrevocable, royalty-free, worldwide,
nonexclusive license, without the right to sublicense, for
Sponsor's own internal research use, under any Princeton-owned
Inventions, under any patents or patent applications.
(2) Princeton, to the extent it is permitted to do so by its
agreements with other government sponsors of research, and the
provisions of Public Laws 96-517 and 98-620, grants to Sponsor an
exclusive Option to obtain an exclusive worldwide license to any
Princeton-owned Inventions and Princeton's right, title and
interest under any Jointly-owned Inventions, patents or patent
applications, with a right to sublicense upon Princeton's
approval, which shall not be unreasonably withheld, on the terms
and conditions set forth in the resulting license agreements.
Sponsor agrees not to sublicense or assign any such intellectual
property to Transcell Technologies Inc., without Princeton's
written consent.
(3) Such Option with respect to each Invention shall extend for a
period commencing on the date the Invention is disclosed to
Sponsor through ninety (90) days from the filing date of a patent
application disclosing and claiming same. Sponsor may exercise
its Option on Princeton-owned and jointly-owned patent
applications or patents by providing a written statement to
Princeton. Upon exercise of each such Option, Sponsor and
Princeton shall have twelve (12) months to negotiate in good
faith a royalty-bearing worldwide exclusive license under
reasonable royalty terms. During the Option and subsequent
negotiation periods, Princeton shall not offer commercial license
rights to any third party. At the end of twelve (12) months from
the date Sponsor exercises its Option if no license agreement has
been signed, Princeton shall be free to negotiate licenses with
other parties, and Sponsor shall have no further rights to such
Inventions except for those provided for in 7.d.1 herein, and
those it retains to any jointly owned Inventions by virtue of its
ownership thereof.
(e) Unpatented Technology
It is recognized that some technology created in the performance of
the Research and uses thereof may not be protected by patent
applications or patents. Accordingly, Princeton, to the extent
permitted by its obligations to other government sponsors, hereby
grants to Sponsor the exclusive Option to negotiate an exclusive
royalty-bearing worldwide license to use any such technology for
commercial purposes, to the extent said technology or the use thereof
contemplated by Sponsor is not covered by a patent application or
patent assigned to or controlled by Princeton. Sponsor may exercise
this
4
<PAGE>
Option in the same manner as, and subject to the limitations of, its
Options under Inventions, patent application or patents with the
Option period beginning upon the provision of a written description or
samples of the technology to Sponsor. Princeton hereby grants to
Sponsor a worldwide, royalty-free, nonexclusive license, without the
right to sublicense, to utilize all such technology for its own
internal research purposes only.
(f) Computer Software
Copyrights and all other rights in any computer software created in
the course of the Research shall be owned by Princeton. Sponsor shall
have nonexclusive royalty-free license for internal use, without the
right to sublicense. Princeton hereby grants Sponsor an exclusive
Option to negotiate an exclusive royalty-bearing license, such Option
to extend for sixty (60) days from the date Sponsor is provided with a
copy of said software. Sponsor may exercise this Option in the same
manner as, and subject to the limitations of, its Option under patent
applications or patents.
8. Publication
(a) Subject to the terms of this paragraph 8, Princeton shall have the
right, at its discretion, to release information or to publish any
material resulting from the Research. Sponsor and Princeton
acknowledge that patent rights may be jeopardized by public disclosure
of such Research results prior to the filing of a patent application.
Accordingly, Princeton shall forward copies of presentations and
publications (including poster sessions) to Sponsor for review and
comment 30 days prior to submission for publication. Sponsor may
request Princeton to delay publication an additional sixty days (60)
days in order to protect the potential patentability of any Invention
described therein. Such delay shall not, however, be imposed on the
filing of any student thesis or dissertation.
(b) The parties will cooperate to minimize delay of manuscripts. In no
event will a submission for publication or presentation under this
Agreement be delayed longer than three (3) months from the date a
manuscript is submitted to Sponsor for review.
(c) Princeton shall give Sponsor the option of receiving an acknowledgment
in any publication for its sponsorship of the Research. Sponsor
understands that the basic objective of research activities at
Princeton is the generation of new knowledge and its expeditious
dissemination. Therefore, in review of any publication, Sponsor shall
provide all reasonable cooperation in meeting this objective.
5
<PAGE>
9. Consultation
Selected personnel of Sponsor, designated by Sponsor to Princeton, shall
have the right to confer with the Principal Investigator and his or her
associates for such reasonable periods and at such times as are mutually
agreeable.
10. Publicity and Use of Names
Neither Sponsor nor Princeton will use the name of the other in connection
with any product, promotional literature, or advertising material without
the prior written permission of the other party. This shall not include
internal documents available to the public that identify the existence of
the Agreement; and shall not preclude the Sponsor from disclosing any
information to the SEC or other governmental regulatory agency, if required
11. Reports
Princeton shall furnish Sponsor annual letter reports during the term of
this Agreement summarizing the research conducted. A final report setting
forth the accomplishments and significant research findings shall be
prepared by Princeton and submitted to Sponsor within ninety (90) days of
the expiration of the Agreement. A final summary report shall be submitted
to Sponsor if the Research is extended for an additional year, under the
terms of Article 3.
12. Proprietary Data
Princeton's acceptance and use of any proprietary data which may be
supplied by Sponsor in the course of the Research shall be subject to the
following:
(a) The data must be marked or designated in writing as proprietary to
Sponsor.
(b Princeton retains the right to refuse to accept any such data which it
does not consider to be essential to the completion of the Research.
(c) When Princeton does accept such data as proprietary, it agrees to
exercise all reasonable efforts not to publish or otherwise reveal the
data to others outside the University without the permission of
Sponsor, unless the data has already been published or disclosed
publicly by third parties or is required to be disclosed by order of a
court of law.
(d) Princeton understands and agrees that the disclosure of proprietary
data or confidential information to the University by the Sponsor
shall not be construed as granting Princeton any ownership rights in,
or to, the disclosed data or information, or any right to use such
data or information, except in the manner agreed upon by the Sponsor
and Princeton prior to disclosure of the proprietary data or
confidential information.
6
<PAGE>
(e) The obligations under this provision shall survive and continue for
one year after termination of this Research Agreement, at which time
Princeton shall return any and all proprietary data or confidential
information to the Sponsor; provided, however, that Princeton may keep
one copy of any form of such proprietary data or confidential
information for archival purposes.
13. Indemnification
Sponsor agrees to indemnify and hold Princeton harmless from any loss,
claim, damage, or liability of any kind involving an employee of Sponsor
arising out of or in connection with this Agreement, except to the extent
that such loss, claim, damage, or liability arises in whole or in part from
the gross negligence or willful misconduct of Princeton.
14. Warranties
Princeton makes no warranties, express or implied, as to any matter
whatsoever, including, without limitation, the condition of the research or
any inventions(s) or product(s), whether tangible or intangible, conceived,
discovered, or developed under this Agreement; or the ownership,
merchantability, or fitness for a particular purpose of the research or any
such invention or product. Princeton shall not be liable for any direct,
consequential, or other damages suffered by any licensee or any others
resulting from the use of the research or any such invention or product,
except to the extent such damages result from the sole negligence of
Princeton.
15. Equipment
Title to any equipment purchased or manufactured in the performance of the
work funded under the Agreement shall vest in Princeton.
16. Assignment
Neither party shall assign this Agreement to another without the prior
written consent of the other party, which will not be unreasonably
withheld; provided, however, that Sponsor may assign this Agreement to a
successor in ownership of all or substantially all its business assets.
Sponsor agrees, however, that this agreement may not be assigned to
Transcell Technologies Inc. without the express written agreement of
Princeton. Such successor shall expressly assume in writing the obligation
to perform in accordance with the terms and conditions of this Agreement.
Any other purported assignment shall be void.
7
<PAGE>
17. Independent Inquiry
Nothing in this Agreement shall be construed to limit the freedom of
researchers who are not participants in this Agreement from engaging in
similar research inquiries made independently under other grants, contracts
or agreements with parties other than Sponsor.
18. Governing Law
This Agreement shall be governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
by proper persons thereunto duly authorized.
Interneuron Pharmaceuticals, Inc. The Trustees of Princeton University
By: /s/ Glenn L. Cooper By: /s/ Allen J. Sinisgalli
---------------------------- ----------------------------
Name: Glenn L. Cooper, M.D. Name: Allen J. Sinisgalli
Title: President and CEO Title: Associate Provost of
Research and Project Admin.
Date: May 1, 1997 Date: 5/6/97
Principal Investigator /s/ Daniel Kahne
----------------------------------------------------
Professor Daniel Kahne Date
8
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
Research Proposal - EXHIBIT A
TITLE: Construction of a [*] Library
INSTITUTION: Princeton University
Department of Chemistry
Princeton, New Jersey 08544
PRINCIPAL INVESTIGATOR:
/s/ Daniel Kahne Oct. 31, 1996
` --------------------------------------------------
Daniel Kahne Date
Department of Chemistry
Princeton, New Jersey 08544
Phone: 609-258-6368
Fax: 609-258-2617
INSTITUTIONAL ENDORSEMENTS:
/s/ George McLendon Nov. 1996
--------------------------------------------------
George McLendon, Chair Date
Department of Chemistry
Princeton, New Jersey 08544
Phone: 609-258-3916
Fax: 609-258-6746
--------------------------------------------------
Allen J. Sinisgalli, Associate Provost Date
Office of Research and Project Administration
5 New South Building
Princeton, New Jersey 08544
Phone: 609-258-3090
Fax: 609-258-1159
TOTAL COST: $441,246
DURATION: July 1, 1996 to June 30, 1998
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
[*]
<PAGE>
References
1. a) Cohen, M.L. Science 1992, 257, 1050; b) Neu, H.C. Science 1992, 257,
1064.
2. Walsh, C.T. Science 1993, 261, 308.
3. Nagarajan, R.; Schabel, A.A.; Occolowitz, J.L.; Counter, F.T.; Ott, J.L.;
Felty-Duckworth, A.M.J. Antibiotics 1989, 41, 63.
4. Yan, L.; Taylor, C.M.; Goodnow, Jr., R.; Kahne, D. J. Am. Chem. Soc. 1994,
116, 6953.
5. Doyle, R.J. and Ofek, I. (Eds.) Adhesion of Microbial Pathogens, Methods in
Enzymology, Vol 253, Academic Press; San Diego, 1995.
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
ATTACHMENT 1.46
SIDE AGREEMENT
REFERENCE IS MADE to (i) the License Agreement between Transcell
Technologies, Inc. ("Transcell") and the Trustees of Princeton University
("Princeton") effective as of October 14, 1993, as amended (the "Princeton
License Agreement"), (ii) the Research Agreement between Princeton and
Interneuron Pharmaceuticals, Inc. ("Interneuron") dated as of April 29, 1997
(the "Princeton Research Agreement") and (iii) the draft Research Collaboration
and License Agreement among Merck & Co., Inc. ("Merck"), Transcell and
Interneuron (the "Merck/Transcell Collaboration Agreement").
WHEREAS, a portion of the collaboration contemplated by the Merck/Transcell
Collaboration Agreement includes the construction by Dr. Daniel Kahne of a [*]
library in order to identify new antibacterial agents based upon [*]; and
WHEREAS, pursuant to the Merck/Transcell Collaboration Agreement, Transcell
and Interneuron are granting to Merck exclusive licenses and sub-licenses
limited to the field of certain antibacterial agents with an option to obtain
exclusive licenses and sub-licenses limited to a specified expanded field of
antibacterial agents, such sub-licenses (the "Merck Rights") being granted to
Merck under Transcell's and Interneuron's exclusive rights pursuant to the
Princeton License Agreement and the Princeton Research Agreement and any
subsequent license agreement entered into between Princeton and Transcell or
between Princeton and Interneuron related to such agreements; and
WHEREAS, Merck, Transcell, Interneuron and Princeton (the "Parties") desire
to set forth the relative rights of the Parties related to certain matters under
the Princeton License Agreement, the Princeton Research Agreement and the
Merck/Transcell Collaboration Agreement. In view of the foregoing, the Parties
agree as follows:
1. Merck agrees that the following provisions of the Princeton License
Agreement shall apply to Merck as if it were the Licensee thereunder, to
the extent, and only to that extent, that such provisions relate to the
Merck Rights and to the activities of Merck pursuant to the Merck/Transcell
Collaboration Agreement: Section 2.4 (manufacture in the U.S.), Section
10.2 (indemnification), Article 12 (non-use of names) and Article 13
(export controls). All other rights and obligations of the Licensee under
the Princeton License Agreement shall be rights and obligations of
Transcell only, except as otherwise provided in this Side Agreement. The
obligations of Interneuron under the Princeton Research Agreement and under
any license agreement entered into by Princeton and Interneuron pursuant to
the Princeton Research Agreement shall be the obligations of Interneuron
only and shall not be binding upon
<PAGE>
Merck, except as otherwise provided in this Side Letter or agreed to in
writing by Merck.
2. In connection with the research project contemplated by the Princeton
Research Agreement, Princeton agrees that all publications or presentations
(including any student thesis or dissertation) subject to Section 8 of the
Princeton Research Agreement and subject to the Merck Rights shall, after
Interneuron's receipt of same from Princeton, be submitted by Interneuron
to Merck for review prior to submission to the publisher or prior to
presentation. In addition to any rights of Interneuron under the Princeton
Research Agreement, upon Merck's request, Interneuron may then request that
Princeton delay publication or presentation for a maximum of an additional
60 days to protect the patentability of any inventions described therein.
Such delay shall not be imposed on the filing of any student thesis or
dissertation for the purposes of fulfilling academic requirements.
3. Notwithstanding the provisions of Article 6 of the Princeton License
Agreement and of Section 7(c) of the Princeton Research Agreement, the
Parties agree that Merck shall have the right to file, prosecute and
maintain patent applications and patents relating to research information
and inventions owned jointly by Merck and Princeton which are subject to
the Merck Rights. In addition, if Transcell or Interneuron, as the case may
be, elects not to file, prosecute or maintain patent applications and
patents covering Princeton-owned inventions subject to the Princeton
License Agreement or the Princeton Research Agreement and subject to the
Merck Rights, Merck shall have the right to prosecute and maintain such
patent applications and patents, if rights thereunder are sublicensed to
Merck under the Merck/Transcell Collaboration Agreement. The rights granted
by and exercised under this paragraph shall have no effect on the rights of
ownership of any patent rights or inventions which shall be governed by
applicable patent laws and applicable provisions of the Princeton License
Agreement, the Princeton Research Agreement and the Merck/Transcell
Collaboration Agreement.
4. Notwithstanding the provisions of Article 9 of the Princeton License
Agreement, the Parties agree that, if Transcell or Interneuron, as the case
may be, elects not to initiate and prosecute a patent infringement action
or to defend against a declaratory judgment action relating to patents
arising out of the Princeton License Agreement or the Princeton Research
Agreement which are subject to the Merck Rights, Merck shall have the right
either to initiate and prosecute such patent enforcement action or to
control the defense of such declaratory judgment action under the terms and
conditions set forth in the Merck/Transcell Collaboration Agreement, if
rights under the relevant patent are sublicensed to Merck under the
Merck/Transcell Collaboration Agreement. The rights granted by and
exercised under this paragraph shall have no effect on the rights of
ownership of any patent rights or inventions which shall be governed by
applicable patent laws and applicable provisions of the Princeton License
Agreement, the Princeton Research Agreement and the Merck/Transcell
Collaboration Agreement.
2
<PAGE>
5. Notwithstanding Section 7.1 of the Princeton License Agreement, the
Parties agree that in the event that Transcell becomes bankrupt, or shall
file a petition in bankruptcy, or if the business of Transcell shall be
placed in the hands of a receiver, assignee or trustee for the benefit of
creditors, whether by the voluntary act of Transcell or otherwise, (i) the
Princeton License Agreement shall not terminate with respect to the rights
granted to Merck under the Merck/Transcell Collaboration Agreement, (ii)
Merck shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code as sub-licensee of such rights and (iii) upon
Merck's request, Merck and Princeton shall negotiate in good faith an
agreement providing for the assumption by Merck of Transcell's rights and
obligations under the Princeton License Agreement with respect to the
rights granted to Merck under the Merck/Transcell Collaboration Agreement.
6. The Parties agree that a copy of any notice of Transcell's failure to
pay or any other material breach or default by Transcell under Sections 7.2
or 7.3 of the Princeton License Agreement shall be sent to Merck as
follows: Merck & Co., Inc., One Merck Drive, P.O. Box 100, Whitehouse
Station, NJ 08889-0100, Attention Office of Secretary, Telecopier No.:
(908) 735-1246, with a copy to Attention: Office of Assistant General
Counsel, Telecopier No.: (908) 735-1226. If Transcell fails to cure such
breach within the specified period, Merck shall have the right, but not the
obligation, to cure such non-payment or other breach on Transcell's behalf
within 30 days of notice to Merck of such failure to cure. In such event,
Princeton shall not have the right to terminate the Princeton License
Agreement pursuant to Sections 7.2 or 7.3 of the Princeton License
Agreement and Merck may credit any amount so paid to Princeton or the
direct and reasonable costs of effecting such other cure on behalf of
Transcell against the amounts then due and owing from Merck to Transcell.
7. Princeton and Transcell agree that they will not amend the Princeton
License Agreement so as to make such agreement inconsistent with Merck's
rights under, or in violation of, this Side Agreement or the
Merck/Transcell Collaboration Agreement without Merck's written consent.
8. Princeton and Interneuron agree that they will not amend the Princeton
Research Agreement so as to make such agreement inconsistent with, or in
violation of, Merck's rights under this Side Agreement or the
Merck/Transcell Collaboration Agreement without Merck's written consent.
Princeton and Interneuron further agree they will not enter into any
license agreement pursuant to the Princeton Research Agreement upon terms
which are inconsistent with, or in violation of, Merck's rights under this
Side Agreement or the Merck/Transcell Collaboration Agreement without
Merck's written consent.
9. Princeton hereby consents to (i) the sublicense by Transcell to Merck
pursuant to the Merck/Transcell Collaboration Agreement of certain of
Transcell's rights under the Princeton License Agreement and (ii) the
sublicense by Interneuron to Merck
3
<PAGE>
pursuant to the Merck/Transcell Collaboration Agreement of certain of
Interneuron's rights under the Princeton Research Agreement and any license
agreement entered into pursuant to the Princeton Research Agreement.
10. This Agreement shall be effective as of June 30, 1997 and shall be
governed by the laws of the State of New Jersey without reference to any
rules of conflict of laws. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
MERCK & CO., INC. TRANSCELL TECHNOLOGIES, INC.
BY: /s/ Edward M. Scolnick BY: /s/ Vincent L. Fabiano
----------------------------- ----------------------------
NAME: Edward M. Scolnick NAME: Vincent L. Fabiano
TITLE: President, TITLE: Executive Vice President
Merck Research Laboratories and Chief Operating Officer
TRUSTEES OF INTERNEURON
PRINCETON UNIVERSITY PHARMACEUTICALS, INC.
BY: /s/ Allen J. Sinisgalli BY: /s/ Glenn L. Cooper
----------------------------- ----------------------------
NAME: Allen J. Sinisgalli NAME: Glenn L. Cooper
TITLE: Associate Provost for TITLE: President and CEO
Research & Project Admin.
4
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
Schedule 1.52
Transcell Patent Assets
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Filing
Title of Application Docket No. Serial No. Date Status Patent No.
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
New Application Regarding [*] Library 2644-007 Not Yet In
Filed Preparation
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002 08/021,391 2/23/93 Issued 5,639,866
Glycosidic Linkages 6/18/97
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AAR 327,496 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AAU 61382/94 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002ACA 2156717 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AEPC 94908048.5 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AIL 108,748 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AIN 119/MAS/94 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AJP 519067/94 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AKE 94/00128 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AMX 94-1390 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002APCT 94/01604 2/23/94 National
Glycosidic Linkages Phase
Completed
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002APH 47814 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002APK 0077/94 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002ARU 95122803 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002ASD 94/150069 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002ASK 703535/95 2/23/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Filing
Title of Application Docket No. Serial No. Date Status Patent No.
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Solution and Solid Phase Formation of 2645-002ATW 83102930 4/02/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AVE 0295-94 3/4/94 Pending
Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Solution and Solid Phase Formation of 2645-002AZA 94/1229 2/23/94 Issued 9401229
Glycosidic Linkages 11/30/94
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
Libraries Prepared by the Solid Phase 2645-002C 08/780,914 1/9/97 Pending
Formation of Glycosidic Linkages
- ---------------------------------------- ------------------ --------------- ---------- -------------- ---------------
</TABLE>
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
ATTACHMENT 2.1.A
[*]
<PAGE>
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment.
The omitted portion has been separately filed with the Commission.
- --------------------------------------------------------------------------------
ATTACHMENT 2.1.B
[*]
<PAGE>
ATTACHMENT 4.3
FORM OF PRESS RELEASE
FOR IMMEDIATE RELEASE
Contact at Interneuron, (617) 402-3410:
William B. Boni
VP, Corp. Communications
Contact at Transcell, (609) 655-6900
Vincent L. Fabiano
Executive VP and COO
TRANSCELL AND MERCK ENTER INTO
ANTI-BACTERIAL RESEARCH COLLABORATION
LEXINGTON, MA and PRINCETON, NJ, July , 1997 - Transcell Technologies, Inc., a
majority-owned subsidiary of Interneuron Pharmaceuticals, Inc. (NASDAQ: IPIC)
and Interneuron today announced that they have entered into a collaborative
research and licensing agreement with Merck & Co., Inc. (NYSE: MRK) to discover
and commercialize novel antibacterial agents.
The initial focus of this collaboration will be the discovery and biological
evaluation of analogues of anti-bacterial compounds selected from two distinct
structural classes and the license to Merck of any products arising out of the
two research programs. Transcell will utilize its combinatorial technologies to
prepare libraries of carbohydrate derivative compounds for biological evaluation
and further development. Additionally, Merck has an option to extend the field
of the collaboration and license to include all antibacterial pharmaceutical
products.
Under this agreement, Transcell receives from Merck an initial licensing payment
and research support over two years. In addition, Transcell will receive
additional payments based upon the achievement of defined milestones for each
program. While there is no assurance these milestones will be reached, these
additional payments, combined with the initial licensing payment and research
support, could total approximately $48,000,000 if products from both programs
were approved by the FDA. In addition, Transcell would receive royalty payments
on sales of any products that may be developed based on the research programs.
- MORE -
Page 1 of 2
<PAGE>
Certain of the rights licensed to Merck are based on exclusive licenses or
rights held by Transcell and Interneuron from Princeton University, which will
be entitled to varying percentages of certain payments and royalties received
from Merck. Transcell's combinatorial carbohydrate technology is based upon the
research of its scientific founders, .Dr. Daniel Kahne and .Dr. Suzanne Walker
of Princeton University.
"Merck's recognition that Transcell's platform of synthetic chemistries and
combinatorial technologies can add significant value to its antibacterial drug
discovery programs is a very important step in our development of the technology
for drug discovery in several therapeutic areas," said Vincent L. Fabiano,
executive vice president and chief operating officer of Transcell. "We are
pleased to have Merck as our first drug discovery partner. Our partnership,
which initially will provide Merck access to libraries of new analogues of two
antibiotics, has the potential for expansion into the broad field of
antibacterial drug discovery."
Transcell Technologies, a majority-owned subsidiary of Interneuron
Pharmaceuticals, is exploiting the molecular diversity of carbohydrates to
discover novel small molecule pharmaceutical products.
Interneuron Pharmaceuticals is a diversified biopharmaceutical company engaged
in the development and commercialization of a portfolio of products and product
candidates primarily for neurological and behavioral disorders. Interneuron is
also developing products and technologies, generally outside the central nervous
system field, through three other subsidiaries: Intercardia, Inc. focused on
cardiovascular disease, Progenitor, Inc. focused on developmental genomics, and
InterNutria, Inc. focused on dietary supplement products.
Except for the descriptions of historical facts contained herein, this release
contains forward-looking statements that involve risks and uncertainties as
detailed from time to time in Interneuron's SEC filings under the Securities Act
of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" that could
cause Interneuron's actual results to differ significantly from those discussed
in the forward-looking statements, including the early stage of development of
Transcell's technology, uncertainties related to preclinical development,
corporate collaborations, clinical trials, patent risks, government regulation,
and dependence on third parties for manufacturing and marketing.
###
Page 2 of 2
<PAGE>
SCHEDULE 7.1
COUNTRIES WHERE INTERNEURON AND TRANSCELL
WILL FILE, PROSECUTE AND MAINTAIN PATENTS
Argentina
Australia
Canada
Austria
Belgium
Switzerland/Liechtenstein
Germany
Denmark
Spain
Finland
France
United Kingdom
Italy
Netherlands
Sweden
Israel
India
Japan
Kenya
Mexico
Philippines
Pakistan
Russian Federation
South Korea
Taiwan
United States
Venezuela
South Africa
Which List of Countries Can Be Amended From Time to Time
By Mutual Written Agreement of the Parties
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
PRINCETON UNIVERSITY
LICENSE AGREEMENT
This Agreement is made and entered into this 29th day of June 1998 (the
Effective Date) by and between The Trustees of PRINCETON UNIVERSITY a
not-for-profit corporation duly organized and existing under the laws of the
STATE OF NEW JERSEY, U.S.A. (hereinafter referred to as PRINCETON), and
Intercardia, Inc., a corporation duly organized under the laws of Delaware, and
having its principal office at 3200 East Highway 54, Cape Fear Building, Suite
300, Research Triangle Park, NC 27709 (hereinafter referred to as LICENSEE).
WITNESSETH
WHEREAS, PRINCETON is the owner of certain "Patent Rights" (as later
defined herein) relating to Princeton University Case #98-1476-1, [ * ] and has
the right to grant licenses under said Patent Rights; and
WHEREAS, PRINCETON desires to have the Patent Rights utilized in the public
interest and is willing to grant an exclusive license thereunder; and
WHEREAS, PRINCETON and Interneuron Pharmaceuticals, Inc ("Interneuron")
entered into a Research Agreement on April 29, 1997 (the "Research Agreement")
granting Interneuron an exclusive option to acquire an exclusive worldwide
license, with the right to sublicense, to any inventions and confidential
information, including any Patent Rights arising under the Research Agreement;
WHEREAS, Interneuron has assigned the Research Agreement to LICENSEE,
WHEREAS, LICENSEE desires to obtain an exclusive license under the Patent
Rights upon the terms and conditions hereinafter set forth; and
WHEREAS, LICENSEE has represented to PRINCETON, to induce PRINCETON to
enter into this Agreement, that LICENSEE intends to commit itself to a thorough,
vigorous and diligent program of exploiting the Patent Rights with the intention
that public utilization shall result therefrom;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
ARTICLE I - DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.1 "Affiliate" shall mean any corporation, company, or other business
entity controlled by, controlling or under common control with LICENSEE or
Princeton, as the case may be. For this purpose, control shall mean direct or
indirect beneficial ownership of more than fifty percent (50%) of the voting
stock of, or a fifty percent (50%) or greater interest in the income of such
corporation or other business entity or fifty percent (50%) or greater
management control over a joint venture, or such other relationship as, in fact,
constitutes actual control.
1.2 "Assay" shall mean a method, process, assay, or screening procedure
that is covered either by a pending claim of a patent application or by a valid,
unexpired claim of an issued patent that is part of the Patent Rights.
1.3 "Compound" shall mean any compound that [ * ] activity and which
activity is discovered by use of an Assay.
1.4 "Licensed Products shall mean any commercial product that includes a
[*], which is covered by a valid, unexpired claim of an issued patent in the
Patent Rights in the country in which the Licensed Product(s) is sold.
1.5 "Licensed Process(es)" shall mean any commercial process that includes
an Assay, which is covered by a valid, unexpired claim of an issued patent in
the Patent Rights in the country in which the Licensed Process(es) is used.
1.6 "LICENSEE" shall mean Intercardia, Inc. ("ITRC"), and any Affiliate or
Subsidiary of ITRC.
1.7 [ * ] shall mean a [ * ], which is covered either by a pending claim of
a patent application or by a valid, unexpired claim of an issued patent that is
part of the Patent Rights.
1.8 "Net Revenues" shall mean all amounts actually received on account of
billings by LICENSEE or its Sublicensees for the sale of the Licensed
Product(s), Licensed Process(es) or Compound(s), less the sum of the following:
(a) Discounts and free goods allowed in amounts customary in the
trade;
(b) Sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales;
2
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
(c) Outbound transportation prepaid or allowed;
(d) Amounts allowed or credited on returns, including, but not limited
to allowances or credits to customers on account of rejection or
return of Licensed Product; and
(e) Actual losses incurred due to changes in foreign currency exchange
rates and an allowance for bad debt expense.
Net Revenues shall not include amounts received by LICENSEE as payment for
product development or other services rendered by LICENSEE.
1.9 "Party(ies)" shall mean person(s) or entity(ies) who is (are) party to
the Agreement.
1.10 "Patent Rights" shall mean:
(a) United States Provisional Patent Application Serial No. [ * ]
filed February 2, 1998 on behalf of the Trustees of Princeton
University in the name of Suzanne Walker Kahne, Hongbin Men, Peter
Park, and Min Ge, inventors, including any regular patent
applications, continuations, continuations-in-part, divisionals,
reissues, reexaminations, or extensions thereof, or any international
or foreign counterparts thereof, (hereinafter referred to as "Patent
Rights Patent Applications"), and
(b) Any United States and/or foreign patents issuing from any of the
foregoing in 1.11 (a) (hereinafter referred to as the "Patent Rights
Patents").
1.11 "Research Program" shall mean the research project described in, and
conducted during the term of, the Research Agreement, which is attached hereto
as Appendix A.
1.12 "Sublicense" shall mean a sublicense granted by LICENSEE.
1.13 "Sublicensee" shall mean any Third Party licensed by LICENSEE to make,
have made, import, export, use or sell any Licensed Product or to use or sell
any Licensed Process.
1.14 "Subsidiary" shall mean any corporation, company, or other entity,
more than fifty percent (50%) of whose voting stock is owned or controlled
directly or indirectly by ITRC.
1.15 "Third Party" shall mean person(s) or entity(ies) who or which is
(are) neither a Party nor an Affiliate of a Party.
3
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
ARTICLE II - GRANT OF LICENSE
2.1 PRINCETON hereby grants to LICENSEE an exclusive (even as to Princeton)
worldwide license, with the right to sublicense, under the Patent Rights to
make, have made, use, lease and/or sell the [ * ] and Licensed Product(s), and
to use, lease, and/or sell the Assay or Licensed Process(es) to the full end of
the term for which the Patent Rights are granted unless sooner terminated as
hereinafter provided.
2.2 LICENSEE agrees to use commercially reasonable efforts to provide that
LICENSED PRODUCTS leased or sold in the United States shall be manufactured
substantially in the United States.
2.3 PRINCETON expressly reserves the right to use the Patent Rights,
Licensed Products, Licensed Processes, and associated information and technology
for Princeton's own educational, research and other non-commercial purposes
only, provided, however, that PRINCETON shall notify LICENSEE of any additional
intellectual property that may arise from such use and shall offer LICENSEE a
first option to license such technology on terms and conditions to be negotiated
in good faith between the Parties, such option to be exercised within six (6)
months of disclosure of the invention by PRINCETON to LICENSEE.
2.4 LICENSEE shall have the right to sublicense the Patent Rights granted
pursuant to this Agreement to any Third Party; provided that LICENSEE shall not
grant any such Sublicense without Princeton's written consent, which consent
shall not be unreasonably withheld.
2.5 LICENSEE agrees that any sublicenses granted by it shall have privity
of contract between PRINCETON and Sublicensee such that the obligations of this
Agreement shall be binding upon the Sublicensee as if it were in the place of
LICENSEE. LICENSEE further agrees to attach copies of Articles II, V, VII, IX,
X, XII, XIII, and XV of this Agreement to all sublicense agreements,
2.6 LICENSEE agrees to forward to PRINCETON a copy of any and all fully
executed sublicense agreements, and further agrees to forward to PRINCETON
annually a copy of such reports received by LICENSEE from its Sublicensees
during the preceding twelve (12) month period under the sublicenses as shall be
pertinent to a royalty accounting under said sublicense agreements.
4
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
ARTICLE III - DUE DILIGENCE
3.1 LICENSEE shall use its best efforts to commercialize the Licensed
Product(s) and/or Licensed Process(es) through a thorough, vigorous and diligent
program for exploitation of the Patent Rights. The progress and results of
LICENSEE's efforts shall be reported to PRINCETON through annual reports.
3.2 A sublicense by LICENSEE of the Patent Rights in accordance with the
terms of this Agreement shall satisfy the obligations of LICENSEE set forth in
Section 3.1; provided, however, that if the sublicense is terminated with
respect to a Licensed Product, LICENSEE shall continue to have the obligations
set forth in Section 3.1. In such event, LICENSEE shall also submit a
development plan to PRINCETON on an annual basis relating to the budget and
estimated time for development of Licensed Products.
3.3 LICENSEE's failure to perform in accordance with Paragraphs 3.1 and 3.2
above shall be grounds for PRINCETON to have the right to terminate this
Agreement pursuant to Paragraph 7.3 hereof.
ARTICLE IV - ROYALTIES AND PAYMENTS
4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay to PRINCETON in the manner hereinafter provided to the end of the term
of the Patent Rights or until this Agreement shall be terminated as hereinafter
provided:
(a) A License Issue Fee of One Hundred Sixty Thousand Dollars
($160,000), which shall be deemed earned immediately upon the
execution of this Agreement and payable upon such execution.
(b) License Maintenance Fees of Fifty Thousand Dollars ($50,000) per
year, payable on each anniversary of the Effective Date of this
Agreement until the earlier of the year in which the first commercial
sale of Licensed Product or Licensed Process occurs or the termination
of the Agreement occurs.
(c) Running royalties in an amount equal to one percent (1%) of Net
Revenues, provided, however, that fifty percent (50%) of any other
royalties or payments accrued or paid by LICENSEE to a Third Party in
connection with the manufacture, use, or sale of [ * ], Licensed
Product(s), Compound(s), Assay(s), or Licensed Process(es) may be
deducted from the amounts due under this Paragraph.
5
<PAGE>
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment.
The omitted portions, marked by [ * ], have been filed separately
with the Commission.
(d) Milestone payment of one million dollars ($1,000,000) payable
within ten (10) days after filing a New Drug Application with the Food
and Drug Administration for the marketing of a Compound.
(e) A payment in an amount equal to Twenty-Five Percent (25 %) of any
Sublicense Fees received by LICENSEE from a Sublicensee of Licensed
Product or Licensed Process, payable within ten (10) days of signing
of such Sublicense Agreement.
4.2 No multiple royalties shall be payable to PRINCETON pursuant to the
License if the manufacture, use or sale of a [ * ] or Licensed Product or
practice of the Assay or Licensed Process is covered by more than one patent
application or patent contained in the Patent Rights, if such royalty or payment
may be covered under more than one of the above provisions, or if a royalty is
payable to PRINCETON in connection with the manufacture, use or sale of such
Licensed Product or Compound under any other License agreement between PRINCETON
and LICENSEE; provided, however, that if a royalty would be payable to PRINCETON
under such other license agreement, then for such Licensed Product or Compound,
PRINCETON shall be entitled to select, by notifying LICENSEE in writing prior to
the First Commercial Sale of such Licensed Product or Compound, whether to
receive the royalty rate set forth under this Agreement or the royalty rate set
forth under such other license agreement.
4.3 Royalty payments shall be paid in United States dollars in Princeton,
New Jersey, or at such other place as PRINCETON may reasonably designate
consistent with the laws and regulations controlling in any foreign country. Any
withholding taxes which LICENSEE or any Sublicensee shall be required by law to
withhold on remittance of the royalty payments shall be deducted from royalties
paid to PRINCETON. LICENSEE shall furnish PRINCETON with copies of all official
receipts for such taxes. If any currency conversion shall be required in
connection with the payment of royalties hereunder, such conversion shall be
made by using the exchange rate prevailing at a first-class foreign exchange
bank on the last business day of the calendar quarterly reporting period to
which such royalty payments relate.
ARTICLE V - REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of account containing
all particulars that may be necessary for the purpose of showing the amount
payable to PRINCETON by way of royalty as aforesaid. Said books of account shall
be kept at LICENSEE's principal place of business or the principal place of
business of the appropriate division of LICENSEE to which this Agreement
relates. Said books and the supporting data shall be open at all reasonable
times, for three (3) years following the end of the calendar year to which they
pertain, to the
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inspection of the PRINCETON Internal Audit Division and/or an independent
certified public accountant retained by PRINCETON and/or a certified public
accountant employed by PRINCETON for the purpose of verifying LICENSEE's royalty
statement or compliance in other respects with this Agreement.
5.2 LICENSEE, within forty-five (45) days after March 31, June 30,
September 30 and December 31, of each year, shall deliver to PRINCETON true and
accurate reports, giving such particulars of the business conducted by LICENSEE
during the preceding quarter under this Agreement as shall be pertinent to a
royalty accounting hereunder. These shall include at least the following:
(a) All Licensed Products manufactured and sold.
(b) Total amounts actually received by LICENSEE on account of its
billings for Licensed Product sold.
(c) Accounting for all the Licensed Process(es) used or sold.
(d) Deductions applicable as provided in Paragraph 1.9.
(e) Total royalties due.
(f) (fl Names and addresses of all SubLicensees of LICENSEE.
(g) Annually, within one hundred (100) days of LICENSEE's fiscal year
end, LICENSEE's certified financial statements for the preceding
twelve (12) months including, at a minimum, a Balance Sheet and an
Operating Statement.
5.3 With each such report submitted, LICENSEE shall pay to PRINCETON the
royalties due and payable under this Agreement, provided that no payment to
PRINCETON shall be payable in the event that the remittance of royalties from
foreign countries to the accounts of LICENSEE in the United States shall be
blocked by exchange controls in foreign countries, which exchange controls are
beyond the control of LICENSE, in which case, such royalties shall be held in
escrow and paid to PRINCETON at such time as such exchange controls are no
longer blocked. If no royalties shall be due, LICENSEE shall so report.
ARTICLE VI - PATENT PROSECUTION
6.1 PRINCETON and LICENSEE agree to cooperate fully in applying for,
obtaining, prosecuting and maintaining patents.
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6.2 For inventions originating under the Research Program, PRINCETON shall
promptly disclose to LICENSEE, in writing, any PRINCETON-owned or Jointly-owned
Inventions disclosed to PRINCETON. PRINCETON shall file and prosecute U.S. and
foreign patent applications in its name at LICENSEE's request and expense, using
mutually agreed upon patent counsel, on such PRINCETON-owned or Jointly-owned
Inventions as may, in LICENSEE's judgement, become appropriate during the term
of this Agreement.
6.3 For inventions originating under the Research Program, PRINCETON shall
have the opportunity to file patent applications in its name at its own expense
for those PRINCETON-owned or Jointly-owned Inventions made by its personnel and
for which LICENSEE does not agree, within thirty (30) days after notification by
PRINCETON of its intent to file a patent application, to pay for PRINCETON to
file said patent applications.
6.4 LICENSEE's patent counsel may prepare, file and prosecute all U.S.
applications for any Jointly-owned Inventions, at LICENSEE's sole cost and
expense, provided, however, that PRINCETON shall have the right to review and
approve the application, and be consulted on all prosecution actions, and
foreign filing decisions. PRINCETON's right, title and interest in the
Jointly-owned Inventions disclosed or claimed in such patent applications or in
any such patents shall be subject to the terms of this Agreement.
ARTICLE VII - TERMINATION
7.1 If LICENSEE shall become bankrupt or insolvent, or shall file a
petition in bankruptcy, or if the business of LICENSEE shall be placed in the
hands of a receiver, assignee or trustee for the benefit of creditors, whether
by the voluntary act of LICENSEE or otherwise, this Agreement shall
automatically terminate.
7.2 Should LICENSEE fail in its payment to PRINCETON of royalties due in
accordance with the terms of this Agreement, PRINCETON shall have the right to
serve notice upon LICENSEE by certified mail at the address designated in
Article XIV hereof, of its intention to terminate this Agreement within thirty
(30) days after receipt of said notice of termination unless LICENSEE shall pay
to PRINCETON, within the thirty (30) day period, all such royalties due and
payable. Upon the expiration of the thirty (30) day period, if LICENSEE shall
not have paid all such royalties due and payable, the rights, privileges and
license granted hereunder shall thereupon immediately terminate.
7.3 Upon any material breach or default of this Agreement by LICENSEE,
other than those occurrences set out in Paragraphs 7.1 and 7.2 hereinabove,
which shall always take precedence in that order over any material breach or
default referred to in this Paragraph 7.3,
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PRINCETON shall have the right to terminate this Agreement and the rights,
privileges and license granted hereunder by ninety (90) days' notice by
certified mail to LICENSEE Agreement. Such termination shall become effective
unless LICENSEE shall have cured any such breach or default prior to the
expiration of the ninety (90) day period from receipt of PRINCETON notice of
termination.
7.4 LICENSEE shall have the right to terminate this Agreement at any time
on six (6) months' notice by certified mail to PRINCETON in whole or with
respect to designated countries or designated Patent Rights, Licensed Products
or Licensed Processes.
7.5 Upon termination of this Agreement for any reason, nothing herein shall
be construed to release either party from any obligation that matured prior to
the effective date of such termination. LICENSEE and/or any Sublicensee thereof
may, however, after the effective date of such termination, sell all Licensed
Products, and complete Licensed Products in the process of manufacture at the
time of such termination and sell the same, provided that LICENSEE shall pay to
PRINCETON the royalties thereon as required by Article IV of this Agreement and
shall submit the reports required by Article V hereof on the sales of Licensed
Products.
ARTICLE VIII - ARBITRATION
8.1 Except as to issues relating to the validity, construction or effect of
any patent licensed hereunder, any and all claims, disputes or controversies
arising under, out of, or in connection with this Agreement, which have not been
resolved by good faith negotiations between the parties, shall be resolved by
final and binding arbitration in Princeton, New Jersey under the rules of the
American Arbitration Association then obtaining. The arbitrators shall have no
power to add to, subtract from or modify any of the terms or conditions of this
Agreement. Any award rendered in such arbitration may be enforced by either
party in either the courts of the State of New Jersey or in the United States to
whose jurisdiction for such purposes PRINCETON and LICENSEE each hereby
irrevocably consents and submits.
8.2 Claims, disputes or controversies concerning the validity, construction
or effect of any patent licensed hereunder shall be resolved in any court having
jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall arise
concerning the validity, construction or effect of any patent licensed
hereunder, the arbitrators shall assume the validity of all claims as set forth
in such patent; in any event the arbitrators shall not delay the arbitration
proceeding for the purpose of obtaining or permitting either party to obtain
judicial resolution of such issue, unless an order staying such arbitration
proceeding shall be entered by a court of competent jurisdiction. Neither party
shall raise any issue concerning the validity,
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construction or effect of any patent licensed hereunder in any proceeding to
enforce any arbitration award hereunder or in any proceeding otherwise arising
out of any such arbitration award.
ARTICLE IX - INFRINGEMENT
9.1 LICENSEE and PRINCETON shall promptly inform the other in writing of
any alleged infringement of which it shall have notice by a third party of any
patents within the Patent Rights and provide such other with any available
evidence of infringement.
9.2 During the term of this Agreement, LICENSEE shall have the right, but
shall not be obligated, to prosecute at its own expense any such infringements
of the Patent Rights and, in furtherance of such right, PRINCETON hereby agrees
that LICENSEE may join PRINCETON as a party plaintiff in any such suit, without
expense to PRINCETON. The total cost of any such infringement action commenced
or defended solely by LICENSEE shall be borne by LICENSEE, and LICENSEE shall
keep any recovery or damages for past infringement derived therefrom. No
settlement, consent judgment or other voluntary final disposition of the suit
may be entered into without the consent of PRINCETON, which consent shall not
unreasonably be withheld. LICENSEE shall indemnify PRINCETON against any order
for costs that may be made against PRINCETON in such proceedings.
9.3 If within six (6) months after having been notified of any alleged
infringement, LICENSEE shall have been unsuccessful in persuading the alleged
infringer to desist and shall not have brought and shall not be diligently
prosecuting an infringement action, or if LICENSEE shall notify PRINCETON at any
time prior thereto of its intention not to bring suit against any alleged
infringer, then, and in those events only, PRINCETON shall have the right, but
shall not be obligated, to prosecute at its own expense any infringement of the
Patent Rights, and PRINCETON may, for such purposes, join LICENSEE as party
plaintiff.
9.4 In the event that LICENSEE shall undertake the enforcement and/or
defense of the Patent Rights by litigation, LICENSEE may withhold up to fifty
percent (50%) of the royalties otherwise thereafter due PRINCETON hereunder and
apply the same toward reimbursement of its expenses, including reasonable
attorneys' fees, in connection therewith. Any recovery of damages by LICENSEE
for any such suit shall be applied first in satisfaction of any unreimbursed
expenses and legal fees of LICENSEE relating to the suit, and next toward
reimbursement of PRINCETON for any royalties past due or withheld and applied
pursuant to this Article IX. The balance remaining from any such recovery shall
be divided equally between LICENSEE and PRINCETON.
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9.5 In the event that a declaratory judgement action alleging invalidity or
non-infringement of any of the Patent Rights shall be brought against LICENSEE,
and LICENSEE is not diligently defending such action, PRINCETON, at its option,
shall have the right, within ninety (90) days after commencement of such action,
to intervene and take over the sole defense of the action at its own expense.
9.6 In any infringement suit as either party may institute to enforce the
Patent Rights pursuant to this Agreement, the other party hereto shall, at the
request and expense of the party initiating such suit, cooperate in all respects
and, to the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
9.7 LICENSEE, during the exclusive period of this Agreement, shall have the
sole right in accordance with the terms and conditions herein to sublicense any
alleged infringer under the Patent Rights for future infringements.
ARTICLE X - PRODUCT LIABILITY
10.1 PRINCETON by this Agreement makes no representation as to the
patentability and/or breadth of the inventions and/or discoveries involved in a
Licensed Patent. PRINCETON by this Agreement makes no representation as to
patents now held or which will be held by others in the field of the Licensed
Products for a particular purpose.
10.2 LICENSEE agrees to defend, indemnify and hold PRINCETON, its Trustees,
Officers, Agents, Employees and Students harmless from and against all
liability, demands, damages, expense or losses for death, personal injury,
illness or property damage arising (a) out of use by LICENSEE or its transferees
of inventions licensed or information furnished under this Agreement, or (b) out
of any use, sale or other disposition by LICENSEE, its Affiliates, Subsidiaries,
Contractors and Subcontractors, or its transferees of products made by use of
such inventions or information.
10.3 In discharge of the above, on or prior to the date on which a clinical
trial commences with respect to a Licensed Product ("the Insurance Commencement
Date"), LICENSEE will maintain general liability insurance in the amount of at
least One Million Dollars ($1,000,000) per occurrence with a deductible of not
more than $10,000 per occurrence with commercially reasonable insurers against
damage to or destruction of property and injury to or death of individuals and
against such other risks as PRINCETON may reasonably request arising out of or
in connection with any of the Licensed Products. PRINCETON, and its respective
officers, trustees, and employees will be named insureds under all such
insurance. Such insurance
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will also provide that PRINCETON will be given notice of any modification
thereof and at least ten (10) days' prior written notice of cancellation or
termination and the reason therefore. LICENSEE will furnish PRINCETON upon
request, and in any event on the Insurance Commencement Date and on each
anniversary of the Insurance Commencement Date, written confirmation issued by
the insurer or an independent insurance agent confirming that insurance is
maintained in accordance with the above requirements.
ARTICLE XI - ASSIGNMENT
11.1 LICENSEE may assign or otherwise transfer this Agreement and the
license granted hereby and the rights acquired by it hereunder, so long as such
assignment or transfer shall be to an Affiliate, or shall be accompanied by a
sale or other transfer of LICENSEE's entire business or of that part of
LICENSEE's business to which the license granted hereby relates or as PRINCETON
may otherwise consent, which consent shall not be unreasonably withheld.
LICENSEE shall give PRINCETON thirty (30) days' prior notice of any such
assignment and transfer requiring PRINCETON's consent, and if PRINCETON raises
no reasonable objection to such assignment or transfer, in writing within thirty
(30) days after the giving of such notice and stating the reasons for such
objection, then PRINCETON shall be deemed to have approved such assignment or
transfer; provided, however, PRINCETON shall not be deemed to have approved such
assignment and transfer unless such assignee or transferee shall have agreed in
writing to be bound by the terms and conditions of this Agreement. Upon such
assignment or transfer and agreement by such assignee or transferee, the term
LICENSEE as used herein shall include such assignee or transferee. If LICENSEE
shall sell or otherwise transfer its entire business or that part of its
business to which the license granted hereby relates and the transferee shall
not have agreed in writing to be bound by the terms and conditions of this
Agreement, or new terms and conditions shall not have been agreed upon within
sixty (60) days of such sale or transfer, PRINCETON shall have the right to
terminate this Agreement.
ARTICLE XII - NON-USE OF NAMES
12.1 LICENSEE shall not use the name of PRINCETON nor any adaptation
thereof in any advertising, promotional or sales literature without prior
written consent obtained from PRINCETON, in each case, except that LICENSEE may
state that it is licensed by PRINCETON under one or more of the patents and/or
applications comprising the Patent Rights.
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ARTICLE XIII - EXPORT CONTROLS
13.1 It is understood that PRINCETON is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended, and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency. PRINCETON neither represents that a license shall not be required nor
that, if required, it shall be issued.
ARTICLE XIV - PAYMENTS, NOTICES
AND OTHER COMMUNICATIONS
14.1 Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such party
by certified first class mail, postage prepaid, addressed to it at its address
below or as it shall designate by written notice given to the other party:
In the case of PRINCETON UNIVERSITY
Office of Technology and Trademark Licensing
Princeton University
5 New South Building, P.O. Box 36
Princeton, New Jersey 08544
Attention: Director, Patent Licensing
In the case of LICENSEE:
Intercardia, Inc.
P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC 27709
Attention: Clayton Duncan, President & CEO
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ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the State of New Jersey, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted.
15.2 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change of modification except by
the execution of a written instrument subscribed to by the parties hereto.
15.3 The provisions of this Agreement are severable, and in the event that
any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
15.4 LICENSEE agrees to mark the Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to or sold in other countries shall be marked in such a manner as to
confirm with the patent laws and practice of the country of manufacture or sale.
15.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this License Agreement the day and year first set forth
below.
Attest: The Trustees of Princeton University
By:
- ----------------------------------- ------------------------------------
Title Title
------------------------------ ----------------------------------
Date
-----------------------------------
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Attest: LICENSEE: Intercardia, Inc.
By:
- ----------------------------------- ------------------------------------
Title Title
------------------------------ ----------------------------------
Date
-----------------------------------
15
PRINCETON UNIVERSITY LICENSE AGREEMENT
This Agreement is made and entered into this 15th day of April, 1998,
effective as of the 30th day of June 1997 (the Effective Date") by and between
The Trustees of PRINCETON UNIVERSITY, a corporation duly organized and existing
under the laws of the STATE OF NEW JERSEY, U.S.A. (hereinafter referred to as
PRINCETON), and Interneuron Pharmaceuticals, Inc., a corporation duly organized
under the laws of Delaware and having its principal office at 99 Hayden Avenue,
Lexington MA 02173 (hereinafter referred to as LICENSEE).
WITNESSETH:
WHEREAS, PRINCETON is the owner of certain "Patent Rights" (as later
defined herein) relating to Princeton University Case #97-1387-1 and has the
right to grant licenses under said Patent Rights; and
WHEREAS, PRINCETON desires to have the Patent Rights utilized in the public
interest and is willing to grant an exclusive license thereunder; and
WHEREAS, PRINCETON and LICENSEE entered into a Research Agreement on April
29, 1997 (the "Research Agreement") granting Licensee an exclusive option to
acquire an exclusive worldwide license, with the right to sublicense, to any
inventions and confidential information, including any Patent Rights arising
under the Research Agreement;
WHEREAS, LICENSEE desires to obtain an exclusive license under the Patent
Rights upon the terms and conditions hereinafter set forth; and
WHEREAS, LICENSEE has represented to PRINCETON, to induce PRINCETON to
enter into this Agreement, that LICENSEE intends to commit itself to a thorough,
vigorous and diligent program of exploiting the Patent Rights with the intention
that public utilization shall result therefrom;
WHEREAS, PRINCETON, LICENSEE, Transcell Technologies, Inc. ("Transcell")
and Merck & Co., Inc. ("Merck") entered into a Side Agreement effective as of
June 30, 1997 (the "Side Agreement") and PRINCETON and LICENSEE desire to have
this Agreement be on terms that are consistent with Merck's rights under the
Side Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
<PAGE>
1.1 "Affiliate" shall mean any corporation, company, or other business
entity controlled by, controlling or under common control with LICENSEE or
Princeton, as the case may be. For this purpose, control shall mean direct or
indirect beneficial ownership of more than fifty percent (50%) of the voting
stock of, or a fifty percent (50%) or greater interest in the income of such
corporation or other business entity or fifty percent (50%) or greater
management control over a joint venture, or such other relationship as, in fact,
constitutes actual control.
1.2 "Compound" shall mean any chemical entity that is synthesized in and/or
discovered in or during the Research Program.
1.3 "Compound Analog" shall mean any derivative, homolog or analog of a
Compound.
1.4 "LICENSEE" shall mean Interneuron Pharmaceuticals, Inc. ("IPI") and any
Affiliate or Subsidiary of IPI (except Transcell).
1.5 "Licensed Product(s)" shall mean any product which includes a Compound
or a Compound Analog which
(a) is covered in whole or in part by (i) a pending claim contained in a
Patent Rights Patent Application in the country in which the Licensed
Product(s) is made, used or sold or (ii) a valid and unexpired claim
contained in a Patent Rights Patent in the country in which the
Licensed Product(s) is made, used or sold.
(b) is manufactured using a process covered in whole or in part by (i) a
pending claim contained in a Patent Rights Patent Application in the
country in which the Compound(s) or Compound Analog(s) is(are)
imported, used or sold or (ii) a valid or unexpired claim contained in
a Patent Rights Patent in the country in which the Compound or
Compound Analog is(are) made, used, or sold.
1.6 "Licensed Process(es)" shall mean any process covered in whole or in
part by (i) a pending claim contained in a Patent Rights Patent Application or
(ii) a valid and unexpired claim contained in a Patent Rights Patent in the
country in which the Process is used.
1.7 "Milestone Payment" shall mean non-refundable cash payments received by
LICENSEE from a Sublicensee upon the achievement of specified milestones related
to Licensed Products or use of Licensed Processes excluding, without limitation,
amounts received by LICENSEE for product development or other services, license,
sublicense or option fees or equity investments.
1.8 "Net Revenues" shall mean all amounts actually received by LICENSEE on
account of its billings for the Licensed Product(s) or Licensed Process(es) sold
by LICENSEE, less the sum of the following:
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(a) Discounts and free goods allowed in amounts customary in the trade;
(b) Sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales;
(c) Outbound transportation prepaid or allowed;
(d) Amounts allowed or credited on returns, including, but not limited to,
allowances or credits to customers on account of rejection or return
of Licensed Product; and
(e) Actual losses incurred due to changes in foreign currency exchange
rates and an allowance for bad debt expense.
Net Revenues shall not include amounts received by LICENSEE as payment for
product development services or other services rendered by LICENSEE.
1.9 "Net Revenues of Sublicensee" shall mean all amounts actually received
by Sublicensee on account of billings by Sublicensee for Licensed Product(s)
sold and Licensed Processes used or sold, by Sublicensee, less the sum of the
following:
(a) Discounts and free goods allowed in amounts customary in the trade;
(b) Sales, tariff duties and/or use taxes directly imposed and with
reference to particular sales;
(c) Outbound transportation prepaid or allowed;
(d) Amounts allowed or credited on returns, including, but not limited to,
allowances or credits to customers on account of rejection or return
of Licensed Product; and
(e) Actual losses incurred due to changes in foreign currency exchange
rates and an allowance for bad debt expense.
1.10 "Net Ancillary Product Royalties" shall mean royalties actually
received by LICENSEE from its Sublicensees on account of Sublicensee's sales of
Licensed Products and/or sale or use of Licensed Processes (giving effect to any
deductions or credits against such sales or royalties).
1.11 "Party(ies)" shall mean person(s) or entity(ies) who is(are) party to
the Agreement.
1.12 "Patent Rights" shall mean:
(a) Any United States and/or foreign patent applications arising out of
the Research Program as set forth in the Research Agreement, including
any
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continuations, continuations-in-part, divisionals, reissues,
reexaminations, or extensions thereof (hereinafter referred to as
"Patent Rights Patent Applications"), and
(b) Any United States and/or foreign patents issuing from any of the
foregoing in 1.12(a) (hereinafter referred to as the "Patent Rights
Patents").
1.13 "Research Program" shall mean the research project described in, and
conducted during the term of, the Research Agreement, which is attached hereto
as Appendix A.
1.14 "Sublicense" shall mean a sublicense granted by LICENSEE.
1.15 "Sublicensee" shall mean any Third Party licensed by LICENSEE to make,
have made, import, export, use or sell any Licensed Product or to use or sell
any Licensed Process.
1.16 "Subsidiary" shall mean any corporation, company, or other entity,
more than fifty percent (50%) of whose voting stock is owned or controlled
directly or indirectly by IPI.
1.17 "Third Party" shall mean person(s) or entity(ies) who or which is(are)
neither a Party nor an Affiliate of a Party.
1.18 "Transcell License Agreement" shall mean the license agreement
effective as of October 14, 1993, as amended on February 21, 1997, between
Princeton and Transcell.
ARTICLE II - GRANT OF LICENSE
2.1 PRINCETON hereby grants to LICENSEE an exclusive (even as to Princeton)
worldwide license, with the right to sublicense, under the Patent Rights to
make, have made, use, lease and/or sell the Licensed Product(s), and to practice
the Licensed Process(es) to the full end of the term for which the Patent Rights
are granted unless sooner terminated as hereinafter provided.
2.2 LICENSEE agrees to use commercially reasonable efforts to provide that
LICENSED PRODUCTS leased or sold in the United States shall be manufactured
substantially in the United States.
2.3 PRINCETON expressly reserves the right to use the Patent Rights,
Licensed Products, Licensed Processes, and associated information and technology
for Princeton's own educational, research and other non-commercial purposes
only, on the terms and conditions as set forth in the Research Agreement and
this Agreement, provided, however, that PRINCETON shall notify LICENSEE of any
additional intellectual property that may arise from such use and such
intellectual property shall become part of and subject to the terms of this
Agreement.
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2.4 LICENSEE shall have the right to sublicense the Patent Rights granted
pursuant to this Agreement to any Third Party (other than Transcell); provided
that LICENSEE shall not grant any such Sublicense without Princeton's written
consent, which consent shall not be unreasonably withheld.
2.5 LICENSEE agrees that any sublicenses granted by it shall have privity
of contract between PRINCETON and Sublicensee such that the obligations of this
Agreement shall be binding upon the Sublicensee as if it were in the place of
LICENSEE. LICENSEE further agrees to attach copies of Articles II, V, VII, IX,
X, XII, XIII and XV of this Agreement to all sublicense agreements, provided,
however, that notwithstanding the foregoing, in accordance with Paragraph 1 of
the Side Agreement, (i) only the following provisions of this Agreement shall
apply to Merck as if it were in the place of LICENSEE, to the extent, and only
to the extent, that such provisions relate to the Merck Rights and to the
Merck/Transcell Collaboration Agreement (as defined in the Side Agreement):
Section 2.2 (manufacture in the U.S.); Section 10.2 (indemnification); Article
XII (non-use of names); and Article XIII (export controls), and (ii) all other
rights and obligations of LICENSEE under this Agreement shall be rights and
obligations of LICENSEE only, except as otherwise provided in this Agreement or
the Side Agreement.
2.6 LICENSEE agrees to forward to PRINCETON a copy of any and all fully
executed sublicense agreements, and further agrees to forward to PRINCETON
annually a copy of such reports received by LICENSEE from its Sublicensees
during the preceding twelve (12) month period under the sublicenses as shall be
pertinent to a royalty accounting under said sublicense agreements.
ARTICLE III - DUE DILIGENCE
3.1 LICENSEE shall use its best efforts to commercialize the Licensed
Product(s) and/or Licensed Process(es) through a thorough, vigorous and
diligent program for exploitation of the Patent Rights. The progress and results
of LICENSEE's efforts shall be reported to PRINCETON through annual reports.
3.2 A sublicense by LICENSEE of the Patent Rights in accordance with the
terms of this Agreement shall satisfy the obligations of LICENSEE set forth in
Section 3.1; provided, however, that if the sublicense is terminated with
respect to a Licensed Product, LICENSEE shall continue to have the obligations
set forth in Section 3.1. In such event, LICENSEE shall also submit a
development plan to PRINCETON on an annual basis relating to the budget and
estimated time for development of Licensed Products.
3.3 LICENSEE's failure to perform in accordance with Paragraphs 3.1 and 3.2
above shall be grounds for PRINCETON to have the right to terminate this
Agreement pursuant to Paragraph 7.3 hereof.
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ARTICLE IV - ROYALTIES AND PAYMENTS
4.1 For the rights, privileges and license granted hereunder, LICENSEE
shall pay to PRINCETON in the manner hereinafter provided to the end of the term
of the Patent Rights or until this Agreement shall be terminated as hereinafter
provided:
(a) A License Issue Fee of One Hundred Thousand Dollars ($100,000), which
shall be deemed earned immediately upon the execution of this
Agreement and payable within ten (10) days after such execution.
(b) License Maintenance Fees of One Hundred Thousand Dollars ($100,000)
per year, payable on each anniversary of the Effective Date of this
Agreement until the earlier of the year in which the first commercial
sale of Licensed Product or Licensed Process occurs or the termination
of the Agreement occurs.
(c) In the event LICENSEE is selling Licensed Products directly, a royalty
in an amount equal to (i) three percent of Net Revenues in any year of
Licensed Products arising from Compounds, and (ii) one and one-half
percent of Net Revenues in any year of Licensed Products arising from
Compound Analogs, provided, however, that fifty percent (50%) of any
other royalties accrued or paid by Licensee in any year to a Third
Party in connection with the manufacture or sale of Licensed Products
may be deducted from the amounts due under this Paragraph.
(d) In the event that LICENSEE grants a Sublicense, a royalty in an amount
equal to (i) twenty-five percent (25%) of Net Ancillary Product
Royalties in any year of Licensed Products arising from Compound,
subject to a minimum royalty equal to 1.5% of Net Revenue of
Sublicensee, and (ii) fifteen percent (15%) of Net Ancillary Product
Royalties in any year of Licensed Products arising from analogs of
Compound, subject to a minimum royalty equal to a 1.0% of Net Revenue
of Sublicensee, provided, however, that fifty percent (50%) of any
other royalties accrued or paid by LICENSEE or a Sublicensee in any
year to a Third Party in connection with the sale of Licensed Products
may be deducted from the amounts due under this Paragraph.
(e) A payment in an amount equal to Fifty Percent (50%) of any Sublicense
Fees received by LICENSEE from a Sublicensee of Licensed Product,
provided, however, that this provision shall be subject to maximum
aggregate payments to Princeton of $500,000, which payment with
respect to the sublicense to Merck is due and payable retroactive to
the Effective Date of this Agreement and payable within ten (10) days
of signing of this License Agreement.
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(f) Payments based on Milestone Payments received by LICENSEE from a
Sublicensee in an amount equal to
(i) 34% of cumulative Milestone Payments up to $1.5 Million;
(ii) 25% of cumulative Milestone Payments from $1.5 Million to $4.5
Million;
(iii) 20% of cumulative Milestone Payments from $4.5 Million to $8.5
Million;
(iv) 15% of cumulative Milestone Payments from $8.5 Million to $14.5
Million; and
(v) 10% of cumulative Milestone Payments greater than $14.5 Million.
4.2 No multiple royalties shall be payable to PRINCETON pursuant to the
License if the manufacture, use or sale of a Licensed Product or practice of the
Licensed Process is covered by more than one patent application or patent
contained in the Patent Rights, if such royalty or payment may be covered under
more than one of the above provisions, or if a royalty is payable in connection
with the manufacture, use, or sale of such Licensed Product under the Transcell
License Agreement, provided, however, that if a royalty would be payable to
Princeton in connection with the manufacture, use or sale of such Licensed
Product under the Transcell License Agreement, then for such Licensed Product,
PRINCETON shall be entitled to select, by notifying LICENSEE in writing prior to
the First Commercial Sale of such Licensed Product, whether to receive the
royalty rate set forth under this Agreement or the royalty rate set forth under
the Transcell License Agreement.
4.3 Royalty payments shall be paid in United States dollars in Princeton,
New Jersey, or at such other place as PRINCETON may reasonably designate
consistent with the laws and regulations controlling in any foreign country. Any
withholding taxes which LICENSEE or any Sublicensee shall be required by law to
withhold on remittance of the royalty payments shall be deducted from royalties
paid to PRINCETON. LICENSEE shall furnish PRINCETON with copies of all official
receipts for such taxes. If any currency conversion shall be required in
connection with the payment of royalties hereunder, such conversion shall be
made by using the exchange rate prevailing at a first-class foreign exchange
bank on the last business day of the calendar quarterly reporting period to
which such royalty payments relate, provided, however, that in the event a
calculation is made based on sales by Merck, the rate of exchange to be used in
computing the amount of currency equivalent in United States dollars shall be
made at the rate of exchange utilized by Merck in its worldwide accounting
system, prevailing in the fourth to the last business day of the Calendar
Quarter in which such payments relate. Such rated of exchange is that rate
quoted by Reuters Ltd. for the spot purchase of U.S. dollars at 7:15 a.m.
Eastern Standard Time on such day.
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ARTICLE V - REPORTS AND RECORDS
5.1 LICENSEE shall keep full, true and accurate books of account containing
all particulars that may be necessary for the purpose of showing the amount
payable to PRINCETON by way of royalty as aforesaid. Said books of account shall
be kept at LICENSEE's principal place of business or the principal place of
business of the appropriate division of LICENSEE to which this Agreement
relates. Said books and the supporting data shall be open at all reasonable
times, for three (3) years following the end of the calendar year to which they
pertain, to the inspection of the PRINCETON Internal Audit Division and/or an
independent certified public accountant retained by PRINCETON and/or a certified
public accountant employed by PRINCETON for the purpose of verifying LICENSEE's
royalty statement or compliance in other aspects with this Agreement.
5.2 LICENSEE, within forty-five (45) days after March 31, June 30,
September 30 and December 31 of each year, shall deliver to PRINCETON true and
accurate reports, giving such particulars of the business conducted by LICENSEE
during the preceding quarter under this Agreement as shall be pertinent to a
royalty accounting hereunder. These shall include at least the following:
(a) All Licensed Products manufactured and sold.
(b) Total amounts actually received by LICENSEE on account of its
billings for Licensed Product sold.
(c) Accounting for all the Licensed Process(es) used or sold.
(d) Deductions applicable as provided in Paragraph 1.8.
(e) Total royalties due.
(f) Names and addresses of all Sublicensees of LICENSEE.
(g) Annually, within one hundred (100) days of LICENSEE's fiscal year
end, LICENSEE's certified financial statements for the preceding
twelve (12) months including, at a minimum, a Balance Sheet and
an Operating Statement.
5.3 With each such report submitted, LICENSEE shall pay to PRINCETON the
royalties due and payable under this Agreement, provided that no payment to
PRINCETON shall be payable in the event that the remittance of royalties from
foreign countries to the accounts of LICENSEE in the United States shall be
blocked by exchange controls in foreign countries, which exchange controls are
beyond the control of LICENSE, in which case, such royalties shall be held in
escrow and paid to PRINCETON at such time as such exchange controls are no
longer blocked. If no royalties shall be due, LICENSEE shall so report.
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ARTICLE VI - PATENT PROSECUTION
6.1 PRINCETON and LICENSEE agree to cooperate fully in applying for,
obtaining, prosecuting and maintaining patents.
6.2 PRINCETON shall promptly disclose to LICENSEE, in writing, any
PRINCETON-owned or Jointly-owned Inventions disclosed to PRINCETON. PRINCETON
shall file and prosecute U.S. and foreign patent applications in its name at
LICENSEE's request and expense, using mutually agreed upon patent counsel, on
such PRINCETON-owned or Jointly-owned Inventions as may, in LICENSEE's judgment,
become appropriate during the term of this Agreement, provided, however, that
notwithstanding the foregoing, Merck shall have the rights set forth in
Paragraph 3 of the Side Agreement. Such patent applications and any patents
resulting therefrom shall be subject to the terms of this Agreement.
6.3 PRINCETON shall have the opportunity to file patent applications in its
name at its own expense for those PRINCETON-owned or Jointly-owned Inventions
made by its personnel and for which Licensee does not agree, within thirty (30)
days after notification by PRINCETON of its intent to file a patent application,
to pay for PRINCETON to file said patent applications, provided, however, that
notwithstanding the foregoing, Merck shall have the rights set forth in
Paragraph 3 of the Side Agreement. Such patent applications and any patents
resulting therefrom shall not be subject to the terms of this Agreement.
6.4 LICENSEE patent counsel may prepare, file and prosecute all U.S.
applications for any Jointly-owned Inventions, at LICENSEE's sole cost and
expense, provided, however, that PRINCETON shall have the right to review and
approve the application, and be consulted on all prosecution actions, and
foreign filing decisions. PRINCETON's right, title and interest in the
Jointly-owned Inventions disclosed or claimed in such patent applications or in
any such patents shall be subject to the terms of this Agreement.
ARTICLE VII - TERMINATION
7.1 If LICENSEE shall become bankrupt or insolvent, or shall file a
petition in bankruptcy, or if the business of LICENSEE shall be placed in the
hands of a receiver, assignee or trustee for the benefit of creditors, whether
by the voluntary act of LICENSEE or otherwise, this Agreement shall
automatically terminate, provided, however, that notwithstanding the foregoing,
Merck shall have the rights set forth in Paragraph 5 of the Side Agreement with
respect to this Agreement.
7.2 Should LICENSEE fail in its payment to PRINCETON of royalties due in
accordance with the terms of this Agreement, PRINCETON shall have the right to
serve notice upon LICENSEE by certified mail at the address designated in
Article XIV hereof, of its intention to terminate this Agreement within thirty
(30) days after receipt of said notice of termination unless LICENSEE shall pay
to PRINCETON, within the thirty (30) day period, all such royalties due and
payable. Upon the expiration of the thirty (30) day period, if LICENSEE shall
not have paid all such royalties due and payable, the rights, privileges and
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license granted hereunder shall thereupon immediately terminate, provided,
however, that notwithstanding the foregoing, Merck shall have the rights set
forth in Paragraph 6 of the Side Agreement in the event of any failure to pay or
other material breach or default by LICENSEE under this Agreement.
7.3 Upon any material breach or default of this Agreement by LICENSEE,
other than those occurrences set out in Paragraphs 7.1 and 7.2 hereinabove,
which shall always take precedence in that order over any material breach or
default referred to in this Paragraph 7.3, PRINCETON shall have the right to
terminate this Agreement and the rights, privileges and license granted
hereunder by ninety (90) days' notice by certified mail to LICENSEE, provided,
however, that notwithstanding the foregoing, Merck shall have the rights set
forth in Paragraph 6 of the Side Agreement in the event of any failure to pay or
other material breach or default by LICENSEE under this Agreement. Such
termination shall become effective unless LICENSEE shall have cured any such
breach or default prior to the expiration of the ninety (90) day period from
receipt of PRINCETON notice of termination, provided, however, that
notwithstanding the foregoing, Merck shall have the rights set forth in
Paragraph 6 of the Side Agreement in the event of any failure to pay or other
material breach or default by LICENSEE under this Agreement.
7.4 LICENSEE shall have the right to terminate this Agreement at any time
on six (6) months' notice by certified mail to PRINCETON in whole or with
respect to designated countries or designated Patent Rights, Licensed Products
or Licensed Processes.
7.5 Upon termination of this Agreement for any reason, nothing herein shall
be construed to release either party from any obligation that matured prior to
the effective date of such termination. LICENSEE and/or any Sublicensee thereof
may, however, after the effective date of such termination, sell all Licensed
Products, and complete Licensed Products in the process of manufacture at the
time of such termination and sell the same, provided that LICENSEE shall pay to
PRINCETON the royalties thereon as required by Article IV of this Agreement and
shall submit the reports required by Article V hereof on the sales of Licensed
Products.
ARTICLE VIII - ARBITRATION
8.1 Except as to issues relating to the validity, construction or effect of
any patent licensed hereunder, any and all claims, disputes or controversies
arising under, out of or in connection with this Agreement, which have not been
resolved by good faith negotiations between the parties, shall be resolved by
final and binding arbitration in Princeton, New Jersey under the rules of the
American Arbitration Association then obtaining. The arbitrators shall have no
power to add to, subtract from or modify any of the terms or conditions of this
Agreement. Any award rendered in such arbitration may be enforced by either
party in either the courts of the State of New Jersey or in the United States to
whose jurisdiction for such purposes PRINCETON and LICENSEE each hereby
irrevocably consents and submits.
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8.2 Claims, disputes or controversies concerning the validity, construction
or effect of any patent licensed hereunder shall be resolved in any court having
jurisdiction thereof.
8.3 In the event that, in any arbitration proceeding, any issue shall arise
concerning the validity, construction or effect of any patent licensed
hereunder, the arbitrators shall assume the validity of all claims as set forth
in such patent; in any event the arbitrators shall not delay the arbitration
proceeding for the purpose of obtaining or permitting either party to obtain
judicial resolution of such issue, unless an order staying such arbitration
proceeding shall be entered by a court of competent jurisdiction. Neither party
shall raise any issue concerning the validity, construction or effect of any
patent licensed hereunder in any proceeding to enforce any arbitration award
hereunder or in any proceeding otherwise arising out of any such arbitration
award.
ARTICLE IX - INFRINGEMENT
9.1 LICENSEE and PRINCETON shall promptly inform the other in writing of
any alleged infringement of which it shall have notice by a third party of any
patents within the Patent Rights and provide such other with any available
evidence of infringement.
9.2 During the term of this Agreement, LICENSEE shall have the right, but
shall not be obligated, to prosecute at its own expense any such infringements
of the Patent Rights and, in furtherance of such right, PRINCETON hereby agrees
that LICENSEE may join PRINCETON as a party plaintiff in any such suit, without
expense to PRINCETON, provided, however, that notwithstanding the foregoing,
Merck shall have the rights set forth in Paragraph 4 of the Side Agreement. The
total cost of any such infringement action commenced or defended solely by
LICENSEE shall be borne by LICENSEE, and LICENSEE shall keep any recovery or
damages for past infringements derived therefrom. No settlement, consent
judgment or other voluntary final disposition of the suit may be entered into
without the consent of PRINCETON, which consent shall not unreasonably be
withheld. LICENSEE shall indemnify PRINCETON against any order for costs that
may be made against PRINCETON in such proceedings.
9.3 If within six (6) months after having been notified of any alleged
infringement, LICENSEE shall have been unsuccessful in persuading the alleged
infringer to desist and shall not have brought and shall not be diligently
prosecuting an infringement action, or if LICENSEE shall notify PRINCETON at any
time prior thereto of its intention not to bring suit against any alleged
infringer, then, and in those events only, PRINCETON shall have the right, but
shall not be obligated, to prosecute at its own expense any infringement of the
Patent Rights, and PRINCETON may, for such purposes, join LICENSEE as party
plaintiff, provided, however, that notwithstanding the foregoing, Merck shall
have the rights set forth in Paragraph 4 of the Side Agreement.
9.4 In the event that LICENSEE shall undertake the enforcement and/or
defense of the Patent Rights by litigation, LICENSEE may withhold up to fifty
percent (50%) of the royalties otherwise thereafter due PRINCETON hereunder and
apply the same toward
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reimbursement of its expenses, including reasonable attorneys' fees, in
connection therewith. Any recovery of damages by LICENSEE for any such suit
shall be applied first in satisfaction of any unreimbursed expenses and legal
fees of LICENSEE relating to the suit, and next toward reimbursement of
PRINCETON for any royalties past due or withheld and applied pursuant to this
Article IX. The balance remaining from any such recovery shall be divided
equally between LICENSEE and PRINCETON.
9.5 In the event that a declaratory judgment action alleging invalidity or
non-infringement of any of the Patent Rights shall be brought against LICENSEE,
and LICENSEE is not diligently defending such action, PRINCETON, at its option,
shall have the right, within ninety (90) days after commencement of such action,
to intervene and take over the sole defense of the action at its own expense,
provided, however, that notwithstanding the foregoing, Merck shall have the
rights set forth in Paragraph 4 of the Side Agreement.
9.6 In any infringement suit as either party may institute to enforce the
Patent Rights pursuant to this Agreement, the other party hereto shall, at the
request and expense of the party initiating such suit, cooperate in all respects
and, to the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like.
9.7 LICENSEE, during the exclusive period of this Agreement, shall have the
sole right in accordance with the terms and conditions herein to sublicense any
alleged infringer under the Patent Rights for future infringements.
ARTICLE X - PRODUCT LIABILITY
10.1 PRINCETON by this Agreement makes no representation as to the
patentability and/or breadth of the inventions and/or discoveries involved in a
Licensed Patent. PRINCETON by this Agreement makes no representation as to
patents now held or which will be held by others in the field of the Licensed
Products for a particular purpose.
10.2 LICENSEE agrees to defend, indemnify and hold PRINCETON harmless from
and against all liability, demands, damages, expense or losses for death,
personal injury, illness or property damage arising (a) out of use by LICENSEE
of its transferees of inventions licensed or information furnished under this
Agreement, or (b) out of any use, sale or other disposition by LICENSEE or its
transferees of products made by use of such inventions or information. As used
in this clause, PRINCETON includes its Trustees, Officers, Agents, Employees and
Students and "LICENSEE" includes its Affiliates, Subsidiaries, Contractors and
Sub-Contractors.
10.3 In discharge of the above, on or prior to the date on which a clinical
trial commences with respect to a Licensed Product (the "Insurance Commencement
Date"), LICENSEE will maintain general liability insurance in the amount of at
least One Million Dollars ($1,000,000) per occurrence with a deductible of not
more than $10,000 per occurrence with commercially reasonable insurers against
damage to or destruction of property
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and injury to or death of individuals and against such other risks as PRINCETON
may reasonably request arising out of or in connection with any of the Licensed
Products. PRINCETON, and its respective officers, trustees, and employees, will
be named insureds under all such insurance. Such insurance will also provide
that PRINCETON will be given notice of any modification thereof and at least ten
(10) days prior written notice of cancellation or termination and the reason
therefor. LICENSEE will furnish PRINCETON upon request, and in any event on the
Insurance Commencement Date and on each anniversary of the Insurance
Commencement Date, written confirmation issued by the insurer or an independent
insurance agent confirming that insurance is maintained in accordance with the
above requirements.
ARTICLE XI - ASSIGNMENT
11.1 LICENSEE may assign or otherwise transfer this Agreement and the
license granted hereby and the rights acquired by it hereunder, so long as such
assignment or transfer shall be to an Affiliate (other than Transcell), or shall
be accompanied by a sale or other transfer of LICENSEE's entire business or of
that part of LICENSEE's business to which the license granted hereby relates or
as PRINCETON may otherwise consent, which consent shall not be unreasonably
withheld. LICENSEE shall give PRINCETON thirty (30) days prior notice of any
such assignment and transfer requiring PRINCETON's consent, and if PRINCETON
raises no reasonable objection to such assignment or transfer, in writing within
thirty (30) days after the giving of such notice and stating the reasons for
such objection, then PRINCETON shall be deemed to have approved such assignment
or transfer; provided, however, PRINCETON shall not be deemed to have approved
such assignment and transfer unless such assignee or transferee shall have
agreed in writing to be bound by the terms and conditions of this Agreement.
Upon such assignment or transfer and agreement by such assignee or transferee,
the term LICENSEE as used herein shall include such assignee or transferee. If
LICENSEE shall sell or otherwise transfer its entire business or that part of
its business to which the license granted hereby relates and the transferee
shall not have agreed in writing to be bound by the terms and conditions of this
Agreement, or new terms and conditions shall not have been agreed upon within
sixty (60) days of such sale or transfer, PRINCETON shall have the right to
terminate this Agreement.
ARTICLE XII - NON-USE OF NAMES
12.1 LICENSEE shall not use the name PRINCETON nor any adaptation thereof
in any advertising, promotional or sales literature without prior written
consent obtained from PRINCETON, in each case, except that LICENSEE may state
that it is licensed by PRINCETON under one or more of the patents and/or
applications comprising the Patent Rights.
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ARTICLE XIII - EXPORT CONTROLS
13.1 It is understood that PRINCETON is subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities (including the Arms Export Control
Act, as amended, and the Export Administration Act of 1979), and that its
obligations hereunder are contingent on compliance with applicable United States
export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
data or commodities to certain foreign countries without prior approval of such
agency. PRINCETON neither represents that a license shall not be required nor
that, if required, it shall be issued.
ARTICLE XIV - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
14.1 Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on the date of mailing if sent to such party
by certified first class mail, postage prepaid, address to it at its address
below or as it shall designate by written notice given to the other party:
In the case of PRINCETON UNIVERSITY
Office of Technology and Trademark Licensing
Princeton University
5 New South Building, P.O. Box 36
Princeton, New Jersey 08544
Attention: Jean A. Mahoney
In the case of LICENSEE:
Interneuron Pharmaceuticals, Inc.
One Ledgemont Center
99 Hayden Avenue
Lexington MA 02173
Attention: Glenn L. Cooper, M.D.,
President and Chief Executive Officer
ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the State of New Jersey, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted.
15.2 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not
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be subject to any change or modification except by the execution of a written
instrument subscribed to by the parties hereto.
15.3 The provisions of this Agreement are severable, and in the event that
any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
15.4 LICENSEE agrees to mark the Licensed Products sold in the United
States with all applicable United States patent numbers. All Licensed Products
shipped to or sold in other countries shall be marked in such a manner as to
conform with the patent laws and practice of the country of manufacture or sale.
15.5 The failure of either party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this License Agreement the day and year first set forth
below.
Attest: The Trustees of Princeton University
_____________________________ By:________________________________________
Title:_______________________ Title:_____________________________________
Date:______________________________________
Attest: LICENSEE: Interneuron Pharmaceuticals, Inc.
_____________________________ By:________________________________________
Title:_______________________ Title:_____________________________________
Date:______________________________________
15
L E A S E A G R E E M E N T
BY AND BETWEEN:
CEDAR BROOK CORPORATE CENTER, L.P.
"Landlord"
- and -
TRANSCELL TECHNOLOGIES, INC.
"Tenant"
PREMISES: 8 Cedar Brook Drive
Cranbury, New Jersey 08512
DATED: September 19, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
1. LEASED PREMISES...........................................................1
2. TERM OF LEASE.............................................................3
3. CONSTRUCTION..............................................................3
4. RENT.....................................................................11
5. PARKING AND USE OF EXTERIOR AREA.........................................13
6. USE......................................................................13
7. REPAIRS AND MAINTENANCE..................................................13
8. COMMON AREA EXPENSES, TAXES AND INSURANCE................................16
9. SIGNS....................................................................21
10. ASSIGNMENT AND SUBLETTING................................................22
11. FIRE AND CASUALTY........................................................22
12. COMPLIANCE WITH LAWS, RULES AND REGULATIONS..............................24
13. INSPECTION BY LANDLORD...................................................28
14. DEFAULT BY TENANT........................................................28
15. LIABILITY OF TENANT FOR DEFICIENCY.......................................31
16. NOTICES..................................................................31
17. NON-WAIVER...............................................................32
18. RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS.....................32
19. NON-LIABILITY OF LANDLORD................................................32
20. RESERVATION OF EASEMENT..................................................33
21. STATEMENT OF ACCEPTANCE..................................................33
22. FORCE MAJEURE............................................................33
23. STATEMENTS BY LANDLORD AND TENANT........................................33
24. CONDEMNATION.............................................................34
25. LANDLORD'S REMEDIES......................................................34
26. QUIET ENJOYMENT..........................................................35
27. SURRENDER OF PREMISES....................................................35
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28. HOLDOVER.................................................................36
29. INDEMNITY................................................................36
30. LEASE CONSTRUCTION.......................................................37
31. BIND AND INURE CLAUSE....................................................38
32. INCLUSIONS...............................................................38
33. DEFINITION OF TERM "LANDLORD"............................................38
34. COVENANTS OF FURTHER ASSURANCES..........................................38
35. COVENANT AGAINST LIENS...................................................39
36. SUBORDINATION............................................................39
37. EXCULPATION OF LANDLORD..................................................39
38. SECURITY.................................................................40
39. BROKERAGE................................................................40
40. LATE CHARGES.............................................................40
41. OPTION TO RENEW..........................................................40
42. RIGHT TO LEASE ADDITIONAL SPACE..........................................42
43. MEMORANDUM OF LEASE......................................................43
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AGREEMENT, made September 19, 1996, between CEDAR BROOK CORPORATE CENTER,
L.P., 1000 Eastpark Blvd., Cranbury, New Jersey 08512, "Landlord"; and TRANSCELL
TECHNOLOGIES, INC., 2000 Cornwall Rd., Monmouth Junction, NJ 08852, "Tenant".
W I T N E S S E T H :
WHEREAS, the Landlord intends to lease to the Tenant a portion of 8 Cedar
Brook Drive, Cranbury, New Jersey 08512, constituting a portion of the
office/industrial park known as CEDAR BROOK CORPORATE CENTER ("Office Park");
and
WHEREAS, the parties hereto wish to mutually define their rights, duties
and obligations in connection with the said lease;
NOW THEREFORE, in consideration of the promises set forth herein, the
Landlord leases unto the Tenant and the Tenant rents from the Landlord the
Leased Premises described in Paragraph 1, and the Landlord and Tenant do hereby
mutually covenant and agree as follows:
1. LEASED PREMISES
1.1 The leased premises shall consist of approximately 32,500 square feet,
measured from outside of glass to center line of common wall, but no less than
30,000 square feet; consisting of approximately 29,300 square feet of
laboratory/office space, plus 3,200 square feet of executive offices, all as
identified on the plan attached hereto and made a part hereof as Schedule "A",
("Leased Premises") together with all improvements to be constructed thereon by
the Landlord for the use of the Tenant, and all improvements, tenements,
hereditaments, fixtures and rights and privileges appurtenant thereto, and any
and all fixtures and equipment which are to be installed in said building by the
Landlord for the use of the Tenant in its occupancy of the Leased Premises and
any expansion phases. Tenant shall also have the right to use all common areas
of the Office Park in a similar manner as other Office Park tenants.
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1.2 Tenant shall have an option to expand the Leased Premises by renting
all, or a portion of the adjacent areas identified on Schedule "A" as Phases 2A
and 2B, in no less than 4,800 square foot increments (except for the final
increment which may be less), by providing Landlord with written notice within 2
years of the Commencement Date, as defined hereafter, and paying Landlord the
Reservation Fee set forth in Paragraph 4.1. If Tenant, at its option, leases all
or a portion of Phase 2, Tenant shall continue to pay the Reservation Fee for
any area of Phase 2 that it does not lease, for the remainder of the two year
period. If Tenant leases any of Phase 2B, then Tenant must either exercise its
option on Phase 2A no later than the end of the two year period or be obligated
to pay full rent for Phase 2A after the end of the 2 year period; provided,
however, if Tenant does not then construct improvements, it shall pay a reduced
rent for said expansion phase of $9.00 for an additional 12 months. Tenant shall
still be entitled to the $40.00 allowance referred to in Paragraph 3.1(d) when
and if it decides to construct improvements and shall pay rent at the rental
rate as shown in Paragraph 4.2 for Months 19-24 plus the sum of $0.55 per square
foot. If Tenant rents only a portion of Phase 2 during the 2 year option period,
the remaining portion of Phase 2 shall continue to be subject to the option for
the remaining balance of the 2 year period. In addition, if Tenant leases any
portion of Phase 2, it may elect to reserve a corresponding amount of space in
Phase 3, contiguous to Phase 2, and pay the $5/sq. ft. Reservation Fee as set
forth in Paragraph 4.2 for that space.
1.3 In the event Tenant leases Phase 2, it shall have a second option to
lease any remaining portion of Phase 3 not then under reservation, by notifying
Landlord and paying the Reservation Fee for such remaining portion.
1.4 In the event Tenant leases Phases 2 and 3, it shall have a further
option to lease Phase 4, which option shall be exercisable at any time during
the term of this Lease. Tenant shall provide Landlord with written notice
exercising its option and Landlord shall then have a period of up to 1 year
after notice to deliver said space to Tenant. If said space is leased to another
tenant, then Landlord shall pay the cost to relocate the other tenant. The
Tenant shall lease Phase 4 in its "as is", broom
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clean condition, and at the then market rent for comparable space in the
vicinity; however, if the parties cannot agree, then standard appraisal methods
shall be used.
1.5 To the extent that Tenant leases any of the expansion Phases, that
space shall be included within the definition of Leased Premises and be
coterminous with the term thereunder. Any construction work performed and/or
machinery, fixtures and equipment installed in the expansion Phases by Landlord
shall be included within the definition of Tenant Improvements as hereinafter
defined.
2. TERM OF LEASE
The term of the Lease shall be 10 years, to commence on the "Commencement
Date" (as that term is hereinafter defined) and to end on the last day of the
month in which occurs the 10th anniversary of the Commencement Date. The term
"Commencement Date" shall mean the later of (x) April 1, 1997 or (y) the first
day of the next succeeding month following the occurrence of all of the
following conditions:
(a) Landlord shall have achieved Substantial Completion (as that term
is defined in Section 3.2 hereof);
(b) All parking and Exterior areas of the Building shall be usable by
Tenant;
(c) All utilities to be furnished by Landlord shall be available to
the Leased Premises; and
(d) Cranbury Township shall have issued a letter stating that Tenant's
use is permitted in the zone.
3. CONSTRUCTION
3.1 (a) Landlord shall complete the building shell in a competent and
workmanlike manner and in accordance with plans being prepared by The Kellner
Group, Architects and CEC, Inc., Structural Engineers ("Base Building Plans").
Landlord shall complete the construction of the Leased Premises in a competent
and workmanlike manner and in accordance with plans and specifications ("Plans")
to be prepared by Ewing Cole Cherry Brott, which Plans shall be in substantial
accordance with the specifications set forth in Schedule "B" and the Plans
attached as Schedule "C" which Plans may be amended from time to time by the
mutual agreement of both
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<PAGE>
parties. Landlord shall use its best efforts to achieve Substantial Completion,
as hereinafter defined, on or before May 1, 1997. Unless specifically revised by
both parties, Schedule "B" assumes the size of the laboratory/office space
portion of the Leased Premises to be 30,000 square feet and has been developed
based on the type and quality of work set forth in the Jacobs Wyper plans and
specifications for Phase 1 of 3000 Eastpark Blvd., Cranbury, NJ. The
improvements, machinery, fixtures and equipment to be constructed and installed
by Landlord, pursuant to this Paragraph 3, are hereafter referred to as the
"Tenant Improvements". In the event the number of square feet leased by Tenant
increases or decreases then the quantity of materials shall be adjusted. Said
Plans will be designed for a minimum area of 47,000 square feet of the building
so that the parties will know where Tenant's expansion is intended to occur in
the event it exercises its option to lease Phases 2A and 2B. Approximately
32,500 square feet will be designed completely, with the balance designed
schematically, including mechanical and electrical support rooms. Tenant shall
deliver to Landlord a complete set of Plans with which Landlord can obtain a
building permit by the later of 30 days after the completion of the erection of
the structural steel, or November 1, 1996. In the event that Tenant does not
meet these dates, Tenant shall be responsible to Landlord from that date for
monthly rent of $21,667 until Plans are delivered, prorated on a per diem basis.
The monthly rent shall accrue, but not be payable, provided the Plans are
delivered prior to February 1, 1997, and shall be paid by Tenant in a lump sum
on the Commencement Date. If the Plans are not delivered by February 1, 1997,
then Tenant shall, on that date, pay to Landlord all of the monthly rent that
has then accrued. Thereafter, Tenant shall pay the monthly rent of $21,667, in
arrears prorated as provided above, until it delivers the Plans to Landlord.
Landlord has prepared the Base Building Plans and has provided Tenant with
the said Plans dated August 28, 1996 prepared by The Keller Group and the
preliminary/final site plan drawings dated June, 1996 prepared by Kupper
Associates and a list of building specifications as set forth in Schedule "D".
Landlord shall be responsible for the construction at its sole cost and expense
of the base building in conformance to the Base Building Plans. Landlord will
use reasonable efforts to keep
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<PAGE>
Tenant advised of the progress of the building construction, and the approval of
same and of the Plans by the local governmental authorities, and will provide
Tenant with benchmark drawings and design parameters for the building. Tenant
shall notify Landlord of any changes it desires to make to the Base Building
Plans and shall bear all cost of such changes. In the event any change requested
by Tenant causes a delay in time, such delay shall extend Landlord's time to
perform hereunder.
Tenant shall contribute toward the cost of construction of the Phase I
laboratory/office space, as defined in Schedule "A", the amount of $800,000. The
$800,000 shall be paid by Tenant upon Substantial Completion (as defined in
Paragraph 3.2) less 5% which shall be withheld until completion of the punch
items. Tenant shall also provide Landlord with an unconditional letter of credit
for $800,000 substantially in accordance with the form attached as Schedule "E"
within 30 days of execution of this Lease which will be promptly returned to
Tenant if it pays said sums as contemplated herein. Subject to Paragraph 3.1(b),
any cost over $800,000 shall be paid by Landlord. The $800,000 shall be adjusted
up or down based on the ratio of actual square footage of laboratory/office
space, excluding executive offices as referred to in Paragraph 1.1., leased to
the 30,000 square foot design standard for laboratory/office space. At Tenant's
request, Landlord will provide Tenant with documentation to support Tenant's
$800,000 contribution to the cost of Tenant Improvements.
In addition, Landlord shall provide Tenant with an allowance for Tenant
Improvements for the executive offices of $50 per square foot, i.e., $50/sq. ft.
x 3200 sq. ft. = $160,000. Upon receipt of Plans from Tenant showing the
complete design of the executive offices, Landlord will provide, in writing,
within 10 business days, an estimated cost to construct the executive offices.
If such cost exceeds $50/sq. ft., then Tenant shall have the option, within 30
days after receipt of Landlord's estimate, to have its own professional
estimator or construction consultant confirm the per square foot price. If the
price is confirmed, then Tenant shall, still within said 30 day period, revise
the Plans to reduce the cost or advise Landlord to commence construction. If
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<PAGE>
Tenant's estimator or consultant feels that the per square foot price is too
high, then the parties shall negotiate in good faith to attempt to achieve a
cost of $50/sq. ft.
In determining the construction cost set forth above, for all authorized
deviations from Schedule B and costs in excess of the $50/sq. ft. allowance for
the executive offices and change orders referred to in Paragraph 3.1(c), the
actual cost charged by subcontractors, material suppliers and/or governmental
authorities shall be marked up for general conditions, overhead and profit as
set forth below:
Billing Cost = Actual Cost x 1.02 x 1.08 x 1.05
After the Plans are delivered by Tenant, any changes shall be governed by
Paragraph 3.1(c).
(b) In the event Tenant or its architect adds to the scope, quantity or
quality of construction described in Schedule B, such additional cost up to a
maximum of $500,000, shall be paid by Tenant, through an increase in rent.
Tenant shall elect the method of paying the increase prior to the Commencement
Date of this Lease by choosing one of the following options:
(i) to fully amortize the increased cost over the first 5 years of
the lease term, beginning from the Commencement Date, at the
interest rate on the date of election of either 500 basis points
over the 5 year Treasury bill rate or the Wall Street Journal
published prime rate plus 3%; or
(ii) to amortize the increased cost over the 10 year lease term,
beginning from the Commencement Date, at the interest rate on the
date of election of either 500 basis points over the 5 year
Treasury bill rate or the Wall Street Journal published prime
rate plus 3%, with a balloon payment of the total unamortized
amount due at the end of the fifth lease year;
If such additional cost exceeds $500,000, Tenant shall pay the amount in excess
of $500,000 within 10 days of the date billed by Landlord.
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<PAGE>
(c) Any change orders that do not delay the Completion Date and that
increase or decrease the cost of the Tenant Improvements and that are desired by
Tenant after the Plans are delivered shall not be effective unless approved, in
writing, by both parties, and such approval by Landlord shall not be
unreasonably withheld or delayed and such cost shall be borne by Tenant and paid
for as set forth in Subparagraph 3.1(b);
(d) In the event Tenant leases any of the expansion Phases, Landlord shall
be responsible for constructing the Tenant Improvements to said space provided
that Landlord has performed in substantial accordance with the construction
provisions set forth in this Lease, and the expansion Phases are not
specialized, scientific space not generally constructed by general contractors
experienced in laboratory construction. Tenant shall deliver the construction
plans for said space and Landlord agrees to develop a schedule and cost budget
for the expansion Phase and deliver same to Tenant within 15 business days after
receipt of the construction plans. Tenant, at its option, may accept such
schedule and budget or may use the services of a professional estimator or
construction consultant to review the schedule and cost budget with Landlord. If
Landlord and Tenant cannot agree, Landlord will be given 3 business days after
receipt of written notice from Tenant of the disagreement to match the schedule
and cost budget provided by Tenant's consultant. If Landlord chooses not to
accept the schedule and cost budget, Tenant shall competitively bid the project
using general contractors that have experience in the type of project being
undertaken. After such bids are received, Tenant shall provide them to Landlord
and Landlord shall have 5 business days after receipt to match the bid chosen by
Tenant. If Landlord elects to match said bid, it shall perform the construction
in accordance with the terms of the bid including reasonable timing and
guarantee terms. If Landlord is to perform said construction, the Reservation
Fee shall terminate in accordance with the terms of Paragraph 4.2 and rent shall
commence upon Substantial Completion in accordance with the terms of Paragraph
3.2. If Landlord does not match such bid, Tenant shall be free to accept the
outside bid. Landlord shall also have the right to approve the outside
contractor, which approval shall not be unreasonably withheld or delayed,
inspect the
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<PAGE>
work as it progresses and receive a fee of 2.5% of the total job cost. Rent
shall commence for said Phase, or part thereof, on the earlier of 6 months after
Tenant elects to retain the outside contractor, or occupancy, at which time the
Reservation Fee shall terminate.
Regardless of who performs the construction on the expansion Phases,
Landlord shall provide Tenant with an allowance for improvements of $40/sq. ft.
The actual cost of construction shall be paid by the Landlord and Tenant as
incurred relative to the amount by which the anticipated construction cost
exceeds $40.00 until Tenant's allowance of $40.00 per square foot has been fully
utilized. For example, if the anticipated construction cost is $120/sq. ft., the
construction costs shall be paid 1/3 by Landlord and 2/3 by Tenant on a monthly
basis until the Tenant allowance has been fully utilized. Thereafter, Tenant
shall be responsible for the full payment of all construction costs. Tenant's
Architect shall certify to Landlord that the construction for which Tenant seeks
payment has been completed. If actual costs are less than the anticipated
construction costs, then at the conclusion of construction, Landlord shall pay
Tenant any unpaid balance of the $40.00 allowance. If Landlord does not pay all
or part of the $40.00 allowance, within 60 days of the date Landlord receives an
invoice, Tenant may offset said amount against rent. Said costs shall include
actual fees for consultants, contractors, subcontractors, material suppliers and
governmental authorities, and the installed cost and related construction costs
of all of the tenant improvements shown on the expansion plans, including but
not limited to such items as trash removal related to tenant improvements.
If Landlord is to construct the expansion Phases, representatives of each
party shall inspect the site no less frequently than every 2 weeks and verify
and agree that work has been completed in a manner acceptable to both Landlord
and Tenant. Landlord will then prepare an invoice for work completed (less
Landlord's proportionate share), and Tenant shall pay the same within 10
business days of receipt. Landlord shall be responsible for paying $40/sq. ft.
for Tenant Improvements to the expansion Phases and Tenant shall bear the
balance of the cost. For example, if the cost is determined to be $137/sq. ft.,
Landlord shall pay $40 and Tenant shall pay $97. In
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the event the payment is not received by Landlord within the specified time,
interest shall accrue on the unpaid balance at an interest rate of 1% per month.
(e) During construction of the Leased Premises or any expansion Phases,
Tenant shall have access in order to install its own equipment provided:
(i) it delivers to Landlord a certificate of insurance for the
coverage set forth in Paragraph 8.5; and
(ii) it shall coordinate its work with the work being performed by
Landlord so that there shall be no unreasonable interference with, delay or
interruption of, Landlord's work.
(f) All construction of expansion Phases by Landlord shall be done in a
competent and workmanlike manner, in accordance with Tenant's plans and
specifications and the cost and timing schedule agreed to by Landlord. At
Tenant's request, Landlord will provide Tenant with documentation to support
Tenant's $800,000 contribution to the cost of Tenant Improvements.
3.2 The Leased Premises and any expansion Phases, if constructed by
Landlord, shall be considered substantially completed, and rent payments shall
commence, upon the issuance of a Temporary or Permanent Certificate of
Occupancy, or a Temporary or Permanent Certificate of Acceptance ("CO/CA")
provided that any Temporary CO/CA is not revoked or does not limit Tenant's use
and is promptly followed by a Permanent CO/CA; and when the machinery, equipment
and fixtures to be installed by Landlord are operable so that Tenant can conduct
its customary business activities ("Substantial Completion") but for the initial
Leased Premises, not before April 1, 1997. It is agreed that for the purpose of
this Lease, wherever and whenever the term Substantial Completion is used, it
shall not include items of maintenance, service or guarantee. Within 30 days
after occupancy, Tenant will provide Landlord with a punch list of items to be
corrected which will be completed by Landlord within 60 days of receipt of the
punch list. Tenant and Landlord shall execute a confirmation of Lease
Commencement Date in the form of Schedule "F". If the
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Commencement Date occurs on a day other than the first day of a month, rent from
such day until the first day of the following month shall be prorated (at a rate
of 1/30th of the monthly rent per day). During said period of partial monthly
occupancy, all other terms and conditions of this Lease shall apply.
3.3 andlord acknowledges and agrees that Tenant will suffer financial loss,
the exact extent of which is difficult to determine, if the Leased Premises are
not Substantially Completed by May 1, 1997 subject to extension for Tenant's
failure to deliver Plans in a timely manner as set forth in Paragraph 3.1(a) and
Paragraph 22, Force Majeure. In connection with the foregoing, if the Tenant
Improvements are not Substantially Completed by June 1, 1997, Landlord shall be
liable for and shall promptly pay to Tenant at the end of the month, as
Stipulated, Fixed, Agreed Upon and Liquidated Damages (and not as a penalty)
$20,000. If the Leased Premises are not Substantially Completed on or before
July 1, 1997, Landlord shall promptly pay to Tenant, on July 3, 1997 and at the
end of each month thereafter, an additional $30,000 for each month or prorated
portion thereof that the Tenant Improvements are not Substantially Complete.
Said monthly sum of $30,000 shall continue to be paid by Landlord until October
1, 1997. After November 15, 1997, Tenant shall have the right to terminate this
Lease if Substantial Completion has not been achieved. Upon termination,
Landlord shall promptly return to the Tenant, the letter of credit referred to
in Paragraph 3.1(a).
3.4 The Landlord shall have the right to substitute for the materials and
equipment required by the Plans, materials and equipment of equal quality and
standard, provided said substitutions are requested in writing and conform with
applicable building codes and Tenant or its designee has consented in writing to
the substitution, which consent shall not be unreasonably withheld or delayed.
If Tenant does not reply to Landlord within 3 business days, it shall be
determined to have approved the change.
3.5 With regard to the initial Leased Premises, Landlord shall, within 10
days of date Tenant requests, waive, in writing, all rights or liens on Tenant's
equipment, such as analytical and synthesis instruments, portable cold rooms,
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refrigerators, freezers, items mounted on bench tops and any equipment which is
bolted to the structure or walls for added stability, which Tenant has leased.
With regard to the expansion Phases, Landlord agrees to, within 10 days of date
Tenant requests, waive, in writing, all rights or liens on Tenant's equipment or
trade fixtures such as fume hoods, case work, refrigerators, freezers, biosafety
cabinets, analytical and synthesis instruments, items mounted on bench tops and
any equipment which is bolted to the structure or walls for added stability
which Tenant has leased. The waiver shall not apply to any building improvements
made by, or on behalf of Tenant, such as permanently installed cold rooms, HVAC
equipment and ducts, plumbing, electrical or units related thereto.
4. RENT
4.1 The Original Base Rent for the Leased Premises shall be calculated
based on the following annual rates per square foot:
================================================================================
Years Laboratory/Office Executive Office Phase 2 (if not occupied)
1-5 27.30 16.75 5.00* for 2 years only
6-10 28.00 18.43 -------
================================================================================
*This sum shall include common area maintenance and real estate taxes.
In the event Tenant occupies the 32,500 square feet contemplated at the
execution of this Lease, the rent on the Commencement Date shall be:
29,300 sq. ft. laboratory/office $799,890
3,200 sq. ft. executive office 53,600
14,510 sq. ft. Phase 2 (Reservation Fee) 72,550
--------
$926,040
payable in equal monthly installments in the sum of $77,170. In the event the
actual space occupied at the Commencement Date varies from 32,500 square feet,
the rent shall be adjusted based on the rental rates per square foot set forth
above.
4.2 Unless a third party performs the construction, the $5/sq. ft. rent
("Reservation Fee") for Phase 2, or part thereof, and Phase 3, or part thereof,
if
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applicable pursuant to Paragraph 1.2, shall continue until (i) 30 days after
Tenant gives written notice that it is cancelling its option to lease such
space; (ii) the receipt by Landlord from Tenant of notice that it has chosen
Landlord to perform the construction and permittable construction documents for
the Phase to be constructed; or (iii) the expiration of the two year period.
However, if Tenant stops paying the Reservation Fee, it shall still have the
Right of First Refusal set forth in Paragraph 42 for Phase 2, or part thereof,
for an additional number of months equal to the number of months that it had
paid the Reservation Fee. Except as provided in Paragraph 42.4, in the event
Tenant leases any or all of Phase 2, the annual rent per square foot shall be as
set forth in the table below, pro rated for a partial month, and such rent shall
be added to the Original Base Rent.
<TABLE>
<CAPTION>
Dollar Amount/Sq. Ft.
Number of Months from Commencement Date to Occupancy of
Phase 2
Lease Year Months 1-6 Months 7-12 Months 13-18 Months 19-24
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 - 5 $15.22 $15.47 $15.74 $16.06
---------------------------------------------------------------------------
6 - 10 $16.74 $17.02 $17.31 $17.67
---------------------------------------------------------------------------
11- 15 (option yrs.) $16.74 $16.74 $16.74 $16.74
---------------------------------------------------------------------------
16 - 20 (option yrs.) $18.41 $18.41 $18.41 $18.41
</TABLE>
Except as provided in Paragraph 42.4, the rental rate for Phase 3, or part
thereof, shall be as set forth above for Phase 2, Months 19-24, increased by 2%
annually until the commencement date of Phase 3, or part thereof. The $40/sq.
ft. tenant allowance shall also be increased annually by 2%.
4.3 Rental payments shall be made promptly in advance on the first day of
each and every month during the term of the Lease without demand and without
off-set or deduction, except as otherwise set forth herein or if Tenant obtains
a money judgment against Landlord, together with such additional rent and other
charges required to be paid by Tenant as are hereinafter set forth, all of which
charges shall be considered additional rent. Tenant shall pay as additional
rent, the amounts required in Paragraph 8. If any amount due to Tenant pursuant
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to Paragraph 3.3 is not paid within 30 days of the date due, Tenant shall have
the right to set off said sum against any rent due hereunder.
5. PARKING AND USE OF EXTERIOR AREA
The Tenant shall have the right to use the parking spaces for their
employees and visitors on a non-exclusive basis in common with other tenants of
the building. Landlord will provide 4 visitor and 2 reserved signs for Tenant to
use, but shall not monitor parking in the spaces. The Landlord and Tenant
mutually agree that they will not block, hinder or otherwise obstruct the access
driveways and parking areas so as to impede the free flow of vehicular traffic
on the property. If Tenant leases the expansion Phases, additional visitor and
reserved signs will be provided in reasonable proportion to the additional space
leased. In connection with the use of the loading platforms, if any, Tenant
agrees that it will not use the same so as to unreasonably interfere with the
use of the access driveways and parking areas. Tenant shall not store trailers
or other vehicles on any portion of the access driveways or parking areas, and
may not utilize any portion of the land outside of the Leased Premises for any
purpose unless consented to in advance by Landlord.
6. USE
The Tenant covenants and agrees to use and occupy the Leased Premises for
office, general laboratory, manufacturing, marketing, pharmaceutical and
bio-technical research and development, or any combination of the foregoing,
which uses are expressly subject to all applicable zoning ordinances, rules and
regulations of any governmental instrumentalities, boards or bureaus having
jurisdiction thereof. Prior to Substantial Completion of Leased Premises,
Landlord will obtain and deliver to Tenant a letter from the Township that the
Tenant's initial use of the building is permitted under the Township ordinances.
Landlord represents that there are no recorded documents that would prevent
Tenant's contemplated use of the Leased Premises.
7. REPAIRS AND MAINTENANCE
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7.1 (a) Subject to Paragraph 7.1(b), Tenant shall generally maintain and
repair the Leased Premises in a good and workmanlike manner, and shall, at the
expiration of the term, deliver the Leased Premises in good order and condition,
damages by fire or casualty, whether or not Tenant has been negligent, the
elements or other causes outside the control of Tenant and ordinary wear and
tear excepted. Tenant covenants and agrees that, subject to Paragraph 8.6
hereof, it shall not cause or permit any waste, damage or disfigurement to the
Leased Premises, or permit the load factor on the slab on grade to exceed 150
p.s.i. The Tenant shall make all repairs to the floor surface, the electrical
and plumbing systems located within the Leased Premises, both above and below
the floor, including all ballasts and fluorescent fixtures and HVAC system,
unless the repair is the result of the negligence of Landlord, its agents,
contractors, employees, tenants or invitees.
(b) Landlord shall assign to Tenant all manufacturer's warranties for
Tenant Improvements and Tenant agrees to rely on said warranties in the event of
any problem with such covered items. Notwithstanding the foregoing, in the event
any Tenant Improvements installed or constructed by Landlord are not covered by
a warranty or the party providing the warranty does not adequately respond, then
Landlord shall guarantee the proper operation and performance of those Tenant
Improvements for a period of one year after Substantial Completion of the
applicable work, except for items of normal maintenance and provided that the
problem was not caused by Tenant's negligence, lack of maintenance or incorrect
maintenance. For the first 60 days after Substantial Completion, the Landlord
will perform all routine maintenance on the HVAC System. Landlord shall be
responsible for good and workmanlike repairs and replacements necessary to the
roof, foundation, exterior and load-bearing walls and other structural elements,
and electric, plumbing and other building systems to the point where they enter
the Leased Premises, unless, and to the extent the repair is necessitated by the
negligence of Tenant or its agents,
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<PAGE>
and the cost thereof is not covered by Landlord's insurance, or the insurance
Landlord is required to carry under this Lease, (without taking into account any
deductible) whichever is greater. Repairs and replacements shall be made within
a reasonable time after Landlord receives notice or has actual knowledge of the
need for such repair or replacement.
7.2 The Tenant shall, at its own cost and expense, pay all utility meter
and service charges for utilities used by Tenant in the Leased Premises,
including gas and electric servicing its space. Landlord shall have the option
to install, at its own cost, a separate water meter in order to monitor Tenant's
water usage. The Tenant agrees to maintain all leased areas at a minimum
temperature of 45 degrees F, excluding cold rooms or other rooms designated for
a lower temperature, to prevent the freezing of domestic water and sprinkler
pipes provided Tenant shall not be liable if gas or electrical service to the
Building has been interrupted for a reason not caused by Tenant. Tenant shall
not store any garbage or recyclables outside the Leased Premises, and shall
deliver its garbage and recyclables to the central receiving area on the lot.
7.3 Landlord shall provide the following during the term of this Lease:
(a) Continually cooperate with Public Service Electric and Gas to have
Public Service Electric and Gas provide gas and electrical service to the
point where it enters the Leased Premises for Tenant's permitted uses, as
specified in the Plans approved by Public Service Electric & Gas;
(b) Extermination and pest control when necessary;
(c) 24-hour access to the Leased Premises;
(d) Water facilities to the point where they enter the Leased Premises
for lavatory, drinking and cleaning purposes; and
(e) Maintenance of the common areas of the Office Park, in a manner
similar to other office parks in the area, with the cost to be passed on to
Tenant as set forth in Paragraph 8.
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7.4 Landlord does not warrant that any services Landlord or any public
utilities supply will not be interrupted. Services may be interrupted because of
accidents, repairs, alterations, improvements or any other reason beyond the
reasonable control of Landlord. Notwithstanding the foregoing, if any essential
services (such as access, electricity or water) supplied to the Leased Premises
are interrupted, or if Landlord fails to make any repairs or replacements it is
required under this Lease to make and that are necessary to enable Tenant and
its employees, invitees and agents to use the Leased Premises without material
interference, then Tenant shall be entitled to an abatement of rent and
additional rent. The abatement shall begin on the seventh consecutive business
day of the interruption or interference, or when Tenant stops using the Leased
Premises because of the interruption or interference, whichever is later. The
abatement shall end when the services are restored or the repairs or
replacements are made or installed. Tenant shall have the option to cancel this
Lease without penalty if the interruption or failure to repair or replace
unreasonably interferes with Tenant's use of or access to the Leased Premises
for at least thirty (30) consecutive days, and Landlord is not exercising its
best efforts to restore the services or make the repair or replacement.
8. COMMON AREA EXPENSES, TAXES AND INSURANCE
8.1 The Tenant shall pay to the Landlord, monthly, as additional rental
during the first lease year, Common Area Expenses at the annual rate of
$1.50/sq. ft. plus property taxes as provided in Paragraph 8.2 and a management
fee of 3% of $16.75/sq. ft. times the square footage of the Leased Premises.
Common Area Expenses shall consist of:
(a) The reasonable costs incurred by the Landlord for the operation,
maintenance or repair of the following:
(i) lawns and shrubbery;
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<PAGE>
(ii) water and standby sprinkler charges including a charge for
sprinkler and electrical room which is at a rent of $6.00
sq. ft.;
(iii) exterior lighting;
(iv) exterior sewer lines;
(v) exterior utility lines;
(vi) repair and maintenance of any signs serving the Office
Park;
(vii) snow removal which Landlord agrees to commence within 12
hours of the end of the storm;
(viii) garbage disposal and recycling;
(ix) general ground maintenance;
(x) parking lot, driveways and walkways;
(xi) maintenance contract for the roof and building site;
(xii) pest control;
(xiii) central station monitoring;
(xiv) the annual insurance premiums charged to the Landlord for
insurance coverage set forth in Paragraph 8.5(b); and
(xv) other ordinary maintenance expenses normally incurred by a
Landlord in comparable office parks, upon prior, if
possible, notice to Tenant.
(b) The following items shall be excluded from common area maintenance
charges:
(i) Cost of decorating, redecorating or special cleaning or
other services not provided on a regular basis to the
tenants of the building;
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(ii) Wages, salaries, fees and fringe benefits paid to
administrative or executive personnel or officers or
partners of Landlord, unless employed at competitive
rates as independent contractors at the building or
Office Park;
(iii) All cost relating to activities for the solicitation,
negotiation, execution and enforcement of leases of
space in the Office Park;
(iv) Cost of any repair or other work made by Landlord
because of the total or partial destruction of the
building or the condemnation of a portion of the
building;
(v) Any insurance premium for which Landlord is to be
reimbursed by Tenant, pursuant to this Lease, or by any
other tenant of the building.
(vi) Depreciation, amortization, interest or rents paid or
incurred by Landlord;
(vii) Any real estate taxes;
(viii) Collection costs for bad debt expenses not related to
Tenant;
(ix) Cost of tenant improvements;
(x) Legal, accounting, bank or other fees incurred in
connection with any equity or debt financing or sale of
the building or Office Park;
(xi) Costs of specialized services or other items provided to
other tenants but not provided to tenants generally;
(xii) Capital expenditures as defined according to GAAP, or
the cost of rentals and related expenses
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incurred in leasing items ordinarily considered to be of
a capital nature;
(xiii) Cost to comply with ADA related to the interior of the
individual buildings, but not exterior doors or the cost
of improvements required by ADA to the Office Park
amortized over their useful life;
(xiv) Fines or costs to cure violations of law or ordinances
in the common areas;
(xv) Electric and water for non-public areas;
(c) The $1.50/sq. ft. for Common Area Expenses shall be increased 2%
for each year of the Lease Term on January 1st each year. At the end of
each 5 years of the Lease Term, the per square foot charge shall be
adjusted for the next 5 year period to reflect the actual increase in the
CPI, as defined hereafter, over the prior 5 year period. The parties also
agree to adjust any individual expense item in Paragraph 8.1(a) which has
an unusual cost or usage, or an unusual increase or decrease during any
year.
8.2 The Tenant shall pay its proportionate share of real estate and
personal property taxes assessed against the land, building shell and site
improvements, along with any levy for the installation of improvements serving
the Leased Premises assessed by any governmental body having jurisdiction
thereof but excluding any special assessments caused by the use of the building
by other tenants. The real estate tax obligation of the Tenant shall include any
tax or imposition for parking lot usage which may be levied by any governmental
body having jurisdiction thereof. Tenant's proportionate share shall be a
percentage derived by dividing the total square feet leased by Tenant by the
total square feet in the building. In addition to its proportionate share of the
above items, Tenant shall pay all real estate taxes assessed by the municipality
on its Tenant improvements. Tenant shall have the right to contest, or cause
Landlord to contest, the assessed value of the building, land and improvements
or the real
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estate or personal property taxes and Landlord agrees to provide any and all
documentation reasonably required for Tenant to contest said assessment. Tenant
shall pay all reasonable costs of Landlord in the event Landlord is required to
contest. Landlord is currently not aware of any abatement or deferral program in
connection with the Leased Premises. If taxes are abated or deferred as a result
of an appeal, or under any other program, Tenant shall gain the benefit of such
reduction. Notwithstanding the foregoing, Tenant shall not be required to
reimburse Landlord for any capital stock, income, franchise, estate,
inheritance, gift or transfer taxes, or any penalties or interest for failure to
pay in a timely manner.
8.3 Tenant shall pay its share of Common Area Expenses monthly together
with the rent except for taxes which shall be billed and paid quarterly.
Tenant's Share of Common Area Expenses and real estate taxes for any calendar
year, part of which falls within the term of this Lease and part of which does
not, shall be appropriately prorated.
8.4 If at any time during the term of this Lease the method or scope of
taxation prevailing at the commencement of the Lease Term shall be altered,
Tenant's proportionate share of such substituted tax or imposition if it relates
to Tenant's occupancy, shall be payable and discharged by the Tenant in the
manner required pursuant to the law which shall authorize such change.
8.5 (a) The Tenant covenants and agrees that it will, at its sole cost and
expense, carry liability insurance covering the Leased Premises in the minimum
amount of $1,000,000.00 per accident for 1 person, $3,000,000.00 per accident
for 2 or more persons, and a minimum amount of $300,000.00 for property damage
with Landlord listed as an insured party;
(b) Landlord shall keep the base building of which the Leased Premises are
a part, including without limitation, all fixtures (but not Tenant Improvements)
insured against damage and destruction by fire, sprinkler damage, vandalism,
comprehensive liability and other perils in the amount of the
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full replacement value of such building, as the value may exist from time to
time, including insurance for one year's rent, with a deductible of no more than
$10,000 except that Landlord will be responsible for any deductible amount over
that sum. The insurance shall include an extended coverage endorsement of the
kind required by an institutional lender to repair and restore such base
building. Any increase in the insurance premiums due to a change in rating of
the base building which is solely attributable to Tenant's use, or due to
special Tenant equipment, shall be paid entirely by the Tenant. During
construction, Landlord will increase the amount of insurance coverage by
$800,000 to cover Tenant's contribution to Tenant Improvements, with the
additional premium cost thereof to be borne by Tenant.
With regard to each expansion Phase, Tenant shall certify to Landlord, at
the completion of construction, the cost of the improvements made to that Phase
and Landlord shall, after receipt of the certification, increase the amount of
insurance coverage by said amount, with the additional premium cost thereof to
be borne by Tenant;
(c) The insurance policies referred to above shall be maintained by
insurance companies licensed to do business in the State of New Jersey, with a
general policyholder's rating of at least A and a financial rating of at least
XI in Best's Insurance Reports. If such ratings are changed or discontinued, the
parties shall agree to an alternate method of rating insurance companies. Such
policies shall be maintained throughout this Lease, including any extensions.
Each party shall deliver a certificate of insurance to the other evidencing this
insurance. Such certificate shall provide that the policy shall not be cancelled
or the coverage will not be materially reduced without 10 days prior written
notice.
8.6 The parties covenant and agree that the insurance policies required to
be furnished in accordance with the terms and conditions of this Lease, or in
connection with insurance policies which they obtain insuring such
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insurable interest as Landlord or Tenant may have in its own properties, whether
personal or real, shall expressly waive any right of subrogation on the part of
the insurer against the Landlord or Tenant. Notwithstanding anything to the
contrary, Landlord and Tenant each mutually waive all right of recovery against
each other, their agents, or employees for any loss, damage or injury of any
nature whatsoever to property or person (regardless of whether the party in
whose favor the waiver applies was negligent) for which either party is required
by this lease to carry insurance.
90 SIGNS
At its sole expense the Tenant shall have the right to install no more than
2 signs, including exterior ground signs at the Leased Premises, subject to
Landlord's approval, which shall not be unreasonably withheld or delayed. The
signs shall comply with the rules and regulations of the applicable governmental
boards and bureaus having jurisdiction thereof. The installation of such signs
shall not cause any structural damage to the building and shall not be permitted
on the roof. Landlord shall provide a monument sign near the entrance to the
building listing all of the tenants occupying space in the building, with
Tenant's name at the top.
100 ASSIGNMENT AND SUBLETTING
10.1 The Tenant may not assign or sublet the Leased Premises or any part
thereof, without the consent of Landlord, which shall not be unreasonably
withheld or delayed. Tenant shall have absolutely no right to assign or sublet
any expansion Phases unless Tenant is paying the full rent due thereon. If
Tenant desires to assign or sublet, it shall first give to Landlord notice in
writing. Landlord shall have 14 calendar days from receipt of such notice to
elect to consent to the assignment of the Lease or the sublease of the Leased
Premises. If Landlord fails to respond in the 14 day period, consent is deemed
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given. However, Tenant shall be permitted to assign this Lease or sublease the
premises, without the consent of Landlord but with notice to Landlord, to (i) a
wholly owned subsidiary, or a parent, (ii) any corporation, partnership, trust,
limited liability company or similar entity controlling, under the direct or
indirect control of Tenant or under common control with Tenant (collectively,
"Tenants Affiliates"), (iii) any corporation resulting from the merger or
consolidation with Tenant or that acquires all of Tenant's assets or stock; (iv)
any joint venture or similar arrangement as to which Tenant or Tenant's
Affiliates are a party; or (v) a Tenant whose use is specifically permitted
under this Lease.
10.2 In the event of any assignment or subletting permitted by the
Landlord, the Tenant and Guarantor, as set forth in a separate Guaranty, shall
remain and be directly and primarily responsible for payment and performance of
the within Lease obligations, and the Landlord reserves the right, at all times,
to require and demand that the Tenant pay and perform the terms and conditions
of this Lease. No such assignment or subletting shall be made to any tenant who
shall occupy the Leased Premises for any use other than that which is permitted
to the Tenant.
110 FIRE AND CASUALTY
11.1 If there occurs any damage to or destruction of any portion of the
building of which the Leased Premises is a part by fire or other casualty
occurring during the term of this Lease, which shall render at least 1/3 of the
floor area of the Leased Premises untenantable or unfit for occupancy, and
either party reasonably determines within 30 days of the casualty that the
Leased Premises cannot be repaired within 240 days from the happening of such
casualty, using reasonable diligence ("Total Destruction") then the Lease shall,
at the option of the Landlord or Tenant, upon written notice to the other within
a further 15 days, cease and become null and void from the date of such Total
Destruction. In such event the Tenant shall immediately surrender the Leased
Premises to the Landlord and this Lease shall terminate. The Tenant shall only
pay rent to the
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time of such Total Destruction. However, in the event of Total Destruction if
the Landlord and Tenant shall elect not to cancel this Lease within the 15 day
period the Landlord shall repair and restore the building, Leased Premises and
all Tenant Improvements to substantially the condition they were in prior to the
damage or destruction, with deliberate speed and dispatch. The rent shall not be
accrued after said damage or while the repairs and restorations are being made,
but shall recommence immediately after the Leased Premises are so restored as
evidenced by the issuance of a CO/CA by municipal authorities and that any
machinery, equipment and/or fixtures Landlord was responsible for installing are
operable so as not to materially interfere with the customary business
activities of Tenant. Notwithstanding the foregoing, if any such restoration is
not completed within 365 days of such Total Destruction, Tenant may terminate
this Lease without penalty.
11.2 In the event of any other casualty which shall not be tantamount to
Total Destruction the Landlord shall promptly repair and restore the Building,
the Leased Premises and the Tenant Improvements, subject to availability of
insurance proceeds, to substantially the same condition as they were prior to
the damage or destruction, with reasonable speed and dispatch. The rent shall
abate or be equitably apportioned from the date of casualty to the extent the
Tenant's use is impaired. Landlord shall have the right to not make the repairs,
if it has complied with Paragraph 8.5(b) but cannot confirm the availability of
insurance proceeds within 90 days of the casualty. In such event, Landlord will
notify Tenant within said 90 day period that it cannot confirm the insurance
proceeds and is electing not to make the repairs. Tenant shall have 10 business
days from receipt of said notice to elect whether to terminate the lease. If
Landlord does make the repairs, the rent shall recommence immediately upon
restoration of the Leased Premises as evidenced by the issuance of a CO/CA by
municipal authorities and any machinery, equipment and/or fixtures Landlord was
responsible for installing are operable so as not to materially interfere with
the
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customary business activities of Tenant. Notwithstanding the foregoing, if any
such restoration is not completed within 365 days of such casualty, Tenant may
terminate this Lease without penalty.
11.3 In the event the Landlord rebuilds, the Tenant agrees, at its cost and
expense, to forthwith remove any and all of its equipment, fixtures, and
personal property in order to permit Landlord to expedite the construction. The
Tenant shall assume at its sole risk the responsibility for damage to or
security of such fixtures and equipment that it does not move in the event that
any portion of the building area has been damaged and is not secure provided
Landlord has not been grossly negligent subsequent to the casualty. However,
nothing shall preclude Tenant from making a claim to any insurance company for
the cost of such removal.
120 COMPLIANCE WITH LAWS, RULES AND REGULATIONS
12.1 (a) The Tenant agrees that upon acceptance and occupancy of the Leased
Premises, it will promptly, at its own cost and expense, comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and Municipal governments ("Applicable Laws") relating to the
manner in which Tenant uses the Leased Premises. The Tenant also agrees that it
will not commit any nuisance, and will dispose of all garbage and waste in
compliance with law and Landlord's reasonable written rules and regulations.
Landlord warrants that on the date this Lease commences, the Leased Premises and
the building of which it is a part will comply with all Applicable Laws.
Notwithstanding anything to the contrary, in no case shall Tenant be required to
comply with Applicable Laws with regard to any structural component or building
system that is Landlord's responsibility pursuant to Paragraph 7.1. Landlord
will comply with all applicable laws with regard to the building shell, core
site and building systems that are not the responsibility of the Tenant.
(b) The Tenant agrees, at its own cost and expense, to comply with such
regulations or requests as may be required by the fire or
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liability insurance carriers providing insurance for the Leased Premises in
connection with Tenant's use and occupancy of the Leased Premises. If such
regulations or requests are arbitrary and capricious then Tenant shall have the
right to require Landlord to obtain insurance from another company.
12.2 In case the Tenant shall fail to comply with all material provisions
of the aforesaid statutes, ordinances, rules, orders, regulations and
requirements with which Tenant is required under the terms of this Lease to
comply, then the Landlord may, after 30 days' notice (except for emergency
repairs, which may be made immediately), and provided that Tenant has failed to
take such reasonable action to investigate or remedy the reason for
noncompliance, enter the Leased Premises and take any reasonable actions to
correct any noncompliance, at the cost and expense of the Tenant. The cost
thereof shall be added to the next month's rent and shall be due and payable as
such, or the Landlord may deduct the same from the balance of any sum remaining
in the Landlord's hands. This provision is in addition to the right of the
Landlord to terminate this Lease pursuant to Section 14.2. However, in the event
that Tenant is proceeding with any investigation or repairs to ensure compliance
with the aforesaid laws and regulations, the initial failure to comply with the
aforesaid laws and regulations shall not constitute an event of default.
12.3 Tenant expressly covenants and agrees to indemnify, defend and save
the Landlord harmless against any claim, damage, liability, cost, penalties, or
fines which the Landlord may suffer as a result of air, ground or water
pollution which requires remediation under any Environmental Law and is caused
by the Tenant, its agents and contractors, in its use of the Leased Premises.
Landlord shall indemnify, defend and save the Tenant harmless against any claim,
damage, liability, cost, penalties, or fines which the Tenant may suffer as a
result of air, ground or water pollution which requires remediation under any
Environmental Law and is caused by Landlord, its agents and contractors. The
Tenant covenants and agrees to provide the Landlord with
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reasonable notice of any claim or notice served upon it with respect to any
claim that the Tenant is causing air, ground or water pollution in violation of
an Environmental Law; and the Tenant shall take prompt and reasonable steps to
halt, remedy or cure any pollution of air, ground or water which requires
remediation under an Environmental Law and is caused by the Tenant by its use of
the Leased Premises.
12.4 Tenant expressly covenants and agrees to fully comply with the
provisions of the New Jersey Industrial Site Recovery Act (N.J.S.A. 13:1K-6, et
seq.) "ISRA", and its regulations to the extent applicable, prior to the
termination of the Lease.
(a) The term "evidence of compliance", as used herein, shall mean a
"letter of non-applicability" issued by the New Jersey Department of
Environmental Protection ("NJDEP"), or an approved "negative declaration"
or a "remediation action plan" which has been submitted to the NJDEP for
approval.
(b) In the event ISRA is applicable and (a) evidence of Tenant's
compliance is not delivered to the Landlord and (b) Tenant has not
attempted to secure evidence from the NJDEP, it is understood and agreed
that Tenant shall be liable to pay to Landlord an amount equal to two times
the Monthly Base Rent then in effect, together with all applicable
additional rent from the date of such surrender until such time as evidence
of compliance with ISRA has been delivered to the Landlord, and together
with any costs and expenses incurred by Landlord in enforcing Tenant's
obligations under this paragraph. Evidence of compliance shall be delivered
to Landlord, together with all copies of all submissions made to the NJDEP,
including all environmental reports, validated test results and other
relevant supporting documentation.
(c) Tenant shall only be liable to Landlord for regular rent and not
for double rent as set forth above, if (i) Tenant has submitted all
documentation initially required by NJDEP to obtain evidence of compliance
at least 6 months before the expiration of the Lease term and Tenant is
unable to
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obtain such evidence prior to the expiration of the Lease term, and (ii)
Landlord is unable to either refinance or relet the Leased Premises solely
as a result of Tenant's failure to obtain evidence of compliance.
Notwithstanding anything to the contrary, it is understood and expressly
agreed by Landlord and Tenant that Tenant shall not be required to comply
with the time limits to submit evidence of compliance if the Lease is
terminated prior to the scheduled expiration of the term of the Lease as a
result of a reason which is beyond the control of the Tenant, such as a
casualty or condemnation. In such event, Tenant shall not be liable for any
rent so long as Tenant diligently attempts to obtain such evidence of
compliance.
(d) In the event ISRA is applicable to any other portion of the Office
Park not under the operation and control of Tenant and Landlord is required
to apply to the NJDEP for a letter of non-applicability, negative
declaration or remediation plan, Tenant agrees that it shall fully
cooperate with Landlord in connection with any information or documentation
which may be requested of Tenant by the NJDEP, provided Landlord pays all
Tenant's reasonable expenses and cost thereof. If, in the course of
Landlord's application, any remediation of the Office Park is required
which is directly attributable to Tenant's operation of the Leased
Premises, Tenant expressly covenants and agrees that it shall be
responsible for only that portion of the remediation which is directly
attributable to its operation. It is understood and expressly agreed by
Landlord and Tenant that Tenant shall not be responsible for any rent
beyond the Lease term as provided for in Paragraph 12(b) or 12(c) if ISRA
is applicable to a portion of the Office Park not under the operation and
control of Tenant.
(e) Tenant hereby represents and warrants that its Standard Industrial
Classification No. is 8731, and that Tenant shall not generate,
manufacture, refine, transport, treat, store, handle or dispose of
"hazardous substances" as the same are defined under ISRA and the
regulations promulgated pursuant thereto in violation of any Environmental
Law.
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Tenant hereby agrees that it shall promptly inform Landlord of any change
in its SIC number.
(f) Landlord represents that, to the best of its knowledge, the Leased
Premises, buildings and Office Park are in compliance with all
Environmental Laws.
12.5 The term "Environmental Law" means Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.ss.9601 et
seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss.6901 et
seq., the Clean Water Act, 33 U.S.C. ss.ss.1251 et seq., the Safe Drinking Water
Act, 42 U.S.C. ss.ss.3300f et seq., the Hazardous Materials Transportation Act,
49 U.S.C. ss.1801 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C.
ss.2601-2692, et seq., the New Jersey Spill Compensation and Control Act ("NJ
Spill Act"), N.J.S.A. 58:10-23.11 et seq., the New Jersey Industrial Site
Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 et seq, the Safe Drinking Water Act, 42
U.S.C. ss.ss.300f-300j-26, the Clean Air Act, 42 U.S.C. ss.ss.7401 et seq., and
the Hazardous Materials Transportation Act, 49 U.S.C. ss.ss.1801, et seq.; and
any subsequent Environmental Laws of a similar nature.
130 INSPECTION BY LANDLORD
The Tenant agrees that the Landlord shall have the right to enter into the
Leased Premises at all reasonable hours for the purpose of examining the same
upon reasonable advance notice of not less than 24 hours (except in the event of
emergency), or to make such repairs as are necessary. Any repair shall not
unreasonably interfere with Tenant's use of the Leased Premises. Unless Tenant
permits otherwise, Landlord shall only enter the Leased Premises: (a) when
accompanied by a duly-authorized representative of Tenant; (b) when wearing any
and all protective clothing or equipment that Tenant may require Landlord to
wear to alleviate disturbance of Tenant's operations in such non-office
portions; and (c) at hours and in a manner which will not disturb or unduly
interfere with Tenant's operations in such non-office portions.
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140 DEFAULT BY TENANT
14.1 Each of the following shall be deemed a default ( an "Event of
Default") by Tenant and a breach of this lease:
(a) (i) filing of a petition by the Tenant for adjudication as a
bankrupt, or for reorganization, or for an arrangement under
any federal or state statute, except in a Chapter 11
Bankruptcy where the rent and additional rent stipulated
herein is being paid and the terms of the lease are being
complied with;
(ii) dissolution or liquidation of the Tenant;
(iii) appointment of a permanent receiver or a permanent trustee
of all or substantially all of the property of the Tenant,
if such appointment shall not be vacated or stayed within 90
days, provided the rent and additional rent stipulated
herein is being paid and the terms of the lease are being
complied with, during said 90 day period;
(iv) taking possession of the property of the Tenant by a
governmental officer or agency pursuant to statutory
authority for dissolution, rehabilitation, reorganization or
liquidation of the Tenant if such taking of possession shall
not be vacated or stayed within 90 days, provided the rent
and additional rent stipulated herein is being paid and the
terms of the lease are being complied with, during said 90
day period;
(v) making by the Tenant of an assignment for the benefit of
creditors.
(b) Default in the payment of the rent or additional rent herein
reserved or any part thereof, when due, which continues for 10 days after
notice from Landlord of such default. However, if Tenant is more than 10
days late, twice in any 12 month period, then the 10 day period is reduced
to 5 days upon notice to Tenant; and written notice shall no longer be
required from Landlord during such 12 month period.
(c) A default in the performance of any other covenant or condition of
this lease on the part of the Tenant to be performed for a period of 30
days after notice. However, no default on the part of Tenant shall be
deemed
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to exist if it diligently commences efforts to rectify same within such 30
day period.
14.2 Upon any Event of Default set forth above and lapse of applicable
grace period, Landlord may serve written notice upon the Tenant with a copy to
the guarantor, if any, electing to terminate this lease upon a specified date
not less than 10 days after the date of serving such notice and this Lease shall
then expire on the date so specified as if that date had been originally fixed
as the expiration date of the term herein granted. However, an Event of Default
shall be deemed waived if such default is made good before the date specified
for termination in the notice of termination served on the Tenant. 14.3 In case
this Lease shall be terminated Landlord or its agents may, immediately or any
time thereafter, re-enter and resume possession of the Leased Premises or such
part thereof, and remove all persons and property therefrom, either by summary
proceedings or by a suitable action or proceeding at law, without being liable
for any damages therefor. No re-entry by Landlord shall be deemed an acceptance
of a surrender of this lease. However, if an Event of Default has occurred and
Tenant moves out, or is dispossessed, and fails to remove any of its property,
machinery, equipment and fixtures or other property within 10 days after such
default, dispossess or removal, then and in that event, the said property,
machinery, equipment and fixtures or other property shall at the option of the
Landlord, be deemed to be abandoned, or the Landlord may remove such property
and charge the reasonable cost and expense of removal and storage to the Tenant.
The Tenant shall be liable for any damage which it causes in the removal of said
property from the Leased Premises.
14.4 In case this Lease shall be terminated Landlord may, relet the whole
or any portion of the Leased Premises, for any period equal to or greater or
less than the remainder of the then current term, for any sum which it
reasonably may deem appropriate, to any tenant which it may reasonably deem
suitable and satisfactory, and for any use and purpose which it may deem
appropriate. In
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connection with any such lease, Landlord may make such changes in the character
of the improvements on the Leased Premises as Landlord may reasonably determine
to be appropriate or helpful in effecting such lease and may grant concessions
or free rent to the extent commercially reasonable. Landlord shall make
reasonable efforts to relet the Leased Premises. Landlord shall not in any event
be required to pay Tenant any sums received by Landlord on a reletting of the
Leased Premises, but this shall not effect Landlord's statutory obligation to
mitigate its damages. Amounts received shall be applied against amounts due from
Tenant.
14.5 In the event this Lease is terminated and whether or not the Leased
Premises be relet, Landlord shall be entitled to recover from the Tenant all
rent due and all reasonable expenses, including reasonable counsel fees,
incurred by Landlord in recovering possession of the Leased Premises, and all
reasonable costs and charges for the care of the Leased Premises while vacant,
which damages shall be due at such time as they are incurred by Landlord; and a
sum equal to all damages set forth in Paragraph 15. Without any previous notice
or demand, separate actions may be maintained by Landlord against Tenant from
time to time to recover any damages which have become due and payable to the
Landlord without waiting until the end of the term.
150 LIABILITY OF TENANT FOR DEFICIENCY
In the event that the relation of the Landlord and Tenant terminates by
reason of:
(a) an uncured Event of Default by the Tenant and the re-entry of the
Landlord as permitted herein; or
(b) by the ejectment of the Tenant by summary proceedings or other
judicial proceedings; it is hereby agreed that the Tenant shall remain
liable to pay in monthly payments the rent and any other charges which
shall accrue. The Tenant expressly agrees to pay as damages for such breach
of this Lease the difference between the rent
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reserved and the rent received, if any, by the Landlord, during the
remainder of the unexpired term.
160 NOTICES
All notices required by this Lease shall be given by certified mail, return
receipt requested, nationally recognized overnight courier or personal delivery
with receipt, at the address set forth on the first page of this lease, and/or
such other place as the parties may designate in writing. Any notices hand
delivered or sent by nationally recognized overnight carrier shall be deemed
delivered when received. All notices sent by mail shall be deemed given 3 days
after deposit in the mail. Upon Tenant's occupancy, Tenant's address for notices
shall be the Leased Premises.
170 NON-WAIVER
The failure of either party to insist upon the strict performance of any of
the terms of this Lease, or to exercise any option contained herein, shall not
be construed as a waiver of any such term. Acceptance of performance of anything
required by this Lease to be performed, with the knowledge of the breach of any
term of this Lease, shall not be deemed a waiver of such breach, nor shall
acceptance of rent by Landlord in a lesser amount than is due (regardless of any
endorsement on any check, or any statement in any letter accompanying any
payment of rent) be construed either as an accord and satisfaction or in any
manner other than as payment on account of the earliest rent then unpaid by
Tenant. No waiver of any term of this Lease shall be deemed to have been made
unless expressed in writing and signed by the benefitted party.
180 RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS
Upon occupancy the Tenant may make alterations, additions or improvements
to the Leased Premises provided the aggregate cost of same shall be less than
$50,000. If greater than $50,000 then Tenant must obtain the consent of the
Landlord, which shall not be unreasonably withheld or delayed. Tenant
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shall obtain all necessary governmental permits and shall furnish to Landlord
as-built drawings of any alterations, additions or improvements which are made.
Landlord agrees to review any alteration, addition, or improvements proposed by
Tenant within 10 days of receipt of plans and specifications, and advise Tenant
of its decision. If Landlord does not respond in 10 days, consent is deemed
given. Any approval given is not intended to subject the Landlord's property to
liability under any lien law.
190 NON-LIABILITY OF LANDLORD
Tenant agrees to assume all risk of damage to its property, equipment and
fixtures occurring in or with respect to the Leased Premises, whatever the cause
of such damage or casualty. Landlord shall not be liable for any damage or
injury to property or person caused by or resulting from steam, electricity,
gas, water, rain, ice or snow, or any leak or flow from or into any part of the
building, or from any damage or injury resulting or arising from any other cause
or happening whatsoever, unless arising from gross negligence or willful
misconduct of Landlord or its agents, contractors or employees.
200 RESERVATION OF EASEMENT
Landlord reserves the right, easement and privilege to enter on the Leased
Premises in order to install, at its own cost and expense, any storm drains and
sewers and/or utility lines in connection therewith as may be required by the
Landlord. It is understood and agreed that if such work as may be required by
Landlord requires an installation which may displace any paving, lawn, seeded
area or shrubs the Landlord, shall, at its own cost and expense, restore or
redesign said paving, lawn, seeded area or shrubs. The Landlord covenants that
the foregoing work shall not unreasonably interfere with the normal operation of
Tenant's business.
210 STATEMENT OF ACCEPTANCE
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Upon the delivery of the Leased Premises to the Tenant the Tenant covenants
and agrees that it will furnish to Landlord a statement which shall set forth
the Date of Commencement and the Date of Expiration of the lease term.
220 FORCE MAJEURE
Except for (i) the obligation of the Tenant to pay rent and other charges,
(ii) the date by which Tenant may terminate this Lease because Landlord has not
substantially completed its work pursuant to Paragraphs 3 or 11 hereof, and
(iii) the time period set forth in Paragraph 7.4, the period of time during
which the Landlord or Tenant is prevented from performing any act required to be
performed under this Lease by reason of fire, catastrophe, industry wide
strikes, lockouts not instituted by Landlord, civil commotion, acts of God,
government prohibitions or preemptions or embargoes, inability to obtain
material or labor by reason of governmental regulations, the act or default of
the other party, or other events beyond the reasonable control of Landlord or
Tenant, as the case may be, shall be added to the time for performance of such
act.
230 STATEMENTS BY LANDLORD AND TENANT
Landlord and Tenant agree at any time and from time to time upon not less
than 10 days' prior notice from the other to execute, acknowledge and deliver to
the party requesting same, a statement in writing, certifying that this lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), that it is not in default (or if claimed to be in default,
stating the amount and nature of the default) and specifying the dates to which
the basic rent and other charges have been paid in advance.
240 CONDEMNATION
24.1 If there is a condemnation or any similar proceedings and in Tenant's
reasonable opinion, said taking unreasonably or unduly interferes with the use
of the Leased Premises, the lease term created shall terminate from the date
when the authority exercising the power of eminent domain takes or
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interferes with the use of the Property. The Tenant shall be responsible for the
payment of rent until the time of surrender. In any event, no part of the
Landlord's condemnation award shall be claimed by the Tenant. Without
diminishing Landlord's award, the Tenant shall have the right to make a claim
against the condemning authority for such independent claim which it may have.
24.2 In the event of any partial taking which would not be cause for
termination of the Lease, or in the event of any partial taking which would
permit termination but Tenant retains the balance of the Leased Premises
remaining after such taking, then the rent shall abate in an amount to be
mutually agreed upon (such agreement not to be unreasonably withheld or delayed)
between the Landlord and Tenant based on the extent of interference with
Tenant's normal use of the Leased Premises. The Landlord shall, to the extent
permitted by applicable law and as the same may be practicable promptly make
such repairs and alterations in order to restore the building and/or
improvements to usable condition to the extent of any condemnation award
received by Landlord.
250 LANDLORD'S REMEDIES
25.1 The rights and remedies given to the Landlord in this lease are
distinct, separate and cumulative remedies, and no one of them, whether or not
exercised by the Landlord, shall be deemed to be in exclusion of any of the
others.
25.2 In addition to any other legal remedies for an Event of Default by the
Tenant or by anyone holding or claiming under the Tenant such Event of Default
shall be restrainable by injunction at the suit of the Landlord.
25.3 No receipt of money by the Landlord from any receiver, trustee or
custodian or debtors in possession shall reinstate, continue or extend the term
of this lease or affect any notice theretofore given to the Tenant, or to any
such receiver, trustee, custodian or debtor in possession, or operate as a
waiver or estoppel of the right of the Landlord to recover possession of the
Leased Premises for any of the causes therein enumerated by any lawful remedy;
and the
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failure of the Landlord to enforce any covenant or condition by reason of its
breach by the Tenant shall not be deemed to void or affect the right of the
Landlord to enforce the same covenant or condition on the occasion of any
subsequent default or breach.
260 QUIET ENJOYMENT
The Landlord covenants that the Tenant, on paying the rental and performing
the covenants and conditions contained in this Lease, subject to applicable
notice and grace periods, may peaceably and quietly have, hold and enjoy the
Leased Premises for the Lease term.
270 SURRENDER OF PREMISES
On the last day, or earlier permitted termination of the Lease term, Tenant
shall quit and surrender the Leased Premises in good and orderly condition and
repair (reasonable wear and tear, and damage by fire or other casualty excepted)
and shall deliver and surrender the Leased Premises to the Landlord peaceably,
together with all alterations and improvements to the Leased Premises. Tenant
shall not be required to remove any alterations or improvements unless: (i)
Landlord advised Tenant in writing that Tenant would have to remove such items
when Landlord approved the alterations or received notice thereof from Tenant or
(ii) Landlord gives Tenant written notice on or before 6 months prior to the
expiration of the Term that the condition of such items is beyond normal wear
and tear and in such event Tenant shall be required to remove any alterations or
improvements installed by the Tenant, and restore the Leased Premises to its
original state, normal wear and tear and damage by fire or other casualty
excepted. Notwithstanding the above, Tenant shall not be required to remove any
alterations or improvements shown on Plans. Notwithstanding the above, Landlord
shall have a right, prior to the expiration of the Term, to notify Tenant that
Landlord shall purchase as many hoods and benches as it desires at a price of
$2300/hood and $50/lineal foot of bench. Said payment shall be made to Tenant in
a lump sum on the termination date. All
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property not removed by Tenant shall be deemed abandoned by Tenant, and Landlord
reserves the right to charge the reasonable cost of removal to the Tenant, for
items which Tenant was required to remove.
280 HOLDOVER
If the Leased Premises are not surrendered at the end of the Lease term,
the Tenant shall pay 150% of the Base Rent then being paid to Landlord, on a
monthly basis with rent pro-rated until date of surrender. These covenants shall
survive the termination of the Lease.
290 INDEMNITY
29.1 Anything in this Lease to the contrary notwithstanding but subject to
Paragraph 8.6 hereof, and without limiting the Tenant's obligation to provide
insurance hereunder the Tenant covenants and agrees that it will indemnify,
defend and save harmless the Landlord against and from all liabilities,
obligations, damages, (except consequential damages) penalties, claims, costs,
charges and expenses, including without limitation reasonable attorneys' fees,
which may be imposed upon or incurred by Landlord by reason of any of the
following occurring during the term of this Lease:
(a) Any claim arising out of Tenant's use, occupancy, control or
management of the Leased Premises and any part thereof unless arising from
negligence or willful misconduct of Landlord or any of its agents,
contractors or employees, or the failure of Landlord to comply with its
obligations under this Lease;
(b) Any negligence on the part of the Tenant or any of its agents,
contractors, servants, employees, licensees or invitees;
(c) Any accident, injury, damage to any person or property of third
parties occurring in, or about the Leased Premises unless arising from
negligence or willful misconduct of Landlord or any of its agents,
contractors or employees, or the failure of Landlord to comply with its
obligation under this Lease;
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(d) Any Event of Default.
Landlord shall promptly notify Tenant of any such claim asserted against it
and shall promptly send to Tenant copies of all papers or legal process served
upon it in connection with any action or proceeding brought against Landlord.
29.2 Landlord covenants and agrees that it will indemnify, defend and save
harmless the Tenant against and from all liabilities, obligations, damages,
(except consequential damages) penalties, claims, costs, charges and expenses,
including without limitation reasonable attorneys' fees, which may be imposed
upon or incurred by Tenant by reason of any of the following occurring during
the term of this Lease:
(a) Any claim arising out of Landlord's use, occupancy, control or
management of the Office Park and any part thereof unless arising from
negligence or willful misconduct of Tenant or any of its agents,
contractors or employees, or the failure of Tenant to comply with its
obligations under this Lease;
(b) Any negligence on the part of the Landlord or any of its agents,
contractors, servants, employees, licensees or invitees;
(c) Any accident, injury, damage to any person or property of third
parties occurring in, or about the Office Park unless arising from
negligence or willful misconduct of Tenant or any of its agents,
contractors or employees, or the failure of Tenant to comply with its
obligation under this Lease.
Tenant shall promptly notify Landlord of any such claim asserted against it
and shall promptly send to Landlord copies of all papers or legal process served
upon it in connection with any action or proceeding brought against Tenant.
300 LEASE CONSTRUCTION
This Lease shall be construed pursuant to the laws of the State of New
Jersey.
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310 BIND AND INURE CLAUSE
The terms, covenants and conditions of this Lease shall be binding upon,
and inure to the benefit of, each of the parties hereto and their respective
heirs, successors and assigns.
320 INCLUSIONS
The neuter gender when used herein, shall include all persons and
corporations, and words used in the singular shall include words in the plural
where the text of the instrument so requires.
330 DEFINITION OF TERM "LANDLORD"
When the term "Landlord" is used in this Lease it shall be construed to
mean and include only the owner of title to the building. Upon the transfer by
the Landlord of the title, the Landlord shall advise the Tenant in writing by
certified mail, return receipt requested, of the name of the Landlord's
transferee. In such event, the Landlord shall be automatically freed and
relieved from and after the date of such transfer of title of all personal
liability with respect to the performance of any of the covenants and
obligations on the part of the Landlord herein contained to be performed,
provided any such transfer and conveyance by the Landlord is expressly subject
to the assumption by the transferee of all of the obligations of the Landlord
hereunder.
340 COVENANTS OF FURTHER ASSURANCES
If, in connection with obtaining financing for the improvements on the
Leased Premises, the mortgage lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or refuse its consent thereto, provided that such modifications
do not in Tenant's reasonable judgment materially increase the obligations or
materially decrease the rights of Tenant hereunder or materially adversely
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affect the leasehold interest hereby created or materially adversely affect
Tenant's use and enjoyment of the Leased Premises. Notwithstanding anything
contained in this paragraph, the rent shall not increase.
350 COVENANT AGAINST LIENS
Tenant agrees that it shall not encumber, or permit to be encumbered, the
Leased Premises or the fee thereof by any lien, charge or encumbrance, and
Tenant shall have no authority to mortgage or hypothecate this Lease in any way
whatsoever. Any violation of this Paragraph shall be considered a breach of this
Lease.
360 SUBORDINATION
This Lease shall be subject and subordinate at all times to the lien of any
mortgages or other encumbrances now or hereafter placed on the land and building
and Leased Premises without the necessity of any further instrument or act on
the part of Tenant to effectuate such subordination. However, Tenant agrees to
execute such further documents evidencing the subordination of the Lease to the
lien of any mortgage or ground lease as shall be reasonably requested by
Landlord. It is a condition precedent to Tenant's obligation to pay rent
hereunder and the foregoing subordination, that Landlord shall provide Tenant
with a non-disturbance agreement from any current or future mortgagee, which
shall provide that so long as no Event of Default has occurred and is
continuing, Tenant's rights under this lease shall not be disturbed. Landlord
shall provide Tenant with the non-disturbance agreement from any such current or
future mortgagee within the later of loan closing or 60 days of Lease execution.
Notwithstanding any language to the contrary contained herein, this Lease shall
not be subordinated until Tenant receives a copy of the non-disturbance
agreement.
370 EXCULPATION OF LANDLORD
Neither Landlord nor its principals shall have any personal obligation for
payment of any indebtedness or for the performance of any
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obligation under this Lease. The performance of Landlord's obligations expressed
herein may be enforced only against the land and building, and the rents, issues
and profits thereof and insurance and condemnation proceeds. The Tenant agrees
that no deficiency judgment or other judgment for money damages shall be entered
by it against the Landlord or its principals personally in any action. This
exculpation provision shall not apply to misappropriation of Tenant's security
deposit or the aforesaid letter of credit.
380 SECURITY
The Tenant shall deposit with the Landlord 1 month's security, calculated
in accordance with Paragraph 4.1, as security for the full and faithful
performance of its obligations under this Lease. Payment shall be made 1/3 each
month for the first 3 months of the Lease Term. Upon termination of this Lease,
and providing that at such time no Event of Default has occurred and is
continuing, the Landlord shall return the security deposit to the Tenant within
30 days of the date of termination. Tenant covenants and agrees that it will not
assign, pledge, hypothecate, mortgage or otherwise encumber the security during
the term of this Lease. It is expressly understood and agreed that the Landlord
shall not be required to segregate the security.
390 BROKERAGE
The parties mutually represent to each other that Tom Giannone of Julien J.
Studley, Inc. is the broker who negotiated and consummated the within
transaction, and that neither party dealt with any other broker in connection
with the Lease. It is agreed that the Landlord shall be responsible, at its sole
cost and expense, to pay the brokerage commission in connection with this Lease.
400 LATE CHARGES
In addition to any other remedy, a late charge of 1% per month shall be due
and payable, without notice from Landlord, on any portion of rent or other
charges not paid within 10 days of when it is due.
410 OPTION TO RENEW
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41.1 Provided there is no continuing Event of Default, Tenant has the right
to renew the lease, for two 5 year periods, to commence at the end of the
initial term of this Lease. The renewal shall be upon the same terms and
conditions as contained in this Lease, except as follows:
(a) For the first 5 year renewal period, the annual rent per square
foot shall be the lesser of $28.00 or the average of the rent then paid by
2 of Landlord's existing tenants, Biomira USA, Inc. at 1002 Eastpark Blvd.,
Cranbury, NJ, and Pharmacopeia, Inc., at 3000 Eastpark Blvd., Cranbury, NJ
or their successors or assigns. In the event either of those tenants, its
successor or assigns have vacated the premises, then the rent for the
laboratory/office space shall be the lesser of $28.00 or $25.50 times 1
plus the percentage increase in the Consumer Price Index ("CPI") over the
initial 10 years of the lease term; and the rent for the executive office
space shall be the lesser of $18.43 or $16.75 times 1 plus the percentage
increase in the CPI during the same term. The CPI to be used shall be the
"All Items" index figures for the N.Y. Northeastern N.J. average of the CPI
for All Urban Consumers (revised CPI-U) (1982-1984 = 100) published by the
U.S. Department of Labor. The rent for all expansion Phases during both
renewal terms shall be as set forth in Paragraph 4.2.
(b) For the second 5 year renewal period, the rent per square foot
shall be the rent during the first 5 year renewal period increased by 10%.
41.2 Since the rent payment for at least the first month of the renewal
term will have been paid prior to the determination of any applicable rent
increase in excess of the Original Base Rent, any increase for months already
elapsed after commencement of the renewal term shall be added to the next
monthly rent payment then becoming due and payable.
41.3 The options of the Tenant to renew this Lease are expressly
conditioned upon the Tenant delivering to the Landlord a notice, in writing, by
certified mail, return receipt requested at least 9 months prior to the date
fixed for
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termination of the original Lease term or any renewal term, provided Landlord
will allow Tenant to exercise the option in less than 9 months if Landlord has
not first given a notice to Tenant of the pendency of the option.
41.4 In the event that the Index figure is discontinued the parties shall
agree on an equivalent and substituted Cost of Living Index to be applied in the
same manner. In the event the parties cannot mutually agree as to a substituted
Index, then the issue shall be submitted for arbitration to the American
Arbitration Association to take place in New Brunswick or any of its contiguous
municipalities, with the cost thereof divided between the parties. If the base
year (1982-84 equal to 100) hereinabove referred to with respect to the "Index"
shall be changed after the execution of the Lease, appropriate adjustments based
on such new Index shall be made so as to have a proper application of the Cost
of Living formula.
420 RIGHT TO LEASE ADDITIONAL SPACE
42.1 Landlord shall not attempt to rent any other space at 8 Cedar Brook
Drive until commencement of the erection of the structural steel. Thereafter,
Landlord shall be free to lease space in any area where Tenant is not paying a
Reservation Fee, subject to a right of first refusal by Tenant as provided in
Paragraph 42.3. Provided Tenant has not given the notice under Paragraph 4.2(i),
Landlord shall agree to lease portions of Phase 3 from north to south.
42.2 If Tenant has leased all of Phase 2 or is paying the Reservation Fee
thereon, Tenant shall have, for a 2 year period from the Commencement Date, the
right of first refusal pursuant to Paragraph 42.3 for all, or the portion of
Phase 3 not then reserved, at the rental rates set forth in paragraph 4.2.
However, if Tenant has not leased all of Phase 2 and provides Landlord with the
notice required under Paragraph 4.2(i) that it is cancelling its option to lease
such space or the 2 year period has expired, and as a result Tenant ceases to
pay the Reservation Fee for Phase 2, the right of first refusal with regard to
Phase 3 shall
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immediately terminate and it shall have the right of first offer set forth in
Paragraph 42.4.
42.3 If Landlord negotiates any lease for Phases 2 or 3 or any portion
thereof while such space is still subject to Tenant's right of first refusal, it
shall give Tenant written notice of same. Tenant shall then have 21 calendar
days to notify Landlord that it will lease the space in which the third party is
interested, at the rent set forth in Paragraph 4.2. If Tenant declines to
exercise its right of first refusal to rent such space, it shall still have the
option of reserving that space, by paying Landlord $8/sq. ft., inclusive of
common area maintenance and real estate taxes. Such reserved space may only be
cancelled upon Tenant giving to Landlord 6 months notice. The provisions for the
termination of the Reservation Fee shall also apply to the $8/sq. ft. amount set
forth in this subparagraph and in Subparagraph 42.4.
42.4 If all of Tenant's rights of first refusal have expired, Landlord
agrees that Tenant shall still have the right to meet any serious offers to
lease space in the building that Landlord makes to other tenants. It is the
intent of this Lease that each party will cooperate with the other and keep the
other party reasonably advised of its plans with regard to expansion and
leasing. In that regard to the extent that Landlord is entertaining a serious
offer from a third party to lease any space in the building, it will notify
Tenant of same and Tenant shall sign a confidentiality agreement with regard to
the details of said lease negotiations. Tenant shall then have a period of 14
calendar days to notify Landlord that it will either meet the third party offer
for the space; reserve the space at $8.00/sq. ft., inclusive of common area
maintenance and real estate taxes; or reject the offer and allow Landlord to
lease said space to the third party on substantially the same terms contained in
the original offer. If Tenant reserves said space, it may only cancel upon
Tenant giving Landlord 6 months notice. However, if Tenant does cancel, then
Landlord shall be free to market
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that particular space without any further right to offer the space to Tenant in
the future.
42.5 In the event Tenant declines to lease or reserve any expansion Phases,
Landlord will make reasonable efforts, without any guarantee of results, to
include a clause in any third party tenant's lease that requires that tenant to
relocate if Tenant decides to lease the space. If, after Tenant gives notice
that it intends to lease the space occupied by the third party tenant, the
Landlord is only able to relocate said tenant to new space at a lower than
market rent, then Tenant shall either (1) revoke its notice of intention to
lease the third party tenant's space; or (2) pay, on a quarterly basis, the
differential between the rent the tenant was paying and the lower than market
rent the tenant will pay in the space to which it is relocated.
43. MEMORANDUM OF LEASE
The parties shall forthwith execute a short form memorandum of this Lease
Agreement in recordable form to be recorded upon Landlord's receipt of the first
month's rent.
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IN WITNESS WHEREOF, the parties hereto have executed this document on the
date first above written.
CEDAR BROOK CORPORATE CENTER, L.P.
WITNESS:
By:/s/ Joseph Stern
-----------------------------------------
Landlord
TRANSCELL TECHNOLOGIES, INC.
ATTEST:
By:/s/ Peter Schied
-----------------------------------------
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SCHEDULE A
DESCRIPTION
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G U A R A N T Y
FOR VALUE RECEIVED, and as an inducement to CEDAR BROOK
CORPORATE CENTER, L.P. ("Landlord"), to enter into a certain lease with
TRANSCELL TECHNOLOGIES, INC. ("Tenant"), dated September 19, 1996, demising a
portion of the premises known as 8 Cedar Brook Drive, Cranbury, New Jersey 08512
("Lease"), to which this Guaranty is attached, Interneuron Pharmaceuticals,
Inc., One Ledgemont Center, Suite 340, 99 Hayden Ave., Lexington, MA 02173
("Guarantor"), hereby guarantees to Landlord, its successors and assigns, the
full performance and observance of all of the covenants, conditions, obligations
and agreements in the Lease to be performed and observed by Tenant, its
successor and assigns, from the signing of the Lease and for a period of 5 years
after the Commencement Date, including the balloon payment referred to in
paragraph 3.1(b) of the Lease, and expressly agrees that the validity of this
agreement and the obligations of Guarantor hereunder shall be and the same are
direct and primary and shall not be terminated, affected or impaired by reason
of the assertion by Landlord against Tenant, its successors or assigns, of any
of the rights or remedies reserved to Landlord pursuant to the provisions of the
Lease or by reason of the waiver by Landlord of, or the failure of Landlord to
enforce, any of the terms, covenants, conditions or obligations of Tenant under
the Lease, or the granting of any indulgence or extension of time to Tenant, its
successors or assigns, all of which may be given or done without notice to
Guarantor. Notwithstanding any language to the contrary contained herein, this
Guaranty shall not cover, and Interneuron shall not be liable, for the payment
of any sums set forth in the Lease which are secured by a letter of credit
(including without limitations the sums specified in Paragraph 3.1(a) of the
Lease).
Landlord shall provide Guarantor with prompt notice of default in the
payment of rent, additional rent or any other amounts contained or reserved in
said Lease, and notice of a breach of nonperformance of any of the covenants,
conditions or agreements contained in the Lease and the opportunity to promptly
cure any such default or breach.
Guarantor further covenants and agrees that this agreement and guaranty
shall remain and continue in full force and effect as to any amendment,
modification, renewal or extension of the Lease, to all of which Guarantor
hereby consents in advance, provided however and only to the extent same do not
increase the term of the lease, the amount of space leased or the rent, and no
course of
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dealing between Landlord, its successors and assigns, and Tenant, its successors
and assigns, shall diminish, impair in any respect or abrogate the obligation of
Guarantor hereunder except as hereinabove set forth.
Guarantor further agrees that its liability hereunder shall be primary and
that, in any right of action which shall accrue to Landlord, its successor and
assigns, may, at its or their option, proceed against Guarantor without having
commenced any action, or having obtained any judgment, against Tenant.
Guarantor further represents to Landlord, as an inducement for it to make
the Lease, that Guarantor has a financial interest in Tenant; and that the
execution and delivery of this guaranty are not in contravention of its charter
or by-laws, and have been duly authorized by its Board of Directors, and
Guarantor will comply with all requirements of New Jersey law to make the
Guaranty valid, subsisting and enforceable in accordance with New Jersey law.
Guarantor acknowledges that Tenant, its successors and assigns, may assign
the Lease pursuant to Paragraph 10 thereof, and Guarantor hereby agrees that no
assignment(s) or transfer(s) of the Lease by Tenant or any succeeding Tenant(s)
shall operate to extinguish or diminish the liability of the Guarantor under
this Guaranty, and that Guarantor shall, nevertheless, remain fully liable under
this Guaranty during the 5 year term of this Guaranty, unless Landlord following
any such assignment, shall determine in its sole and absolute judgment that the
financial responsibility of such assignee and/or any guarantor of the
obligations of such assignee under the Lease are satisfactory to Landlord, and
Landlord, in its sole and absolute discretion, shall elect to release the
Guarantor from its obligations hereunder. Notwithstanding the above, Landlord
agrees that in the event Guarantor (a) sells the Tenant; or (b) the Tenant
assigns the Lease pursuant to Paragraph 10 of the Lease; or (c) Tenant becomes a
publicly owned company; and the purchasing company, the assignee or the public
company, as the case may be, has an amount of cash equal to or greater than the
amount of cash possessed by Guarantor at the time the Lease is signed, then this
Guaranty shall automatically expire. If the purchasing company, the assignee or
the public company has less cash than Guarantor at the time the Lease is signed,
but has at lease fifty million dollars in cash, then Landlord shall release
Guarantor from this Guaranty if such entity either (1) provides Landlord with an
unconditional Letter of Credit, or another form of collateral which is
reasonably satisfactory to both Landlord and the
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lender that financed the Tenant Improvements, for all rent to come due for the
balance of the 5 year guarantee period and the balloon payment set forth in
Paragraph 3.1(b) of the Lease; or (2) agrees to add to the rent due Landlord in
Paragraph 4 of the Lease an additional $3.00/sq. ft. from the date of the sale,
assignment or public issue, as the case may be, to the end of the 6th full year
of the Lease term. In the event the purchasing company, the assignee or the
public company elects option (2), and maintains cash of at least fifty million
dollars for 4 consecutive quarters after said election, then the $3.00/sq. ft.
additional rent shall decrease to $1.50/sq. ft. at the start of the 5th quarter
and continue at that level until the end of the 6th full year of the Lease term.
Guarantor agrees that if during the 5 year term of this Guaranty the Tenant
shall become insolvent or shall be adjudged a bankrupt, or shall file a petition
for reorganization, arrangement or similar relief under any present or future
provision of the United States Bankruptcy Code or the bankruptcy or receivership
laws of the United States or the State of New Jersey or if such a petition filed
by creditors of Tenant shall be approved by a Court, or if Tenant shall seek a
judicial readjustment of the rights of its creditors under any present or future
Federal or State law or if a receiver of all of its property and assets is
appointed by any State or Federal Court, and in any such proceeding the Lease
shall be terminated or rejected, or the obligations of Tenant thereunder shall
be modified, Guarantor agrees that it will immediately pay to Landlord or its
successors or assigns an amount equal to all fixed, contingent and additional
rent accrued (and unpaid) to the date of such termination, rejection or
modification, and when due, the rent and additional rent which would have been
payable under the Lease during the unexpired portion of the term occurring prior
to the fifth anniversary of the Commencement Date, less the aggregate of rentals
received by Landlord, its successors and assigns, either from Tenant, or tenants
occupying the demised premises or any portion thereon during such unexpired
portion of the term occurring prior to the fifth anniversary of the Commencement
Date. Any lump sum payment made by Guarantor pursuant to this Paragraph shall be
discounted assuming an interest rate of 4%.
Guarantor's obligation to make payment in accordance with the terms of this
Guaranty shall not be impaired, modified, changed, released or limited in any
manner whatsoever by any impairment, modification, change, release or limitation
of the liability of Tenant or its estate in bankruptcy resulting from the
operation of any present or future provision of the Federal bankruptcy
-54-
<PAGE>
statute or other statute, or from the decision of any court. By execution of the
within Guaranty, the Guarantor does hereby covenant, agree and acknowledge that
it irrevocably submits to the jurisdiction of the State of New Jersey and agrees
that the within Guaranty shall be construed in accordance with the laws of the
State of New Jersey in connection with its obligations as Guarantor as in this
Guaranty provided.
This Guaranty is for the benefit of the Landlord and any present or future
bona fide first mortgagee, their successors and assigns, as additional
collateral for any present or future mortgage loan to the Landlord.
This Guaranty shall be null and void and of no further force or effect
after the fifth anniversary of the Commencement Date.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate officers
and caused their proper corporate seals to be hereto affixed, the day and year
first above written.
ATTEST: INTERNEURON PHARMACEUTICALS, INC.
/s/ Kathy Embriano By: /s/ Thomas F. Farb
------------------------- -------------------------
-55-
<PAGE>
AMENDMENT TO LEASE
AMENDMENT TO LEASE dated June 23, 1998, by and between CEDAR BROOK
CORPORATE CENTER, L.P., having an office at 1000 Eastpark Boulevard, Cranbury,
New Jersey 08512 (hereinafter called the "Landlord"); and INTERCARDIA, INC.,
having an office at 8 Cedar Brook Drive, Cranbury, New Jersey 08512 (hereinafter
called "Intercardia" or the "Tenant").
W I T N E S S E T H :
WHEREAS, Tenant entered into a Lease Agreement dated September 19, 1996
("Lease"), in connection with the leasing of laboratory/office space at 8 Cedar
Brook Drive, Cranbury, New Jersey 08512; and
WHEREAS, the parties wish to amend the Lease;
NOW, THEREFORE, the parties hereto covenant and agree as follows:
1. Pursuant to Paragraph 1.2 of the Lease, Tenant has an option to expand
the Leased Premises by renting an adjacent area referred to as Phase 2B and
consisting of 10,682 square feet. The parties have agreed that the Landlord
shall have the right to use approximately 5,444 square feet of Phase 2B as shown
on Schedule A attached hereto for temporary office space ("Temporary Office
Space") until approximately January 1, 1999.
2. During the time that the Landlord is utilizing the Temporary Office
Space, Tenant shall not be responsible for paying any Reservation Fee or utility
cost for said area (approximately 5,444 square feet). Utilities for said space
shall be the responsibility of Landlord.
3. At the conclusion of the Tenant's use of the Temporary Office Space,
Intercardia shall have the following three (3) options to choose from:
i. The Temporary Office Space shall remain "as is" and Intercardia
shall resume paying the original (full) Reservation Fee.
ii. Intercardia can take over the occupancy of the Temporary Office
Space in "as is" condition and pay $12.50 per square foot (net) for the
approximately 5,444 square feet and continue to pay the $5.00 per square
foot Reservation Fee for the remainder of the original reserved area.
iii. Landlord agrees to return the Temporary Office Space to the
56
<PAGE>
same unfinished condition it is now immediately upon Intercardia exercising
their rights under the Lease Agreement to commence use of the Reserved
Space. Landlord shall then (if required) return the space to its original
condition at its own expense.
4. Except as hereinabove referred to, all other terms and conditions of the
Lease shall remain in full force and effect, unimpaired and unmodified.
5. This Agreement shall be binding upon the parties hereto, their heirs,
successors, and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals or caused these presents to be executed by their proper corporate officers
and caused their proper corporate seals to be hereunto affixed the day and year
first above written.
CEDAR BROOK CORPORATE CENTER, L.P.
BY:
-----------------------------------------------
A. JOSEPH STERN
INTERCARDIA, INC.
BY:
-----------------------------------------------
RICHARD W. REICHOW
Senior Vice President & Chief Financial Officer
AMENDMENT 1
to Sponsored Research Agreement
This Amendment ("Amendment") to the Sponsored Research Agreement ("Agreement"),
effective July 1, 1997, by and between National Jewish Medical and Research
Center ("National Jewish") and Aeolus Pharmaceuticals, Inc. ("Sponsor"), shall
be effective as of July 1, 1998.
The parties agree to modify the Agreement as follows, all other terms of the
Agreement shall remain effective.
Paragraph 2 of the Agreement is replaced in its entirety by the following.
2. Personnel
The Research shall be performed by, and under the supervision and direction
of, Dr. Brian Day ("Day") and Dr. Ling-Yi Chang ("Chang") who collectively shall
be designated as the Principal Investigator, together with such additional
personnel as may be assigned by National Jewish. National Jewish covenants that
all personnel and entities (including any other organizations) performing
research hereunder shall execute agreements assigning all of their rights, title
and interest to and in any invention resulting from the Research to National
Jewish. If for any reason the Principal Investigator is unable to continue to
serve as Principal Investigator, and a successor acceptable to both National
Jewish and the Sponsor is not available, this agreement may be terminated as
provided in Article 10(a).
Paragraph 4 of the Agreement is replaced in its entirety by the following.
4. Payment of Costs
In consideration of National Jewish's performance hereunder, Sponsor agrees
to support National Jewish's costs incurred in performance of the research in an
amount not to exceed $400,000 for the period from July 1, 1997 through June 30,
1998 and $400,000 for the period from July 1, 1998 through June 30, 1999, which
amount shall not be exceeded unless mutually agreed upon in writing by Sponsor
and National Jewish. Sponsor shall make payments to National Jewish according
to the following schedule. For the first year, Sponsor paid $100,000 upon or
before the execution of the Research Agreement; and additional payments of
$100,000 on or before September 30, 1997, December 31, 1997 and March 30, 1998.
During the second year of the research program, Sponsor will pay $100,000 upon
or before execution of this Amendment for support of work performed by Dr. Day
and Dr. Chang, and will make additional payments while this Agreement is in
effect of $100,000 on or before October 1, 1998, January 2, 1999 and April 1,
1999 for support of work performed by Dr. Day and Dr. Chang. Notwithstanding the
foregoing, the amount of the payments may be changed upon mutual agreement by
Sponsor and National Jewish.
1
<PAGE>
Paragraph 5 of the Agreement is replaced in its entirety by the following.
5. Research Reports
National Jewish through the Principal Investigator shall prepare and
maintain records, including bound laboratory notebooks maintained in accordance
with generally accepted standard scientific procedures for the industry,
containing all appropriate data reflecting results of the Research, with each
page containing at least two (2) signatures. The Principal Investigator and Dr.
James Crapo ("Crapo") shall furnish to the Sponsor during the term of this
Agreement periodic informal written or oral reports regarding the progress of
the Research. Sponsor will have the opportunity to observe the work being
carried on under this Agreement as mutually agreed to and scheduled by both
parties.
Paragraph 6 of the Agreement is replaced in its entirety by the following.
6. Publication
National Jewish reserves, on behalf of the Principal Investigator, Crapo,
and other National Jewish employees and/or students, the right to disseminate
information, or to publish any material resulting from the Research; provided,
however, National Jewish shall make no such disclosure unless National Jewish
shall have provided the Sponsor with a copy of any proposed publication
forty-five (45) days in advance of the submission by National Jewish or any
author to a third party of any written materials intended for publication. If
the proposed disclosure contains Sponsor's Confidential Information, National
Jewish shall remove or cause the author to remove such Sponsor Confidential
Information prior to submission for publication or other public disclosure. The
Sponsor may request, and National Jewish shall agree to, a delay of such
proposed publication for an additional period, not to exceed forty-five (45)
days, in order to protect the potential patentability of any invention described
therein by having National Jewish or Sponsor prepare and file a patent
application. All publications resulting from this Agreement will include an
acknowledgement of the research support from the Sponsor.
Paragraph 7 of the Agreement is replaced in its entirety by the following.
7. Proprietary Information
All confidential information of either party disclosed to the other party
in connection with the Research hereunder ("Confidential Information") will be
treated by the receiving party as confidential and restricted in its use to only
those uses contemplated by the terms of this Agreement. Any information which is
to be treated as confidential must be clearly marked as confidential prior to
transmittal to the other party. If such Confidential Information is disclosed
orally, it shall be identified as being confidential at the time of disclosure,
and shall thereafter be reduced to writing within 30 days, marked as
confidential, and transmitted to the receiving party. The Sponsor may submit
Confidential Information only to the Principal Investigator or Crapo, who shall
be free to refuse to accept such Confidential Information. The obligations of
this paragraph shall survive and continue for five (5) years after termination
of this Agreement. Specifically excluded from such confidential treatment shall
be information which: (a) is or becomes part of the public domain, through no
fault of the receiving party; (b) is lawfully disclosed to the receiving party
by a third party who is not obligated to retain such information in confidence;
(c) is independently developed at the receiving party by someone not privy to
the confidential information; (d) is required to be disclosed to comply with
applicable laws or governmental regulations, provided that the disclosing party
receives prior notice of such disclosure and that the receiving party takes all
reasonable and lawful actions to minimize the extent of such disclosure, and if
possible to avoid such disclosure; or (e) as of the date of its disclosure
and/or delivery is already known to the party receiving such information, except
in the case of disclosures of information relating to the Research hereunder
made between Sponsor or consultants of Sponsor and the Principal Investigator or
Crapo.
2
<PAGE>
Each party shall retain full ownership of all its Confidential Information
in the possession of the other party. At the termination of this Agreement, each
party shall secure the return of, or destroy, any Confidential Information that
is in its possession and that is owned by the other party.
Paragraph 8(a) of the Agreement is replaced in its entirety by the following.
8. Results of the Research
(a) All rights in any inventions or discoveries, whether or not patentable,
that are developed, conceived or reduced to practice in the course of the
Research or within the field of antioxidant compounds, nitrosylating compounds
or related discoveries from the research laboratories of Crapo, Day or Chang
solely by any persons, including Crapo, Day or Chang who work in their
respective laboratories under their supervision and are students, lab employees
or post-doctoral fellows ("National Jewish Employees") shall be property of
National Jewish ("National Jewish Inventions"). All rights in any inventions or
discoveries whether or not patentable, that are developed, conceived or reduced
to practice jointly by National Jewish Employees and Sponsor employees or
consultants in the course of the Research or within the field of antioxidant
compounds, nitrosylating compounds or related discoveries from the research
laboratories of Crapo, Day or Chang shall be jointly owned by National Jewish
and the Sponsor ("Joint Inventions"). Title to any Joint Inventions,
developments or discoveries resulting directly from the Research will be
determined in accordance with U.S. Patent law, Title 35 U.S.C., in effect at the
time of the invention, development or discovery. All rights in any inventions or
discoveries whether or not patentable, that are developed, conceived or reduced
to practice in the course of the Research solely by Sponsor employees or
consultants and without the use of any National Jewish resources or facilities
shall be property of the Sponsor. National Jewish shall promptly report to the
Sponsor any National Jewish Inventions. Both parties agree promptly to inform
the other party of any Joint Inventions. All license negotiation periods for any
type of invention hereunder shall be limited to between 90 and 120 days after
the option to license is exercised. For the purpose of this Section 8 only, any
National Jewish Employees may not be defined as a Sponsor consultant or
employee.
3
<PAGE>
Paragraph 8(b) of the Agreement is replaced in its entirety by the following.
8. Results of the Research
(b) National Jewish grants to Sponsor an option to negotiate for a
royalty-bearing exclusive license to any patent application filed by National
Jewish on any National Jewish Invention or Joint Invention resulting from the
Research or within the field of antioxidant compounds, nitrosylating compounds
or related discoveries from the research laboratories of Crapo, Day or Chang by
National Jewish Employees and any patents granted thereon, for an initial option
period of ninety (90) days after a patent has been filed on such invention.
Sponsor may elect to extend such option for a period not to exceed one hundred
twenty (120) days, provided the Sponsor reimburses National Jewish for all costs
related to the filing, prosecution and maintenance of said patent(s) or patent
applications. National Jewish and Sponsor agree that the royalty rate and other
license terms to be negotiated in any such license agreement(s) shall be fair,
reasonable, and customary for the industry to which the invention applies. In
addition, the royalty shall reflect the relative contributions of National
Jewish and of Sponsor in making the invention. It is anticipated by the parties
that a reasonable royalty rate on small molecule antioxidant compounds will be
approximately one percent to two percent of ultimate net sales of any product
developed. Royalties on inventions not contemplated in the scope of this
Agreement may result in royalty rates higher than those payable in connection
with the license of small molecule antioxidant compounds. In the event that
National Jewish and Sponsor are not able to reach agreement regarding the terms
of a license agreement for a National Jewish or Joint Invention, National Jewish
shall be free to offer a license (which would be a non-exclusive license in the
case of a Joint Invention) on terms it deems appropriate to third parties;
provided, however, National Jewish shall not offer a license to any such third
party on terms more favorable than those offered to Sponsor without first
offering Sponsor an opportunity to accept a license on the same terms as
National Jewish proposes to offer to such third party.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Agreement, and hereby reaffirm all other provisions of the Agreement, by their
duly authorized officers or representatives.
NATIONAL JEWISH MEDICAL AND AEOLUS PHARMACEUTICALS, INC.
RESEARCH CENTER
By: /s/Judith Baskett By: /s/Clayton I. Duncan
------------------------ -------------------------
Name: Judith Baskett Name: Clayton I. Duncan
---------------------- -----------------------
Title: Director Title: President &
Research Administration CEO
--------------------- ----------------------
Date: 8-3-98 Date: 8-7-98
---------------------- -----------------------
By: /s/Dr. James D. Crapo
------------------------
Dr. James D. Crapo
Title:
---------------------
Date: 7-28-98
----------------------
Consented to by the Principal Investigators:
By: /s/Dr. Brian Day By: /s/Dr. Ling-Yi Chang
------------------------ -------------------------
Dr. Brian Day Dr. Ling-Yi Chang
Principal Investigator Principal Investigator
Date: 7/28/98 Date: 7/28/98
---------------------- -----------------------
5
EXHIBIT 11.1
INTERCARDIA, INC.
STATEMENT RE COMPUTATION OF NET LOSS PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------------------- --------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net loss per Unaudited Consolidated
Statements of Operations $ (10,189) $ (3,016) $ (17,341) $ (5,839)
================ ================ ================ ================
Weighted average number of common
shares and common share
equivalents outstanding - basic and
diluted 7,167,708 6,989,690 7,056,621 6,978,121
================ ================ ================ ================
Net income (loss) per common share
- basic $ (1.42) $ (0.43) $ (2.46) $ (0.84)
================ ================ ================ ================
Net income (loss) per common share
- diluted $ (1.42) $ (0.43) $ (2.46) $ (0.84)
================ ================ ================ ================
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 11,237
<SECURITIES> 11,204
<RECEIVABLES> 1,322
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,395
<PP&E> 3,272
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,330
<CURRENT-LIABILITIES> 4,707
<BONDS> 1,471
0
0
<COMMON> 7
<OTHER-SE> 21,145
<TOTAL-LIABILITY-AND-EQUITY> 27,330
<SALES> 0
<TOTAL-REVENUES> 1,662
<CGS> 0
<TOTAL-COSTS> 633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (17,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,341)
<EPS-PRIMARY> (2.46)<F1>
<EPS-DILUTED> (2.46)
<FN>
<F1> EPS BASIC
</FN>
</TABLE>
