FORM S-1
DELAWARE 8731 13-3660391
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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777 OLD SAW MILL RIVER ROAD, TARRYTOWN, NY 10591-6705
(914) 345-3344
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JEREMY M. LEVIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER CADUS PHARMACEUTICAL CORPORATION
777 OLD SAW MILL RIVER ROAD, TARRYTOWN, NY 10591-6705 (914) 345-3344
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies of all communications regarding this
Registration Statement should be sent to:
SALOMON R. SASSOON, ESQ. LESLIE E. DAVIS, ESQ.
MORRISON COHEN SINGER & WEINSTEIN, LLP TESTA, HURWITZ & THIBEAULT, LLP
750 LEXINGTON AVENUE, 125 HIGH STREET,
NEW YORK, NEW YORK 10022 BOSTON, MA 02110
(212) 735-8600 (telephone) (617) 248-7000 (telephone)
(212) 735-8708 (facsimile) (617) 248-7100 (facsimile)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE (1) FEE
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Common Stock, par value $0.01 3,162,500 shares (2) $12.50 $39,531,250 $13,631.47
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Includes 412,500 shares of Common Stock issuable upon exercise of the underwriters' over-allotment option.
CADUS PHARMACEUTICAL CORPORATION
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND
FORM OF PROSPECTUS PURSUANT TO REGULATION S-K, Item 501(b)
ITEM NO. LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus .............. Facing Page, Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus ....................................... Inside Front Cover Page,
Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges ........................ Prospectus Summary; Risk Factors
4. Use of Proceeds ..................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price ..................... Outside Front Cover Page;
Risk Factors; Underwriting
6. Dilution ............................................ Risk Factors; Dilution
7. Selling Security Holders ............................ Not Applicable
8. Plan of Distribution ................................ Outside Cover Page; Underwriting
9. Description of Securities to be Registered .......... Outside Cover Page; Prospectus Summary;
Risk Factors; Dividend Policy; Capitalization;
Description of Capital Stock;
Shares Eligible for Future Sale
10. Interests of Named Experts and Counsel ............. Experts
11. Information with Respect to the Registrant ......... Outside Cover Page; Prospectus Summary;
Risk Factors; The Company; Dividend
Policy; Dilution; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business; Management; Certain Transactions;
Principal Stockholders; Description of
Capital Stock; Shares Eligible for Future
Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities ..... Not Applicable
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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MAY 24, 1996
PROSPECTUS
2,750,000 Shares
CADUS PHARMACEUTICAL CORPORATION
COMMON STOCK
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share ......... $ $ $
Total (3) ......... $ $ $
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(1) See "Underwriting" for indemnification arrangements with the several Underwriters.
(2) Before deducting expenses payable by the Company estimated at $570,000.
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
GENESIS MERCHANT GROUP SECURITIES
, 1996
[Graphical Representation of SSCL]
Cadus exploits similarities between the yeast and human genome to identify new drug discovery targets. One of Cadus' proprietary technologies, the Self Selecting Combinatorial Library (SSCL) technology described below, provides a systematic means to identify the ligand that activates an identified human cell surface receptor of unknown function (an "orphan receptor"). Once the ligand has been identified, the biological function of the human receptor can be determined, a necessary prerequisite to a drug discovery program focused on that receptor.
Self Selecting Combinatorial Library (SSCL)
STEP ONE
Human orphan receptor gene inserted into genome of yeast strain.
STEP TWO
Each cell in strain now expresses the human orphan receptor on the cell surface.
STEP THREE
Millions of different peptide genes are inserted into a yeast strain. Each yeast cell now produces a single different peptide ligand.
STEP FOUR
The yeast cell that produces a peptide ligand that binds to the human orphan receptor will replicate continuously, creating an autocrine system.
STEP FIVE
The resulting peptide ligand is then isolated, purified and analyzed.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
APEX(trademark) and SSCL(trademark) are trademarks of the Company. Tradenames and trademarks of other companies appearing in this Prospectus are the property of their respective holders.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed information and the Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
THE COMPANY
Cadus Pharmaceutical Corporation is engaged in the discovery of novel small molecule therapeutics that act on targets in human cell signaling pathways. The Company has developed proprietary drug discovery technologies based on genetically engineered yeast cells. Cadus uses these and other proprietary technologies to identify human cell surface receptors and other molecular targets, to elucidate the function of such targets and to identify lead compounds that act on such targets. The Company conducts drug discovery programs both independently and with its collaborative partners, Bristol-Myers Squibb Company ("Bristol-Myers Squibb") and Solvay Duphar B.V. ("Solvay Duphar").
Cadus is a leader in the development of proprietary technologies that exploit the similarities between yeast and human genes to elucidate gene function and cell signaling pathways. The Company has developed four proprietary drug discovery technologies. Two of these technologies are used to identify small molecules that act as agonists or antagonists to cell surface receptors and other targets in the signal transduction pathway: (i) a hybrid yeast cell technology that expresses a functioning human receptor and a portion of its signaling pathway in a yeast cell and (ii) the Autocrine Peptide Expression ("APEX") system that expresses a known human ligand in a hybrid yeast cell as well as the receptor that is activated by that ligand. The other two technologies are used to identify and characterize receptors whose ligand and hence function are not known (which are called orphan receptors), ligands and key signaling molecules: (i) the Company's Self Selecting Combinatorial Library ("SSCL") technology, which is used to identify a ligand that activates a targeted orphan receptor and (ii) the Company's signal transduction technologies, which are used to determine potential molecular targets in the human cell signaling pathway and to assist in the determination of a receptor's biological function.
Cadus has focused its research to date on discovering G protein-coupled receptors, their ligands and resulting cell signaling pathways. G protein-coupled receptors are involved in the majority of basic cell functions and are therefore potential targets in the treatment of common human diseases. The importance of G protein-coupled receptors is demonstrated by the fact that more than 60% of all commercially available prescription drugs (including the anti-ulcer agents Zantac and Tagamet and the cardiac drugs Tenormin and Lopressor) work by interacting with G protein-coupled receptors. There are an estimated 2,000 to 5,000 G protein-coupled receptors in the human genome. The function of approximately 100 of these G protein-coupled receptors has been identified. This knowledge has been used to help identify the sequences of an additional 100 orphan G protein-coupled receptors. Although the Company believes that orphan receptors are likely to prove therapeutically important, a receptor cannot become the subject of a systematic drug discovery program until its function has been determined. Traditional methods used to determine the function of an orphan receptor are time consuming and expensive. The Company believes that its technologies will enable it to determine the function of many orphan receptors rapidly and cost-effectively.
The Company's technologies can also be applied to other receptors and their related signaling pathways. For this reason, the Company is pursuing selected targets such as cytokine receptors and multisubunit immune recognition receptors. These receptors and their signaling pathways are involved in cell growth, in the release of biologically active substances such as histamines and in the regulation of the immune system.
The Company's proprietary drug discovery programs are focused on allergic inflammation, acute inflammation and cancer. The Company's collaboration with Bristol-Myers Squibb is focused on cardiovascular disease, acute inflammation, central nervous system disorders, obesity and diabetes. To date, this collaboration has resulted in the identification of potential lead compounds in the area of central nervous system disorders and ligands to an orphan receptor. The Company's collaboration with Solvay Duphar is also focused on cardiovascular disease and central nervous system disorders, as well as gynecological diseases and gastrointestinal disorders. Through March 31, 1996, the Company had received an aggregate of approximately $34.9 million in research funding and equity investments (including a $5.0 million equity investment made as a result of the achievement of a research milestone in 1995) from its collaborative partners.
The Company was incorporated in Delaware in January 1992. The Company's
corporate headquarters and principal research facilities are located at 777 Old
Saw Mill River Road, Tarrytown, New York 10591, and its telephone number is
(914) 345-3344.
THE OFFERING
Common Stock offered by the Company ................ 2,750,000 Shares
Common Stock to be outstanding after the offering .. 11,482,052 Shares(1)
Use of Proceeds .................................... Research and development, working capital
and general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol ............. KDUS
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SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PERIOD FROM THREE MONTHS
JANUARY 23, 1992 YEAR ENDED DECEMBER 31, ENDED MARCH 31,
(DATE OF INCEPTION) TO ----------------------------- ------------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
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STATEMENT OF OPERATIONS DATA: (Unaudited)
Revenues $ -- $ -- $ 1,355 $ 4,418 $1,000 $1,625
Operating costs and expenses:
Research and development 753 1,645 2,246 5,383 1,040 1,654
General and administrative 214 550 937 1,376 317 318
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Total operating costs and expenses 967 2,195 3,183 6,759 1,357 1,972
Operating loss (967) (2,195) (1,828) (2,341) (357) (347)
Net loss $(967) $(2,148) $(1,393) $(1,482) $ (155) $ (43)
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Pro forma net loss per share(2) $ (0.16) $ 0.00
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Pro forma weighted average shares
outstanding(2) 9,043,609 8,987,992
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MARCH 31, 1996
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ACTUAL AS ADJUSTED(3)
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(Unaudited)
BALANCE SHEET DATA:
Cash and cash equivalents(4) ......... $25,086 $53,928
Total assets ......................... 30,585 59,427
Short term debt ...................... 2,397 2,397
Accumulated deficit .................. (6,034) (6,034)
Total stockholders' equity ........... 27,691 56,533
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(1) Gives effect to the automatic conversion of all outstanding shares of Convertible Preferred Stock into Common Stock upon the closing of this offering. Excludes 1,289,035 shares of Common Stock issuable upon the exercise of stock options outstanding as of March 31, 1996, of which options to purchase 505,756 shares of Common Stock are exercisable. See "Capitalization" and "Management-Incentive Plans."
(2) Computed on the basis described for pro forma net loss per share in Note 2 of Notes to Financial Statements.
(3) Adjusted to reflect the sale of the 2,750,000 shares of Common Stock offered hereby at an assumed initial offering price of $11.50 per share, and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds."
(4) Does not include restricted cash of $2.5 million.
Except as otherwise specified, all information in this Prospectus: (i) assumes no exercise of the Underwriters' over-allotment option; (ii) reflects a one-for-three reverse stock split of the Company's Common Stock to be effected immediately prior to closing of this offering; and (iii) reflects, upon the closing of this offering, the automatic conversion of all outstanding shares of the Company's Convertible Preferred Stock into an aggregate of 7,400,376 shares of Common Stock. See "Description of Capital Stock," "Underwriting" and Note 15 of Notes to Financial Statements.
This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors."
RISK FACTORS
An investment in the shares of Common Stock being offered by this Prospectus involves a high degree of risk. Accordingly, prospective investors should consider carefully the following risk factors, as well as all other information contained in this Prospectus, before purchasing the shares of Common Stock offered hereby.
EARLY STAGE OF DEVELOPMENT; TECHNOLOGICAL UNCERTAINTIES
The Company is at an early stage of development and has not completed development of any products. The Company does not expect that any products resulting from its research and development efforts will be commercially available for a significant number of years, if at all. All of the Company's potential products will require significant research and development and are subject to numerous risks. Potential products that appear to be promising at early stages of development may not reach the market for a number of reasons. Furthermore, potential products may be found ineffective or cause harmful side effects during preclinical testing or clinical trials, fail to receive necessary regulatory approvals, be difficult to manufacture on a large scale, be uneconomical to produce, fail to achieve market acceptance or be precluded from commercialization by proprietary rights of third parties. There can be no assurance that the Company's or its collaborative partners' product development efforts will be successfully completed, that required regulatory approvals will be obtained or that any products, if introduced, will be successfully marketed or achieve customer acceptance.
The scientific understanding of yeast genes and yeast cells at an early stage. Yeast-based drug discovery has not yet been shown to be successful in the development of any commercialized drug. There can be no assurance that these technologies will enable the Company to successfully identify and characterize receptors, ligands or signaling molecules and understand their roles in disease. The human genome is not fully represented by the yeast genome, which may inhibit the Company's ability to use its yeast-based technologies to discover drugs for those diseases linked to a human gene that has no counterpart in the yeast genome. There also can be no assurance that the Company's technologies will result in lead compounds that will be safe and efficacious. Development of new pharmaceutical products is highly uncertain, and no assurance can be given that the Company's drug discovery technologies will result in any commercially successful products.
DEPENDENCE ON COLLABORATIVE PARTNERS
The Company depends on collaborations with pharmaceutical companies for access to research, drug development, manufacturing, marketing and financial resources for its drug development programs. To date, the Company has entered into two such arrangements, one with Bristol-Myers Squibb and the other with Solvay Duphar. There can be no assurance that the Company will be able to establish additional collaborative arrangements, that any such arrangements will be on terms favorable to the Company, or that current or future collaborations will ultimately be successful in discovering any potential products. To the extent that the Company chooses not to or is unable to continue its current collaborations or establish new arrangements, it would require substantially greater capital to undertake research, preclinical and clinical development, and manufacturing and marketing of products at its own expense, which could have a material adverse effect on the Company's business, financial condition and results of operations.
Under their collaborative agreements with the Company, Bristol-Myers Squibb and Solvay Duphar have the right, but not the obligation, to conduct preclinical testing and clinical trials of compounds developed by them through the use of the Company's technology, to seek regulatory approvals and to manufacture and commercialize any resulting drug candidates. As a result, the Company's receipt of revenues from drug development milestones or royalties on sales under the collaborative agreements is dependent upon the activities and the development, manufacturing and marketing resources of its collaborative partners. The collaborative agreements allow the Company's collaborative partners significant discretion in electing whether or not to pursue any of these activities. The Company cannot control the amount and timing of resources to be dedicated by the collaborative partners to their respective collaborations with the Company. There can be no assurance that such partners will pursue the development and commercialization of such compounds as expected, that any such development or commercialization would be successful or that the Company will derive any additional revenue from such arrangements. While the Company's collaborative arrangements with Bristol-Myers Squibb and Solvay Duphar provide that the Company will receive milestone payments and royalties with respect to drugs developed from
compounds identified or confirmed using the Company's technologies, there can be no assurance that disputes will not arise over whether or not specific compounds were identified or confirmed using the Company's technologies and are, therefore, covered by such royalty and milestone provisions. Furthermore, there can be no assurance that Bristol-Myers Squibb, Solvay Duphar or any other potential future collaborator will not pursue alternative technologies in preference to those being developed in collaboration with the Company. In addition, there can be no assurance that the Company's collaborators will make milestone payments to the Company or that they will develop and market any products that may result under the agreements. Moreover, there can be no assurance that the interests of the Company will continue to coincide with those of its collaborative partners, that some of the Company's collaborative partners will not develop independently or with third parties drugs that could compete with drugs of the types covered by the collaborations, or that disagreements over rights or technology or other proprietary interests will not occur. Disagreements between the Company and its collaborative partners could lead to delays in collaborative research or in the development or commercialization of certain product candidates, or could require or result in litigation or arbitration, which could be time consuming and expensive. Any of these factors could have a material adverse effect on the Company's business, financial condition and results of operations.
The Company is relying on its collaborative partners to fund a substantial portion of its research operations over the next several years. The initial term of the research provisions of the contracts between the Company and each of Bristol-Myers Squibb and Solvay Duphar expire in July 1997 and December 2000, respectively. Bristol-Myers Squibb can extend the term of its collaboration for two years and Solvay Duphar can extend the term of its collaboration from two to five years. There can be no assurance that these contracts will be extended or renewed, or that any renewal will be made on terms favorable to the Company. Moreover, commencing in July 1998, the research provisions of the Solvay Duphar Agreement may be terminated for nonperformance under certain circumstances, which termination would result in the Company losing its research funding from Solvay Duphar. The termination or expiration of the research provisions of either of such contracts, or the failure by Bristol-Myers Squibb or Solvay Duphar to provide research funding to the Company, could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Collaborative Arrangements."
HISTORY OF OPERATING LOSSES; QUARTERLY FLUCTUATIONS; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has incurred net losses every year since its inception in January 1992. At March 31, 1996, the Company had an accumulated deficit of approximately $6.0 million. The Company's losses have resulted principally from costs incurred in connection with research and development activities and from general and administrative costs associated with the Company's operations. The Company expects to incur additional operating losses over the next several years and expects cumulative losses to increase substantially as the Company's research and development efforts are expanded and preclinical testing is commenced. The Company expects that losses will fluctuate from quarter to quarter and that such fluctuations may be substantial. The Company has no products or services available for sale, and no revenues have been generated from the commercialization by the Company or any of its collaborative partners of products or services. In addition, the Company does not anticipate that it will generate revenues from products or services in the foreseeable future. To date, all of the Company's revenues have resulted from research funding by its collaborative partners. The Company's ability to generate significant revenues and become profitable is dependent in large part on the ability of the Company to enter into additional collaborative arrangements. The Company's product revenues and profitability is also dependent on the Company, alone or with others, successfully completing the development of drug candidates, obtaining the required regulatory approvals and manufacturing and marketing any potential products. There can be no assurance that the Company will ever achieve product revenues or profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in part on the Company, its licensors and its licensees, successfully obtaining patent protection for the technologies owned by or licensed to the Company and for the compounds and other products, if any, resulting from the application of such technologies, preserving their respective trade secrets, preventing third parties from infringing upon their respective proprietary rights, and operating without infringing on the proprietary rights of others, both in the United States and in other countries.
Patent matters in biotechnology, and in particular with respect to drug discovery technologies, are highly uncertain and involve complex legal and factual questions. Accordingly, the breadth and validity of claims allowed in biotechnology and pharmaceutical patents cannot be accurately predicted. As of April 30, 1996, the Company was the exclusive worldwide licensee of two issued U.S. patents and a field exclusive worldwide licensee of another issued U.S. patent. In addition, as of such date, the Company had filed or held exclusive licenses or field exclusive licenses to 46 U.S. patent applications, as well as related foreign patent applications. There can be no assurance that the Company will develop technology that is patentable, that patents will issue from any of the pending applications, or that claims allowed will be sufficient to protect the Company's technologies. There can be no assurance that the Company or its collaborative partners will be able to obtain patent protection for pharmaceutical products discovered using the Company's technologies. Furthermore, there can be no assurance that any patents issued to the Company or its collaborative partners, or for which the Company has license rights, will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company. There can be no assurance that the Company's issued or licensed patents would be held valid by a court of competent jurisdiction. An assertion of coinventorship has been made by a third party with respect to one of the patents relating to a signal transduction protein exclusively licensed by the Company. There can be no assurance that the Company will retain exclusive rights under the patent or that the scope and validity of this patent or related patent applications will not be adversely affected by the assertion.
A number of pharmaceutical companies, biotechnology companies, universities and research institutions have been issued patents, may have filed patent applications or may obtain additional patents and proprietary rights for drug discovery technologies similar to those of the Company. The commercial success of the Company will depend in part on the Company not infringing patents issued to competitors. The Company cannot determine with certainty whether any existing third party patents or the issuance of any third party patents would require the Company to alter its technologies, obtain licenses or cease certain activities. If any licenses are required, there can be no assurance that the Company will be able to obtain any such license on commercially favorable terms, if at all, and if these licenses are not obtained, the Company might be prevented from using certain of its technologies. The Company's failure to obtain a license to any technology that it may require to continue its drug discovery efforts may have a material adverse effect on the Company's business, financial condition and results of operations. The Company is presently seeking to obtain licenses from several different third parties. One such license is for patents relating to certain drug screening techniques used widely in the biotechnology industry and related to the Company's drug discovery technologies. Certain other licenses are for patents which relate to reagents. There can be no assurance that any of these licenses will be obtained or, if obtained, will be on terms favorable to the Company. Failure to obtain these licenses may require the Company to utilize alternate techniques and/or other reagents.
Litigation, which could result in substantial costs to the Company, may be necessary to enforce any patents issued or licensed to the Company or to determine the scope and validity of third party proprietary rights. Some of the Company's competitors have, or are affiliated with companies having, substantially greater resources than the Company, and such competitors may be able to sustain the costs of complex patent litigation to a greater degree and for longer periods of time than the Company. Uncertainties resulting from the initiation and continuation of any patent or related litigation could have a material adverse effect on the Company. An adverse outcome in connection with an infringement proceeding brought by a third party could subject the Company to significant liabilities, require disputed rights to be licensed from third parties or require the Company to cease using the disputed technology, any of which could have a material adverse effect on the Company's business, financial condition or results of operations. If competitors of the Company prepare and file patent applications in the United States that claim technology also claimed by the Company, the Company may have to participate in interference proceedings declared by the Patent and Trademark Office to determine priority of invention, which could result in substantial costs to the Company, even if the eventual outcome is favorable to the Company. The Company is aware of a U.S. patent application related to certain receptors in yeast cells filed more than three years after one of the patents licensed by the Company. There can be no assurance that an interference will not be declared between such U.S. patent application and the patent and related earlier filed patent applications licensed by the Company.
The Company also relies on trade secrets to protect technology, especially where patent protection is not believed to be appropriate or obtainable. The Company attempts to protect its proprietary technology and processes in part by confidentiality agreements with its collaborative partners, employees, consultants and certain
contractors. There can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known or be independently discovered by competitors. To the extent that the Company or its consultants or research collaborators use intellectual property owned by others in their work for the Company, disputes may also arise as to the rights in related or resulting know-how and inventions, which could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Patents, Proprietary Technology and Trade Secrets."
INTENSE COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
Competition in the pharmaceutical and biotechnology industry is intense. The Company competes with the research departments of pharmaceutical companies, biotechnology companies and research and academic institutions. The Company's technology platform consists principally of genetically engineered yeast cells and certain signal transduction technologies, which it utilizes to determine the biological function of orphan receptors and signaling molecules. The Company is aware of other companies, such as American Home Products Corporation and Glaxo Wellcome, Plc, that may use yeast as a drug discovery medium. Other companies, such as Merck & Co., Inc. and SmithKline Beecham, Plc, may be engaged in efforts to determine the biological function of orphan receptors, and other companies such as Sandoz Ltd. and Pfizer Inc. may be engaged in research and development efforts relating to signal transduction. In addition, there are several smaller companies pursuing these areas of research. Furthermore, many companies have potential drugs in various stages of development to treat asthma and small-cell lung carcinoma, two diseases targeted by the Company in its proprietary research programs. Many of the Company's competitors have greater financial and human resources, and more experience in research and development, preclinical and clinical testing, obtaining regulatory approvals, manufacturing and marketing than the Company. There can be no assurance that competitors of the Company will not develop competing drug discovery technologies or drugs that are more effective than those developed by the Company and its collaborative partners or obtain regulatory approvals of their drugs more rapidly than the Company and its collaborative partners, thereby rendering the Company's and its collaborative partners' drug discovery technologies and/or drugs obsolete or noncompetitive. Moreover, there can be no assurance that the Company's competitors will not obtain patent protection or other intellectual property rights that would limit the Company's or its collaborative partners' ability to use the Company's drug discovery technologies or commercialize drugs, which could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, there can be no assurance that some of the Company's collaborative partners will not develop, independently or with third parties, products that could compete with drugs of the types covered by the collaboration or otherwise being developed by the Company. Furthermore, there is intense competition for access to libraries of compounds to use for screening and any inability of the Company to maintain access to sufficiently broad libraries of compounds for screening potential targets would have a material adverse effect on the Company's business, financial condition and results of operations.
Biotechnology and related pharmaceutical technology have undergone rapid and significant change. The Company expects the technologies associated with the Company's research and development will continue to develop rapidly, and the Company's future success will depend in large part on its ability to maintain a competitive position with respect to these technologies. Rapid technological development by the Company or others may result in compounds, products or processes becoming obsolete before the Company recovers any expenses it incurs in connection with developing such products. There can be no assurance that yeast-based drug discovery will be viable or that it will achieve market acceptance or that it will not be superseded by other drug discovery techniques. See "Business--Competition."
GOVERNMENT REGULATION
The preclinical testing and clinical trials of compounds developed through the use of the Company's technologies and the manufacturing and marketing of any drugs that may result are subject to regulation by numerous Federal, state and local governmental authorities in the United States, the principal one of which is the United States Food and Drug Administration ("FDA"), and by similar agencies in other countries in which drugs developed through the use of the Company's technologies may be tested and marketed. Any compound developed by the Company or its collaborative partners must receive regulatory approval before it may be marketed as a drug in a particular country. The regulatory process, which includes preclinical testing and clinical trials of each
compound in order to establish its safety and efficacy, can take many years and requires the expenditure of substantial resources. Data obtained from preclinical and clinical activities are susceptible to varying interpretations which could delay, limit or prevent regulatory agency approval. In addition, delays or rejections may be encountered during the period of drug development, including delays during the period of review of any application. Delays in obtaining regulatory approvals could adversely affect the marketing of any drugs developed by the Company or its collaborative partners, impose costly procedures upon the Company's and its collaborative partners' activities, diminish any competitive advantages that the Company or its collaborative partners may attain and adversely affect the Company's ability to receive royalties. There can be no assurance that regulatory approvals will be obtained for any compounds developed by, or in collaboration with, the Company. Moreover, even if regulatory approval for a compound is granted, such approval may entail limitations on the indicated uses for which it may be marketed. Further, approved drugs and their manufacturers are subject to continual review, and discovery of previously unknown problems with a drug or its manufacturer may result in restrictions on such drug or manufacturer, including withdrawal of the drug from the market. Regulatory approval of prices is required in many countries and may be required for the marketing of any drug developed by the Company or its collaborative partners. The Company's inability to obtain regulatory approvals in the United States and foreign markets would have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Government Regulation."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ACCESS TO CAPITAL
The Company may be required to raise additional capital over a period of several years in order to conduct its operations. Such capital may be raised through additional public or private financings, as well as collaborative arrangements, borrowings and other available sources. The Company depends upon its collaborative partners for research funding. As of March 31, 1996, the Company had received approximately $6.4 million in research funding from Bristol-Myers Squibb and approximately $1.0 million from Solvay Duphar. There can be no assurance that the Company will continue to receive funding under the Collaborative Agreements. There can be no assurance that the Company's existing or potential future collaborative arrangements will be adequate to fund the Company's operating expenses. The Company's capital requirements depend on numerous factors, including the ability of the Company to enter into additional collaborative arrangements, competing technological and market developments, changes in the Company's existing collaborative relationships, the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, the purchase of additional capital equipment, the progress of the Company's drug discovery programs and the progress of the Company's collaborative partners' milestone and royalty producing activities. The Company may require substantial funds to conduct the research and development and the preclinical studies and clinical trials for its potential products. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to the Company's existing stockholders. There can be no assurance that additional funding, if necessary, will be available on favorable terms, if at all. If adequate funds are not available, the Company may be required to curtail operations significantly or to obtain funds through entering into arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates, products or potential markets that the Company would not otherwise relinquish, which would have a material adverse effect on the Company's business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
NEED TO ATTRACT AND RETAIN KEY OFFICERS, EMPLOYEES AND CONSULTANTS
The Company is highly dependent on the principal members of its scientific and management staff. The loss of one or more members of the Company's scientific or management staff could significantly delay or prevent the achievement of research, development or business objectives. The Company maintains a $1.0 million key person life insurance policy on the life of each of Jeremy M. Levin and James R. Broach. Certain key members of the Company's scientific staff, including James R. Broach, John C. Cambier and Gary L. Johnson, are consultants who devote a majority of their professional time to activities unrelated to the Company. In addition, the Company relies on consultants and advisors, including the members of its Scientific Advisory Board, to assist the Company in formulating its research and development strategy. Retaining and attracting qualified personnel, consultants and advisors is critical to the Company's success. In order to pursue its collaborative relationships, product
development and marketing plans, the Company will be required to hire additional qualified scientific personnel to perform research and development, as well as personnel with expertise in clinical testing, government regulation, manufacturing, and marketing. These requirements are also expected to demand the addition of management personnel and the development of additional expertise by existing management personnel. The Company faces competition for qualified individuals from numerous pharmaceutical and biotechnology companies, universities and other research institutions. There can be no assurance that the Company will be able to attract and retain such individuals on acceptable terms, if at all, and the failure to do so would have a material adverse effect on the Company's business, including its ability to conclude collaborations with additional corporate partners.
RELIANCE ON THIRD PARTIES FOR CONDUCT OF CLINICAL TRIALS AND MANUFACTURING
The Company has no preclinical or clinical development expertise and intends to rely on its collaborative partners and third party clinical research organizations to design and conduct most of such activities, if required. In addition, the Company has no manufacturing facilities and intends to rely on its collaborative partners and contract manufacturers to produce the materials for preclinical and clinical development purposes. If the Company were unable to contract for these services on acceptable terms, or if it should encounter delays or difficulties in its relationships with such providers, the Company's product development would be delayed, which could have a material adverse effect on the Company's business, financial condition and results of operations. Moreover, contract manufacturers that the Company may use must adhere to Good Manufacturing Practices ("GMP") regulations enforced by the FDA through its facilities inspection program. If their facilities cannot pass a pre-approval plant inspection, the Company's products will not be granted FDA approval.
EXPOSURE TO PRODUCT LIABILITY CLAIMS; LIMITED AVAILABILITY OF INSURANCE
The Company's business will expose it to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. The Company currently has no clinical trial liability insurance and there can be no assurance that it will be able to obtain and maintain such insurance for any of its clinical trials if its drug discovery efforts are successful. In addition, there can be no assurance that the Company will be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities. A successful product liability claim or series of claims brought against the Company could have a material adverse effect on its business, financial condition and results of operations.
UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND THIRD PARTY REIMBURSEMENT
The Company's and its collaborative partners' realization of revenues and income with respect to drugs, if any, developed through the use of the Company's technologies will depend, in part, upon the extent to which reimbursement for the cost of such drugs will be available from third party payors, such as government health administration authorities, private health care insurers, health maintenance organizations, pharmacy benefits management companies and other organizations. Third party payors are increasingly challenging the prices charged for pharmaceutical products. Significant uncertainty exists as to the reimbursement status of newly approved pharmaceutical products. There can be no assurance that third party reimbursement will be available or sufficient for any drugs developed through the use of the Company's technologies. The inability to maintain price levels for such drugs could adversely affect the Company's business, financial condition and results of operations. Furthermore, in certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to governmental control. In the United States there have been, and the Company expects that there will continue to be, a number of federal and state proposals to implement similar governmental control.
HAZARDOUS MATERIALS
As with many biotechnology and pharmaceutical companies, the Company's research and development involves the controlled use of hazardous materials, chemicals and various radioactive compounds. The Company is subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products. Although the Company believes that its safety procedures comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could
be held liable for any damages that result and any such liability could exceed the resources of the Company. The Company may incur substantial costs to comply with environmental regulations if the Company develops manufacturing capacity.
CONTROL BY EXISTING STOCKHOLDERS AND MANAGEMENT; CONCENTRATION OF STOCK OWNERSHIP
Upon completion of this offering, four existing stockholders of the Company will beneficially own approximately 56.9% of the outstanding shares of Common Stock (approximately 54.9% if the Underwriters' over-allotment option is exercised in full). As a result, these stockholders, acting together, will be able to control most matters requiring approval by the stockholders of the Company, including the election of directors, the adoption of charter amendments, and the approval of mergers and other extraordinary corporate transactions. Furthermore, seven out of the twelve current directors were designated by Carl C. Icahn. In addition, as ofMarch 31, 1996, the management and scientific officers of the Company owned stock options to purchase an aggregate of 973,410 shares of Common Stock, of which options to purchase 394,995 shares were exercisable at such time. Such a concentration of ownership may have the effect of delaying or preventing a change in control of the Company, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices. See "Principal Stockholders" and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET PRICE
Future sales of substantial amounts of the Company's Common Stock in the public market following this offering could adversely affect the market price of the Common Stock. Upon completion of this offering, the Company will have 11,482,052 shares of Common Stock outstanding (including shares to be issued upon conversion of the Convertible Preferred Stock upon completion of this offering), assuming no exercise of the underwriters' over-allotment option or currently outstanding options. All of the shares being sold pursuant to this offering (plus any additional shares sold upon exercise of the Underwriters' over-allotment option) will be freely transferable without restriction under the Securities Act, unless they are held by "affiliates" of the Company as that term is used under the Securities Act and the regulations promulgated thereunder. The remaining 8,732,052 shares of Common Stock that will be outstanding upon completion of the offering (the "Restricted Shares") will be held by officers, directors, employees, consultants and other stockholders of the Company. The Restricted Shares were sold by the Company in reliance on exemptions from the registration requirements of the Securities Act and are "restricted securities" under the Securities Act. In addition to the shares of Common Stock offered hereby, up to 475,004 of the Restricted Shares may currently be eligible for sale in the public market pursuant to Rule 144(k) under the Securities Act (of which at least 398,335 shares are subject to the agreements not to sell described below). Beginning 90 days after the effective date of this offering (the "Effective Date"), at least 5,176,500 additional shares of Common Stock (including approximately 579,913 shares issuable upon the exercise of vested options) will become eligible for sale in the public market pursuant to Rule 144 and Rule 701 under the Securities Act (of which at least 5,014,414 shares are subject to the agreements not to sell described below). Stockholders of the Company, holding in the aggregate at least 8,623,714 Restricted Shares, have agreed, subject to certain limited exceptions, not to sell or otherwise dispose of any of the shares held by them for a period of 180 days after the Effective Date without the prior written consent of Hambrecht & Quist LLC. At the end of such 180-day period, at least 6,896,412 shares of Common Stock (including approximately 662,094 shares issuable upon exercise of vested options) will be eligible for immediate resale, subject to compliance with Rule 144 and Rule 701. The remainder of the approximately 8,732,052 shares of Common Stock held by existing stockholders will become eligible for sale at various times over a period of less than two years and could be sold earlier if the holders exercise any available registration rights. The holders of 7,400,376 Restricted Shares have the right in certain circumstances to require the Company to register their shares under the Securities Act for resale to the public. If such holders, by exercising their demand registration rights, cause a large number of shares to be registered and sold in the public market, such sales could have an adverse effect on the market price for the Company's Common Stock. If the Company were required to include in a Company initiated registration shares held by such holders pursuant to the exercise of their piggyback registration rights, such sales might have an adverse effect on the Company's ability to raise needed capital. In addition, the Company expects to file a registration statement on Form S-8 after the expiration of 180 days following the Effective Date registering a total of approximately 1,300,000 shares of Common Stock subject to outstanding stock options or reserved for issuance under the Company's stock option plans. See "Management--Incentive Plans," "Shares Eligible for Future Sale--Registration Rights" and "Underwriting."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common Stock and there can be no assurance that an active public market for the Common Stock will develop or be sustained after the offering. The initial offering price will be determined by negotiations between the Company and the Underwriters and is not necessarily indicative of the market price at which the Common Stock of the Company will trade after this offering. The market prices for securities of biotechnology companies have been highly volatile and the market has experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Announcements of technological innovations or new commercial products by the Company or its competitors, developments concerning proprietary rights, including patents and litigation matters, publicity regarding actual or potential results with respect to products or compounds under development by the Company or its collaborative partners, regulatory developments in both the United States and foreign countries, changes in reimbursement policies, developments in the Company's relationship with current or future collaborative partners, if any, public concern as to the safety and efficacy of drugs developed by the Company, its collaborative partners and its competitors, public concern as to the efficacy of new technologies, general market conditions, as well as quarterly fluctuations in the Company's revenues, if any, and financial results and other factors, may have a significant effect on the market price of the Common Stock. In particular, the realization of any of the risks described in these "Risk Factors" could have an adverse effect on the market price of the Company's Common Stock. See "Underwriting."
ANTI-TAKEOVER EFFECT OF DELAWARE CORPORATE LAW
Certain provisions of the Delaware corporate law may have the effect of deterring hostile takeovers or delaying or preventing changes in the control or management of the Company, including transactions in which stockholders might otherwise receive a premium for their shares over the then current market prices. See "Description of Capital Stock--Delaware Takeover Statute."
DILUTION
The initial public offering price will be substantially higher than the book value per share of Common Stock. Purchasers of the shares of Common Stock offered hereby will therefore experience immediate and substantial dilution in the net tangible book value of their investment from the initial offering price. Additional dilution will occur upon exercise of outstanding options. See "Dilution" and "Shares Eligible for Future Sale."
ABSENCE OF DIVIDENDS
The Company has not paid any dividends on its Common Stock and does not anticipate paying dividends in the foreseeable future. See "Dividend Policy."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,750,000 shares of Common Stock offered by the Company hereby, at an assumed initial public offering price of $11.50 per share, are estimated to be $28,841,250 ($33,252,938 if the Underwriters exercise their over-allotment option in full), after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company.
The Company intends to use the net proceeds for research and development, working capital and general corporate purposes. The Company expects to expand its proprietary research, drug discovery and drug development activities, including the further development of its yeast-based and signal transduction platform technologies, its genomics activities and its proprietary product development programs in cancer and inflammation. The Company also expects to spend funds to recruit and employ additional scientific and technical staff and to add capability in the area of pre-clinical testing. Further, the Company plans to expand its facilities to accommodate these additional staff, as well as to support additional activities with collaborative partners. The Company also may spend funds on clinical development activities for its proprietary product candidates, if any. The Company may use approximately $2.4 million of the proceeds to repay its existing credit line and other loans with banks. The Company may use a portion of its available cash to acquire technologies or products under its strategy to continue to broaden its platform technologies. The Company may use a portion of its available cash to acquire or invest in companies complementary to its business. The Company is not currently in any negotiations with respect to any such acquisitions or investments. Pending application as described above, the Company intends to invest the net proceeds of this offering in investment-grade, interest bearing securities.
The amount and timing of the Company's actual expenditures for the purposes described above will depend upon a number of factors, including the Company's ability to enter into additional collaborative or licensing arrangements focused on its drug discovery programs, as well as the timing of and terms governing such arrangements. In addition, the Company's research and development expenditures will vary as programs are expanded or abandoned and as a result of variability in funding from its collaborative partners.
The Company believes that the net proceeds from this offering, together with its existing resources, will be sufficient to satisfy its capital needs through the end of 1999. Companies in the biotechnology industry generally expend significant capital resources in product research and development. The Company expects that additional equity or debt financings will be required to fund its operations.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not anticipate paying any dividends on its Common Stock in the foreseeable future.
CAPITALIZATION
The following table sets forth as of March 31, 1996: (i) the actual capitalization of the Company; (ii) the pro forma capitalization of the Company, giving effect to the conversion of all outstanding Convertible Preferred Stock into Common Stock at the closing of this offering; and (iii) the capitalization of the Company on an as adjusted basis to reflect the issuance and sale by the Company of 2,750,000 shares of Common Stock offered hereby at an assumed initial public offering price of $11.50 per share.
MARCH 31, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(in thousands)
Bank loans and line of credit (1) ............................................... $ 2,422 $ 2,422 $ 2,422
-------- -------- --------
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value; 22,201,080 shares authorized,
22,201,080 shares issued and outstanding, actual; no shares issued and
outstanding,
pro forma and as adjusted .................................................... 22 -- --
Common Stock, $0.01 par value; 35,000,000 shares authorized; 1,473,343 shares
issued and 1,331,676 shares outstanding, actual; 8,873,719 shares issued and
8,732,052 outstanding, pro forma; 11,623,719 shares
issued and 11,482,052 outstanding, as adjusted (2) ............................ 15 89 117
Additional paid-in capital ..................................................... 33,988 33,936 62,750
Accumulated deficit ............................................................ (6,034) (6,034) (6,034)
Treasury stock, at cost (141,667 shares) ....................................... (300) (300) (300)
-------- -------- --------
Total stockholders' equity ................................................... 27,691 27,691 56,533
-------- -------- --------
Total capitalization ....................................................... $ 30,113 $ 30,113 $ 58,955
======== ======== ========
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(1) As of March 31, 1996, the current portion of the debt included herein totaled $2,397,459. The Company may use a portion of the net proceeds of this offering to repay the outstanding balance of the bank loans and line of credit. The above table does not reflect any such repayment.
(2) Excludes 1,289,035 shares of Common Stock issuable upon the exercise of stock options outstanding at March 31, 1996, at a weighted average exercise price of $1.98, of which options to purchase 505,756 shares were immediately exercisable on such date.
DILUTION
The pro forma net tangible book value of the Common Stock at March 31, 1996, was approximately $27,452,000, or $3.14 per share. Pro forma net tangible book value per share represents the amount of total tangible assets of the Company less total liabilities, divided by 8,732,052, the number of shares of Common Stock outstanding as of March 31, 1996, after giving effect to the conversion of all outstanding shares of Convertible Preferred Stock into an aggregate of 7,400,376 shares of Common Stock upon completion of this offering. After giving effect to the sale of the 2,750,000 shares of Common Stock offered hereby at an assumed initial public offering price of $11.50 per share and after deducting the underwriting discounts and estimated offering expenses, the adjusted pro forma net tangible book value of the Company at March 31, 1996, would have been $56,294,000 or $4.90 per share of Common Stock. This represents an immediate increase in pro forma net tangible book value per share of $1.76 to existing stockholders and an immediate dilution per share of $6.60 to new investors purchasing shares in this offering. The following table illustrates the per share dilution described above:
Assumed initial public offering price per share ........................... $ 11.50
Pro forma net tangible book value per share at March 31, 1996 ........... $3.14
Increase attributable to new investors .................................. 1.76
----
Adjusted pro forma net tangible book value per share after this Offering .. 4.90
-------
Dilution to new investors ................................................. $ 6.60
=======
|
The following table sets forth on a pro forma basis as of March 31, 1996, the number of shares of Common Stock purchased from the Company, the total cash consideration paid for such shares and the average consideration paid per share by the existing stockholders and by investors purchasing shares offered by the Company hereby. The following computations are based on an assumed initial public offering price of $11.50 per share before deduction of the underwriting discount and estimated offering expenses.
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
------------------- ------------------- -------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
Existing stockholders ................ 8,732,052 76.0% $34,453,115 52.1% $3.95
New investors ........................ 2,750,000 24.0 31,625,000 47.9 11.50
---------- ----- ----------- -----
Total ............................... 11,482,052 100.0% $66,078,115 100.0%
========== ===== =========== =====
|
The foregoing tables exclude 1,289,035 shares of Common Stock reserved as
of March 31, 1996, for issuance upon the exercise of options outstanding as of
such date at a weighted average price per share of $1.98. At March 31, 1996,
options to purchase 505,756 shares of Common Stock were exercisable. To the
extent that options granted in the future become vested and are exercised, there
could be further dilution to new stockholders. See "Capitalization," "Management
- -- Incentive Plans," and "Underwriting."
SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1992, 1993, 1994 and 1995, and for the period from January 23, 1992 (date of inception) to December 31, 1992, and for each of the years in the three-year period ended December 31, 1995, are derived from the financial statements of the Company, which financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The financial statements as of December 31, 1994 and 1995, and for each of the years in the three-year period ended December 31, 1995, and the report thereon, are included elsewhere in this Prospectus. The balance sheet data as of March 31, 1996 and the statement of operations data for the three months ended March 31, 1995 and 1996 are derived from unaudited financial statements included elsewhere in this Prospectus. The unaudited financial statements include all adjustments that the Company considers necessary for a fair presentation of the financial position and results of operations for these periods. Operating results for the three months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 1996. The selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's financial statements and related notes thereto included elsewhere in this Prospectus. The historical results are not necessarily indicative of the results of operations to be expected in the future.
PERIOD
FROM
JANUARY 23,
1992 THREE MONTHS
(DATE OF ENDED
INCEPTION) TO YEAR ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, ------------------------------- -----------------
1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ----
(in thousands, except per share data) (Unaudited)
STATEMENT OF OPERATIONS DATA:
Revenues ..................................... $ -- $ -- $ 1,355 $ 4,418 $ 1,000 $ 1,625
Operating costs and expenses:
Research and development ................... 753 1,645 2,246 5,383 1,040 1,654
General and administrative ................. 214 550 937 1,376 317 318
------ -------- ------- ------- ------- -------
Total operating costs and
expenses ................................... 967 2,195 3,183 6,759 1,357 1,972
Operating loss ............................... (967) (2,195) (1,828) (2,341) (357) (347)
Net loss ..................................... $ (967) $ (2,148) $(1,393) $(1,482) $ (155) $ (43)
====== ======== ======= ======= ======= =======
Pro forma net loss per share (1) ............. $ (0.16) $ 0.00
======= =======
Pro forma weighted average
shares outstanding (1) ..................... 9,043,609 8,987,992
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DECEMBER 31, MARCH 31,
----------------------------------------- ---------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(in thousands) (Unaudited)
BALANCE SHEET DATA:
Cash and cash equivalents (2) ..................... $ 4 $ 3,568 $ 14,406 $ 25,683 $ 25,086
Total assets ...................................... 113 3,962 15,740 30,725 30,585
Short-term debt ................................... -- 6 203 2,397 2,397
Convertible Preferred Stock ....................... -- 15 18 22 22
Deficit accumulated during the development stage .. (967) (3,115) (4,508) (5,991) (6,034)
Stockholders' equity (deficit) .................... (963) 3,491 14,534 27,723 27,691
|
(1) Computed as described in Note 2 of Notes to Financial Statements.
(2) Does not include restricted cash of $2.5 million at March 31, 1996 and December 31, 1995, and $305,000 at December 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was incorporated in 1992 and has devoted substantially all of its resources to the development and application of novel yeast-based and signal transduction drug discovery technologies. The Company has financed its operations primarily through the sale of Convertible Preferred Stock. To date, all of the Company's revenues have resulted from research funding provided by its collaborative partners. As of March 31, 1996, the Company had total stockholders' equity of approximately $27.7 million.
The Company has incurred operating losses in each year since its inception, including net losses of approximately $1.5 million during the year ended December 31, 1995. At March 31, 1996, the Company had an accumulated deficit of approximately $6.0 million. The Company's losses have resulted principally from costs incurred in research and development and from general and administrative costs associated with the Company's operations. These costs have exceeded the Company's revenues and interest income. The Company expects to incur substantial additional operating losses over the next several years as a result of increases in its expenses for research and product development.
The Company entered into research collaborations with Bristol-Myers Squibb and Solvay Duphar in July, 1994 and November, 1995, respectively. These collaborations have provided the Company with equity investments aggregating $27.5 million and research funding of $7.4 million through March 31, 1996. In addition, the Company is entitled to payments upon the achievement of certain milestones and royalties based upon the net sales of any drugs developed from compounds identified or confirmed using the Company's technologies.
The Company currently receives research funding under each of these agreements. Research funding is received quarterly based on predetermined funding requirements and is recognized as revenue when earned as a result of work completed. The Company does not expect to receive significant milestone payments or any royalties for a number of years, if at all. See "Risk Factors-Dependence on Collaborative Partners", "-History of Operating Losses; Quarterly Fluctuations; Uncertainty of Future Profitability" and "-Government Regulation."
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 and March 31, 1995
Revenues
Revenues for the three months ended March 31, 1996 increased to $1.6 million from $1.0 million for the same period in 1995. This increase was attributable to the inclusion in 1996 of research funding from Solvay Duphar.
Operating Expenses
The Company's research and development expenses for the three months ended March 31, 1996 increased to $1.7 million from $1.0 million for the same period in 1995. This increase was attributable primarily to an increase in staffing related to implementation of the research collaboration with Solvay Duphar, as well as expenses in connection with licenses from third parties.
General and administrative expenses for the three months ended March 31, 1996 increased to $318,000 from $317,000 for the same period in 1995.
Interest Income
Net interest income for the three months ended March 31, 1996 increased to $321,000 from $209,000 for the same period in 1995. This increase related primarily to interest earned on the net proceeds from the sale of Series B Preferred Stock in September 1995 and November 1995, net of interest expense on a line of credit and bank loans.
Net Loss
The net loss for the three months ended March 31, 1996 decreased to $43,000 from $155,000 for the same period in 1995. The decrease can be attributed to the increase in interest earned on the net proceeds from the sale of Series B Preferred Stock in September 1995 and November 1995.
Fiscal Years Ended December 31, 1995 and 1994
Revenues
Revenues for 1995 increased to $4.4 million from $1.4 million in 1994. This increase was attributable to receipt in 1995 of a full year of research funding from Bristol-Myers Squibb and the commencement in November 1995 of research funding from Solvay Duphar.
Operating Expenses
The Company's research and development expenses for 1995 increased to $5.4 million from $2.2 million in 1994. This increase was attributable primarily to an increase in staffing and laboratory supplies related to implementation of the research collaborations with Bristol-Myers Squibb and Solvay Duphar, and, to a lesser extent, to expenses related to facilities and equipment as a result of the Company's move to expanded facilities in December 1994.
General and administrative expenses for 1995 increased to $1.4 million from $937,000 in 1994. This increase resulted primarily from an increase in staffing and facilities expenses related to the Company's expansion of its operations in conjunction with its relocation to its new facilities.
Interest Income
Net interest income for 1995 increased to $903,000 from $314,000 in 1994. This increase related primarily to interest earned on the net proceeds from the sale of Series B Preferred Stock in July 1994, September 1995 and November 1995, net of interest expense on a line of credit and bank loans.
Net Loss
The net loss for 1995 increased to $1.5 million from $1.4 million in 1994. The 1994 loss of $1.4 million was net of an extraordinary gain from the early extinguishment of a debt obligation.
Fiscal Years Ended December 31, 1994 and 1993
Revenues
Revenues in 1994 increased to $1.4 million from $0 in 1993. This increase was due to the commencement in June 1994 of research funding from Bristol-Myers Squibb.
Operating Expenses
The Company's 1994 research and development expenses increased to $2.2 million from $1.6 million in 1993. This was primarily attributable to an increase in staffing and laboratory supplies in conjunction with the implementation of the research collaboration with Bristol-Myers Squibb, as well as to increased expenditures in connection with licenses from third parties and the sponsorship of research at academic institutions.
General and administrative expenses in 1994 increased to $937,000 from $550,000 in 1993. This increase was due primarily to an increase in corporate development staffing and activities.
Interest Income
Net interest income in 1994 increased to $314,000 from $48,000 in 1993. This increase was primarily attributable to interest earned on the net proceeds from the sale of Series B Preferred Stock in July 1994.
Net Loss
The net loss in 1994 decreased to $1.4 million from $2.1 million in 1993. The 1994 results were net of an extraordinary gain of $159,000 resulting from the early extinguishment of a debt obligation.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations through the sale of Convertible Preferred Stock and from research funding from its collaborative partners. Through March 31, 1996, the Company had sold
Convertible Preferred Stock for $31.9 million in cash and $2.0 million in satisfaction of indebtedness. In addition, the Company had received $7.4 million in revenues for research funding.
The Company also has established a $2.5 million secured line of credit with a bank, of which borrowings of $2.4 million were outstanding as of March 31, 1996. All obligations of the Company with respect to this line of credit are secured pursuant to a security agreement granting the bank a first and prior security interest in the Company's negotiable certificates of deposit held by the bank. Such certificates of deposit have been recorded in the balance sheet as "Restricted Cash." The line of credit is cancelable at any time by the Company or the bank and expires on June 30, 1996. The Company may repay such borrowings from the net proceeds of this offering.
As of March 31, 1996, the Company had cash and cash equivalents of $25.1 million and restricted cash of $2.5 million.
The Company has invested $3.1 million in property and equipment, including purchases amounting to $198,000 in the three months ended March 31, 1996, $1.9 million in 1995, $605,000 in 1994 and $249,000 in 1993. The Company expects capital expenditures to increase over the next several years as it expands facilities to support the planned expansion of research and development efforts.
The Company leases laboratory and office facilities in Tarrytown, New York and Lakewood, Colorado under agreements expiring December 30, 1997 and March 9, 1997, respectively. The aggregate minimum annual payment under the leases is $684,000.
The Company intends to increase its expenditures substantially over the next several years to enhance its technologies and pursue internal proprietary drug discovery programs. The Company believes that its existing capital resources, together with the net proceeds from this offering, interest income and future payments due under its research collaborations, will be sufficient to support its current and projected funding requirements through the end of 1999. The Company's capital requirements may vary as a result of a number of factors, including the progress of its drug discovery programs, competitive and technological developments, the continuation of its existing Collaborative Agreements and the establishment of additional collaborative agreements, and the progress of the development efforts of the Company's corporate partners. The Company expects that it will require significant additional financing in the future, which it may seek to raise through public or private equity offerings, debt financings or additional corporate partnerships. No assurance can be given that such additional financing will be available when needed or that, if available, such financing will be obtained on terms favorable to the Company. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to the Company's stockholders.
At December 31, 1995, the Company had tax net operating loss carryforwards of approximately $5.4 million and research and development credit carryforwards of approximately $431,000 which expire in years 2007 through 2011. The Company's ability to utilize such net operating loss and research and development credit carryforwards is subject to certain limitations due to ownership changes as defined by rules enacted with the Tax Reform Act of 1986.
Recently issued accounting standards may affect the Company's Financial Statements in the future. SeeNote 14 of Notes to Financial Statements.
BUSINESS
Cadus Pharmaceutical Corporation is engaged in the discovery of novel small molecule therapeutics that act on targets in human cell signaling pathways. The Company has developed proprietary drug discovery technologies based on genetically engineered yeast cells. Cadus uses these and other proprietary technologies to identify human cell surface receptors and other molecular targets, to elucidate the function of such targets and to identify lead compounds that act on such targets. The Company conducts drug discovery programs both independently and with its collaborative partners, Bristol-Myers Squibb Company ("Bristol-Myers Squibb") and Solvay Duphar B.V. ("Solvay Duphar").
Cadus is a leader in the development of proprietary technologies that exploit the similarities between yeast and human genes to elucidate gene function and cell signaling pathways. The Company has developed four proprietary drug discovery technologies. Two of these technologies are used to identify small molecules that act as agonists or antagonists to cell surface receptors and other targets in the signal transduction pathway: (i) a hybrid yeast cell technology that expresses a functioning human receptor and a portion of its signaling pathway in a yeast cell and (ii) the Autocrine Peptide Expression ("APEX") system that expresses a known human ligand in a hybrid yeast cell as well as the receptor that is activated by that ligand. The other two technologies are used to identify and characterize receptors whose ligand and hence function are not known (which are called orphan receptors), ligands and key signaling molecules: (i) the Company's Self Selecting Combinatorial Library ("SSCL") technology, which is used to identify a ligand that activates a targeted orphan receptor and (ii) the Company's signal transduction technologies, which are used to determine potential molecular targets in the human cell signaling pathway and to assist in the determination of a receptor's biological function.
BACKGROUND
The human body is comprised primarily of specialized cells that perform different physiological functions and that are organized into organs and tissues. All human cells contain DNA, which is arranged in a series of subunits known as genes. It is estimated that there are approximately 100,000 genes in the human genome. Genes are responsible for the production of proteins. Proteins such as hormones, enzymes and receptors are responsible for managing most of the physiological functions of humans, including regulating the body's immune system. Thus, genes are the indirect control center for all physiological functions. Over the last few decades, there has been a growing recognition that many major diseases have a genetic basis. It is now well established that genes play an important role in cancer, cardiovascular disease, psychiatric disorders, obesity, and metabolic diseases. Significant resources are being focused on genomics research based on the belief that the sequence and function of a gene, and the protein that gene expresses, will lead to an understanding of that gene's role in the functioning and malfunctioning of cells. This understanding is expected in turn to lead to therapeutic and diagnostic applications focused on molecular targets associated with the gene and the protein it expresses.
Cell surface receptors are an important class of proteins involved in cellular functioning because they are the primary mediators of cell to cell communication.Their location on the cell surface also makes them the most accessible targets for drug discovery. Cellular communication occurs when one cell releases a chemical messenger, called a "ligand," which communicates with another cell by binding to and activating the receptor on the exterior of the second cell. Typically, a ligand binds only with one specific receptor. This binding event activates the receptor triggering the transmission of a message through a cascade of signaling molecules from the exterior to the interior of the cell. This process is called signal transduction. When the signal is transmitted into the interior of the cell, it may, among other things, activate or suppress specific genes that switch on or switch off specific biological functions of the cell. The biological response of the cell, such as the secretion of a protein, depends primarily on the specific ligand and receptor involved in the communication.
[GRAPHICAL REPRESENATION OF CELL MEMBRANE]
DIAGRAM: SIGNAL TRANSDUCTION IS THE PROCESS BY WHICH A SIGNAL IS TRANSMITTED FROM THE EXTERIOR OF THE CELL TO ITS INTERIOR, CAUSING THAT CELL TO CHANGE ITS BIOLOGICAL BEHAVIOR. LIGAND-RECEPTOR BINDING LEADS TO A SIGNAL BEING TRANSMITTED TO THE INTERIOR OF THE CELL VIA A CASCADE OF SIGNALING MOLECULES. THE SIGNAL CAN CAUSE A DIRECT
BIOLOGICAL RESPONSE BY THE CELL WITHOUT ACTIVATING THE CELL'S GENES OR CAN ACTIVATE OR DEACTIVATE GENES IN THE NUCLEUS, WHICH IN TURN TRIGGER A BIOLOGICAL RESPONSE.
Many diseases, such as cancer, stem from the malfunctioning of cellular communication. Efforts to treat a particular disease often concentrate on developing drugs that interact with the receptor or signaling pathway believed to be associated with the malfunction. These drugs work by inhibiting or enhancing the transmission of a signal through the cascade of signaling molecules triggered by the receptor. Drugs that inhibit signal transduction by blocking a receptor or the intracellular proteins that carry the signal sent by a receptor are called antagonists and those that enhance signal transduction by stimulating a receptor or associated intracellular proteins are called agonists.
Human cells carry many different types of receptors. Receptors are classified into groups based upon similarities in their chemistry and structure. Some of the major receptor groups involved in signal transduction are: G protein-coupled receptors, cytokine receptors, tyrosine kinase coupled receptors and multisubunit immune recognition receptors. G protein-coupled receptors, which are located on the surface of the cell, constitute the largest group of receptors. In humans, G protein-coupled receptors are involved in many of the body's most basic functions, including heartbeat, sight, sense of smell, cognition and behavior and also mediate most of the body's basic responses such as secretion from glands, contractility of blood vessels, movement of cells, growth and cell death. Tyrosine kinase coupled receptors are involved in cell growth and differentiation. Multisubunit immune recognition receptors activate the body's immune defense system.
There are an estimated 2,000 to 5,000 genes encoding G protein-coupled receptors in the human genome. The sequences and functions of approximately 100 of these genes have been identified. This knowledge has been used to help identify the sequence of an additional approximately 100 genes encoding orphan G protein-coupled receptors. As a result of the sequences being identified as part of the Human Genome Project, it is expected that all remaining G protein-coupled receptor genes will be sequenced over the next few years. Even after the gene sequence of an orphan receptor has been identified, it generally cannot become the subject of drug discovery efforts until its biological function is determined and its role in disease processes identified.
The importance of G protein-coupled receptors is demonstrated by the fact that more than 60% of all commercially available prescription drugs work by interacting with G protein-coupled receptors. These drugs include the anti-ulcer agents Zantac and Tagamet, as well as the cardiac drugs Tenormin and Lopressor. Many of these drugs were developed through the application of time consuming and expensive trial and error methods without an understanding of the chemistry and structure of the G protein-coupled receptors with which they interact. More efficient drug discovery methods are available once the gene sequence, biological function and role in disease processes of a G protein-coupled receptor have been determined. The Company believes that the identification of the gene sequences and functions of the remaining receptors will yield a substantial number of potential drug discovery targets.
Traditional Drug Discovery
Drug discovery consists of three key elements: (i) the target, such as a receptor, on which the drug will act, (ii) the potential drug candidates, which include organic chemicals, proteins or peptides, and (iii) the assays or tests to screen these compounds to determine their effect on the target.
Historically, drug discovery has been an inefficient and expensive process. Traditional drug discovery has been hampered by the limited number of known targets and a reliance on in vitro assays as a format in which to test compounds. Until scientists began to define the molecular structure of receptors and ligands, there was no simple method to determine the function of such molecules in the cell and, therefore, their utility as drug discovery targets. Even when the target's molecular structure is known, incorporating that target effectively into an in vitro assay can be difficult. For example, all known G protein-coupled receptors are woven through the cell membrane seven times in a very complex, looped structure that cannot be maintained when the isolated protein is put into an in vitro assay format. If an assay does not accurately replicate the structure of a target receptor, the compounds identified in the assay may not function as expected when applied to the target receptor on a living cell. Furthermore, receptors, signal transduction proteins and other molecular targets for therapeutic intervention do not exist in isolation in the cell. Their functional activity results from a complex interrelationship with numerous
other molecules within the cell. Consequently, traditional drug screening assays often identify compounds as potential drug candidates which, when tested in living cells, prove to have no useful activity or are even toxic. A variety of methods have been developed to address these problems, including using living cells in assays. However, most live cell assays are slow, complex and expensive to maintain.
In recent years, scientific advances have created new and improved tools for drug discovery. For example, molecular biology is identifying a growing number of targets and their gene sequences. Cells have been genetically engineered to produce assays that more effectively replicate the physiological environment of a living organism. Robotics have enabled the creation of high-throughput screening systems. Combinatorial chemistry has enhanced the ability to optimize lead compounds by improving their pharmacological characteristics. However, due to the complexity of G protein-coupled receptors and limited knowledge of their gene sequences and function, these advances do not offer a comprehensive, rapid and cost effective approach to the identification of drug discovery candidates targeted at G protein-coupled receptors.
Yeast
Yeast is a single-celled microorganism that is commonly used to make bread, beer and wine. In the 1980's, scientists discovered structural and functional similarities between yeast cells and human cells. Both yeast and human cells consist of a membrane, an intracellular region and a nucleus containing genes. Basic cellular processes, including metabolism, cell division, DNA and RNA synthesis and signal transduction, are the same in both human and yeast cells. Yeast also have signal transduction pathways that function similarly to human cell pathways. More than 40 percent of all human gene classes have functional equivalents in yeast. The genes in yeast express proteins, including cell-surface receptors such as G protein-coupled receptors and signaling molecules such as protein kinases, that are similar to human proteins.
The Company believes that yeast cells have several important characteristics that are useful in drug discovery.
o The strong correlation between human and yeast gene classes enables the evaluation of the biological function of human proteins, including receptors and signaling molecules, of unknown function. Proteins with comparable gene sequences frequently carry out similar functions. This fact can be used to determine the function of a human gene by genetically engineering a yeast cell to replace a yeast gene coding for a known function with the human gene suspected of having a comparable function. If the yeast cell retains its normal function, it suggests that the human gene and its protein have a biological function similar to that of their yeast counterparts. Consequently, genetically-engineered yeast cells can replicate human gene function and provide a biologically relevant context for evaluating interactions between receptors and their related signaling pathways.
o Recently, the yeast genome has been fully sequenced. This knowledge will enable full analysis of the correlation between yeast and human gene structure and may aid in the definition of human gene functions.
o While the yeast signaling mechanism bears many similarities to the human signaling mechanism, the yeast intracellular environment is less complex, thus eliminating much of the ancillary and redundant intracellular signaling pathways that exist in human cells.
o Yeast have the ability to absorb DNA fragments and incorporate them into their genome. As a result, their genetic structure can be easily manipulated using common genetic engineering techniques.
o Yeast cells replicate rapidly. Speed of replication is particularly important because creating a new yeast strain that successfully incorporates new genetic material and adapts to new conditions may take several generations and the strain that so adapts is identifiable by growth. In addition, because a yeast cell reproduces itself every two hours, compared with 24 to 48 hours for mammalian cells, a drug screening process using yeast can be developed and evaluated much faster than one using human cell assays.
o Yeast can be easily and inexpensively grown in the laboratory using standard microbiological techniques and, as a consequence, can readily be used in automated screening systems.
o Yeast are resistant both to the solvents often needed to dissolve potentially active compounds and the toxins often found in natural products. Consequently, hybrid yeast cells can be used to screen libraries of synthetic compounds, combinatorial chemicals or natural products.
CADUS' DRUG DISCOVERY AND DEVELOPMENT STRATEGY
The Company's goal is to discover and develop novel small molecule drugs targeted to receptors and signaling molecules. The following are the key elements of the Company's strategy:
o Develop Proprietary Yeast-Based Drug Discovery Technologies. The Company manipulates the yeast genome by inserting human genes into yeast cells to create hybrid yeast strains as a novel drug discovery platform.
o Identify Novel Orphan Receptor Targets. The Company uses its proprietary yeast-based and signal transduction technologies to determine the biological function of orphan receptors in human cells and to determine whether they are appropriate drug discovery targets.
o Identify Novel Targets in Signal Transduction Pathways. The Company uses its proprietary signal transduction technologies to identify new signaling molecules in signal transduction pathways and to determine whether they are appropriate drug discovery targets.
o Conduct Proprietary Drug Discovery and Development Programs. The Company conducts proprietary drug discovery programs to identify novel targets and lead compounds. The Company intends to develop selected lead compounds through the preclinical testing stage.
o Collaborate with Pharmaceutical Companies. The Company collaborates with pharmaceutical companies in order to combine its drug discovery capabilities with its collaborators' research, drug development, manufacturing, marketing and financial resources. The Company is currently engaged in collaborations with Bristol-Myers Squibb and Solvay Duphar.
CADUS' DRUG DISCOVERY PLATFORM
The Company has developed a novel platform for drug discovery that addresses many of the limitations of traditional drug discovery methods. This platform consists of four proprietary drug discovery technologies: two that are used to screen for compounds that act as agonists or antagonists to cell surface receptors and other molecules in the signal transduction pathway, and two that are used to identify and characterize orphan receptors, ligands and key signaling molecules.
Hybrid Yeast Cells
The Company has developed a proprietary technology to insert human genes into yeast cells to create hybrid yeast cells. Initially, the Company has focused its hybrid yeast cell technology primarily on G protein-coupled receptors. The Company's scientists typically create hybrid yeast cells by replacing yeast G protein-coupled receptor genes and certain signaling molecules with their human equivalents. As a result, these hybrid yeast cells express a human G protein-coupled receptor and a portion of its signaling pathway. The Company uses these hybrid yeast cells to identify those compounds that act as agonists or antagonists to that receptor or a molecule that is in its signaling pathway. The Company has also created hybrid yeast cells using other classes of human cell-surface receptors that have a functional equivalent in yeast. Because different yeast strains accept particular human proteins more readily than others, the Company has designed and developed tens of thousands of genetically different yeast strains that are used to build novel hybrid yeast cells.
The Company believes that hybrid yeast cells are highly effective for screening compounds. Hybrid yeast cells can be used to measure the biological activity of the human signaling pathway in which intervention is desired. In addition, hybrid yeast cells contain a single human receptor which connects to a defined signaling pathway. Accordingly, a specific change in cell behavior, such as replication, is easily monitored and can be attributed to the compound being tested. Also, because the Company is able to insert different human genes into yeast, hybrid yeast cells enable the Company to identify compounds that act at virtually any site in the human cell signaling pathway. These sites include the ligand binding site on the receptor, as well as other sites on the receptor, and the protein components of individual signaling pathways. Moreover, because yeast are resistant to solvents
and toxins often used to dissolve test compounds, hybrid yeast cells can be used to screen synthetic organic libraries, combinatorial libraries and natural product libraries. Finally, the Company uses hybrid yeast cells to perform inexpensive high throughput screening of compound libraries.
Autocrine Peptide Expression System (APEX)
The Company has extended its hybrid yeast cell technology to develop a novel drug screening technology. Biological signaling frequently involves the concerted behavior of at least two cells: one that sends the signal and a second that receives and responds to that signal. The Company's scientists have converted this natural multi-cell process into a single cell process by inserting into a hybrid yeast cell both the gene for a humanG protein-coupled receptor and the gene for the ligand that naturally binds to that receptor on the same hybrid yeast cell. As a result, the Company's scientists have made the cell self-stimulating, or "autocrine," in that it both sends a signal through production and secretion of a ligand and responds, by replication, to that same signal through the receptor. The Company believes that the autocrine nature of the APEX system makes it an effective tool for the identification of compounds that act as agonists or antagonists with respect to that receptor or a molecular target in its signaling pathway. As a result, drug screening may be conducted in an accelerated, cost effective process as compared to conventional screening techniques.
Self Selecting Combinatorial Library Technology (SSCL)
The Company has developed and is using a systematic approach to determine the biological function of orphan receptors and demonstrate their value as drug discovery targets. The critical first step in this approach is to identify a ligand that activates the orphan receptor. The Company accomplishes this by using its proprietary SSCL technology. The SSCL technology involves the creation of a library of peptides encoded in DNA, called a combinatorial peptide expression library. This library is inserted into a strain of hybrid yeast cells. All of the cells in this strain express the same orphan receptor. As a result, each of the millions of yeast cells in the strain incorporates a different peptide encoded in DNA, resulting in the expression or production of a different peptide by each yeast cell. This peptide is then secreted through the cell membrane. Most of the secreted peptides have no effect on the orphan receptor and the hybrid yeast cells producing these peptides do not replicate. The Company estimates that one in a million hybrid yeast cells generates a peptide ligand that activates the orphan receptor. These particular hybrid yeast cells replicate and, therefore, are readily identified. Thus, the SSCL technology uses self selection to identify the ligand that binds to the targeted orphan receptor. The sequence of the peptide ligand can then be rapidly identified and undergo further evaluation. The Company's combinatorial peptide expression libraries contain approximately one hundred million peptides. One to ten million peptides can be tested in a matter of hours. The Company has used its SSCL technology to successfully identify ligands to orphan receptors in less than a week, significantly accelerating traditional drug discovery efforts.
Once the Company has identified a ligand that activates an orphan receptor, the Company uses a number of different approaches to determine the biological significance of the orphan receptor. These include testing the ligand on human cells, in animals and on human tissue. In addition, the Company uses its signal transduction technologies to determine the human cell signaling pathway that is linked to the orphan receptor in order to thereby determine whether to focus drug discovery efforts at the receptor or in the signaling pathway.
Signal Transduction Technologies
The Company has developed signal transduction technologies, based on genetically engineered human cells, to complement its yeast-based technologies. The Company uses these signal transduction technologies to dissect human cell signaling pathways from the receptor to the interior of the cell. As a result, the Company can confirm the effectiveness of compounds identified through the use of hybrid yeast cells and ligands identified by the SSCL technology and determine where and how compounds and ligands modulate the signaling pathway. Potential sites of action by a compound include the receptor itself or molecules downstream in the receptor's signal transduction pathway. Accordingly, each molecule in the signaling pathway may be a potential target for drug discovery. Traditional drug discovery has resulted in several successful drugs that are now known to target such molecules in the signaling pathway, including the immunosuppressants Cyclosporin A and FK506. For this reason, the Company is pursuing such molecules as potential targets for drug discovery. The Company's scientists have used the Company's signal transduction technologies to develop proprietary assays to identify antagonists of specific
molecular targets, as
well as to identify new molecular targets in the signaling pathway. The Company
also uses its yeast-based and human cell-based technologies to determine the
function of such newly identified signaling molecules.
The Company's scientists have used the Company's signal transduction technologies to discover, sequence and characterize a series of related MEKK enzymes that are part of the inflammatory signaling pathway in human white blood cells. MEKK enzymes regulate the synthesis and secretion from white blood cells of cytokines, some of which are inflammation inducing proteins. MEKK enzymes have also been shown to play a central role in regulating cell growth and cell death in a variety of cell types, including cancer. The Company is the exclusive worldwide licensee of a patent on a MEKK enzyme. The Company believes that MEKK enzymes are important targets for drug discovery.
Other Drug Discovery Technologies
Information technology is an important tool in the Company's drug discovery strategy. The gene sequence of the entire yeast genome and large portions of the human genome are available on public databases. The Company uses a variety of software in combination with its extensive knowledge of the structure of G protein-coupled and other receptors to search these databases for previously unrecognized human receptors that represent potential drug discovery targets and for correspondences between gene sequences in the human and yeast genomes. The Company believes that this use of information technology will result in more focused and productive drug discovery programs.
The Company uses a variety of other drug discovery tools, such as high throughput screening and combinatorial chemistry. High throughput screening is the practice of rapidly testing thousands of compounds against a target assay by using computer controlled robotics. Cadus has developed a proprietary laboratory information system to handle the vast quantity of data generated. Combinatorial chemistry techniques optimize a compound's pharmacological characteristics once it has been identified as a drug candidate. Optimization involves improving the potency, stability, bioavailability and toxicity characteristics of a lead compound by synthesizing new compound analogs.
The Company's drug discovery strategy includes the screening of compound libraries. Access to large libraries of diverse compounds is, therefore, an important aspect of the Company's drug discovery efforts. The Company assembles combinatorial chemical libraries from readily available and inexpensive chemical building blocks. In addition, the Company has acquired its own synthetic organic compound library. The Company also has access to the compound libraries of Bristol-Myers Squibb and Solvay Duphar and the combinatorial libraries of Houghten Pharmaceuticals, Inc. ("Houghten").
CADUS' PROPRIETARY DRUG DISCOVERY PROGRAM
The Company is conducting proprietary drug discovery programs to identify novel targets and lead compounds. The Company has directed these efforts to G protein-coupled receptors, G proteins, tyrosine kinase coupled receptors, multisubunit immune recognition receptors, cytokine receptors, phosphotyrosine phosphatases and certain other intracellular signaling molecules, including MEKK enzymes, as potential targets for a variety of therapeutic areas. These therapeutic areas are allergic inflammation, acute inflammation and cancer, with a specific focus on allergic asthma and small-cell lung carcinoma. There can be no assurance that the Company's drug discovery efforts will lead to the discovery of lead compounds in these therapeutic areas.
Allergic Inflammation. Approximately 20% of the population of the United States suffers from time to time from some form of allergic inflammation. The best known form of allergic inflammation is asthma. Approximately 14 million people each year suffer from asthma in the United States. Asthma and other allergic responses result from a complex series of physiological events involving signaling by chemokine, IgE and cytokine receptors, with IgE receptor signaling initiating the allergic response. Chemokine receptors are G protein-coupled receptors. IgE receptors and cytokine receptors are coupled to specific tyrosine kinases, which are proteins in the signaling cascade.
The Company has used its signal transduction technologies to define a small molecule agonist which stimulates an enzyme that blocks IgE receptor signaling. This prevents the release of histamine and other substances which cause allergic inflammation. The Company is currently optimizing an analog of this compound
to improve its pharmaceutical characteristics, although no assurance can be given that such efforts will result in a product candidate.
SCLC. Approximately 20% of all lung cancer is small-cell lung carcinoma ("SCLC"), and approximately 35,000 people each year are diagnosed with this disease in the United States. The disease is characterized by rapid tumor growth and metastasis, and the mean survival of untreated patients is only two to three months. SCLC generally cannot be surgically removed and chemotherapy has not been effective. Certain G protein-coupled receptors stimulate SCLC growth. Based on this knowledge, the Company has used its signal transduction technologies and identified peptides that selectively cause the death of SCLC cells in vitro. The Company is using its hybrid yeast cells and other technologies in efforts to identify small molecules that mimic the action of SCLC-death promoting peptides and believes this approach, if successful, may lead to a novel therapeutic for SCLC.
Houghten Joint Discovery Program. In January 1995, the Company and Houghten commenced a joint discovery effort, with acute inflammation as the initial therapeutic focus for the collaboration. Houghten provides combinatorial libraries to the Company and the Company screens such combinatorial libraries against hybrid yeast cells for the purpose of identifying candidates for drug development. Houghten and the Company may jointly develop or sell or license any such compounds identified by the Company as candidates for drug development to corporate partners of the Company or others. Either Houghten or the Company may develop any such compound on its own if the other party elects not to pursue joint development.
COLLABORATIVE ARRANGEMENTS
As a key part of its business strategy, the Company pursues collaborations with pharmaceutical companies to combine the Company's drug discovery capabilities with the collaborators' research, drug development, manufacturing, marketing and financial resources. The Company has existing collaborative arrangements with two pharmaceutical companies and is currently in discussions with several other pharmaceutical companies regarding potential collaborations. The Company structures its collaborations around specific targets, such as receptors and signaling molecules, rather than in specific therapeutic areas. This approach enables the Company to broadly exploit its drug discovery technologies, while retaining maximum flexibility in pursuing additional collaborations. There can be no assurance, however, that the current collaborations will result in the development of drugs, any new collaboration will be established or, if a collaboration is established, it will be on terms favorable to the Company. Failure either to maintain its existing, or enter into any new, collaborations could limit the scope of the Company's drug discovery and development activities, particularly if alternative sources of funding are unavailable. Such failure could have a material adverse effect on the Company's business, financial condition and results of operations.
The Company's existing collaborations are as follows:
The Bristol-Myers Squibb Collaboration
In July 1994, the Company and Bristol-Myers Squibb entered into a three-year drug discovery collaboration. Currently, the collaboration focuses on certain G protein-coupled receptors whose functions are known, certain orphan receptors and certain other molecular targets as targets for drug discovery in a variety of therapeutic areas. These therapeutic areas include cardiovascular disease, acute inflammation, central nervous system disorders, obesity and diabetes. Bristol-Myers Squibb's use of the Company's yeast-based technologies has resulted in the identification of potential lead compounds in the area of central nervous system disorders. The collaboration has also resulted in the identification of a ligand for an orphan receptor that acts on human cells in vitro and that has been delivered to Bristol-Myers Squibb for further evaluation in animal models.
During the term of the research program, Bristol-Myers Squibb is required to provide the Company with research funding of up to $4.0 million each year. From July 1994 through March 31, 1996, Bristol-Myers Squibb paid the Company approximately $6.4 million in research funding. Bristol-Myers Squibb is required to make payments to the Company upon the achievement by Bristol-Myers Squibb of certain drug development milestones and to pay the Company royalties on the sale of any drugs developed as a result of the research program or through the use of the Company's drug discovery technologies. The research program expires in July 1997 and it cannot be terminated by Bristol-Myers Squibb unless the Company breaches a material obligation and does not
cure such breach for a period of 60 days after receiving notice. The research program may be extended by Bristol-Myers Squibb, on essentially the same terms adjusted for inflation, for an additional two years by notice to the Company given prior to February 1997.
Bristol-Myers Squibb purchased $12.5 million of the Company's Series B Convertible Preferred Stock ("Series B Preferred Stock") in July 1994 and an additional $5.0 million of such Series B Preferred Stock in September 1995 upon the Company achieving a research milestone. In connection with its sale of Series B Preferred Stock to Bristol-Myers Squibb, the Company granted to Bristol-Myers Squibb certain registration rights with respect to the shares of Common Stock issuable upon the conversion of the shares of Series B Preferred Stock owned by it.
The Solvay Duphar Collaboration
In November 1995, the Company and Solvay Duphar (an indirect wholly-owned subsidiary of Solvay S.A.) entered into a drug discovery collaboration. The collaboration focuses on certain G protein-coupled receptors whose functions are known, certain orphan receptors and certain other molecular targets as targets for cardiovascular disease, central nervous system disorders, gynecological diseases and gastrointestinal indications. The Company is in the initial phase of this collaboration and is cloning, identifying and confirming targets related to these therapeutic areas.
During the term of the research program, which expires in December 2000, Solvay Duphar is required to provide the Company with research funding of up to $2.5 million each year, adjusted for inflation. Solvay Duphar has an option to increase its funding commitment up to $3.8 million, commencing in 1997. Such option must be exercised prior to October 1996. From November 1995 through March 31, 1996, Solvay Duphar paid the Company approximately $1.0 million in research funding. Solvay Duphar is required to make payments to the Company upon the achievement by Solvay Duphar of certain drug development milestones and to pay the Company royalties on the sale of drugs developed through the use of the Company's drug discovery technologies.
The term of the research program may be extended by Solvay Duphar for between two and five years by notice to the Company given at least two years (and in some circumstances at least 18 months) prior to January, 2001. Solvay Duphar has the right under certain circumstances to terminate the program after July 1998, if the Company fails to meet certain minimum performance objectives in connection with the conduct of the research program. In the event of such termination, Solvay Duphar has no further obligation to provide the Company with funding for the research program. There can be no assurance that the Company will be able to meet the minimum performance objectives or that the collaboration with Solvay Duphar will be extended or if extended, that such collaboration will result in the development of any drugs.
The Company has reserved the right to use certain hybrid yeast cells that are part of the research program for its own benefit in the discovery of drugs relating to cancer, autoimmune, allergic and inflammatory diseases, with certain specific exclusions. The Company is required to make payments to Solvay Duphar upon the achievement by the Company of certain drug development milestones and to pay Solvay Duphar royalties on the sale of such drugs.
In November 1995, Physica B.V., an indirect wholly-owned subsidiary of Solvay S.A. (the "Solvay Subsidiary"), purchased $10.0 million of the Company's Series B Preferred Stock. In connection with its sale of Series B Preferred Stock to the Solvay Subsidiary, the Company granted to the Solvay Subsidiary certain registration rights with respect to the shares of Common Stock issuable upon the conversion of the shares of Series B Preferred Stock owned by it.
PATENTS, PROPRIETARY TECHNOLOGY AND TRADE SECRETS
The Company believes that patents and other proprietary rights are important to the development of its business. The Company also relies upon trade secrets, know-how, continuing technological innovations and
licensing opportunities to develop and maintain its competitive position. As of April 30, 1996, the Company was the exclusive worldwide licensee of two issued U.S. patents and a field exclusive worldwide licensee of another issued U.S. patent. In addition, as of such date, the Company had filed or held exclusive or field exclusive licenses to 46 U.S. patent applications, as well as related foreign patent applications.
The Company seeks to protect its proprietary technology at every stage of development. The Company files patent applications which claim inventions arising from each of the various aspects of the Company's drug discovery and development process including: gene sequences encoding novel targets and ligands, amino acid sequences of protein targets, methods of treating a disease based on the Company's knowledge of how signaling molecules interact with one another and how this causes an abnormal condition, and specific chemical compositions that may be useful as therapeutics, as well as novel methods of manufacture. In addition, the Company files patent applications claiming its proprietary methodologies, such as drug discovery techniques, unless it believes that keeping an invention a trade secret is preferable. This approach may give the Company multiple opportunities of proprietary protection.
The Company has obtained from Duke University an exclusive worldwide license to an issued U.S. patent and U.S. and international patent applications covering hybrid yeast cell technologies. In consideration for such license, the Company pays a minimum annual royalty and is required to make payments upon the achievement by the Company of certain drug development milestones and to pay royalties (net of minimum royalties) on the sale of drugs by the Company which were initially identified by the Company through the use of the licensed technology. In lieu of milestones and royalty payments on sales of drugs by sublicensees initially identified by sublicensees through the use of the licensed technology, the Company pays an annual fee (net of the minimum annual royalty) for each sublicense granted by it to such technology. This patent and these patent applications are directed to hybrid yeast cells engineered to express human G protein-coupled receptors and to methods of their use.
The Company has also filed patent applications based on inventions by Cadus' scientists directed to hybrid yeast cells and yeast cells engineered to produce both peptide libraries and human proteins that can function in certain signal transduction pathways of the engineered yeast cell. These applications seek to protect aspects of the APEX and SSCL technologies. The Company has also filed patent applications directed to methods, constructs and reagents, including engineered cells, for discovering ligands to orphan receptors. Peptides, and mimetics thereof, which have been discovered using the SSCL technology are also covered in these patent applications both as compositions and for their therapeutic use.
The Company is the exclusive worldwide licensee of an issued U.S. patent relating to an MEKK enzyme and U.S. and international patent applications in the field of signal transduction in human cells from National Jewish Center for Immunology and Respiratory Medicine. In consideration for such license, the Company pays an annual maintenance fee and is required to make payments upon the achievement by the Company of certain drug development milestones and to pay royalties (net of annual fees and milestone payments) on the sale of drugs by the Company whose utility was identified by the Company through the use of the licensed technology. In lieu of milestone and royalty payments on sales of drugs by sublicensees initially identified by sublicensees through the use of the licensed technology, the Company pays an annual fee (net of the annual maintenance fee) for each sublicense in effect. Certain of these patent applications are directed to novel genes and gene products and methods of their use, including as therapeutic targets in drug screening assays. Certain other patent applications are directed to certain small molecule agents and their uses in modulating cellular signal transduction, particularly as therapeutic agents.
The Company has granted certain rights under several of its patents and patent applications relating to its yeast-based technologies to Bristol-Myers Squibb and Solvay Duphar.
In addition to patent protection, the Company relies upon trade secrets, proprietary know-how and technological advances to develop and maintain its competitive position. To maintain the confidentiality of its trade secrets and proprietary information, the Company requires its employees, consultants and collaborative partners to execute confidentiality agreements upon the commencement of their relationships with the Company. In the case of employees and consultants, the agreements also provide that all inventions resulting from work performed by them while in the employ of the Company will be the exclusive property of the Company.
Patent law as it relates to inventions in the biotechnology field is still evolving, and involves complex legal and factual questions for which legal principles are not firmly established. Accordingly, no predictions can be made
regarding the breadth or enforceability of claims allowed in the patents that have been issued to the Company or its licensors or in patents that may be issued to the Company or its licensors in the future. Accordingly, no assurance can be given that the claims in such patents, either as initially allowed by the United States Patent and Trademark Office or any of its foreign counterparts or as may be subsequently interpreted by courts inside or outside the United States, will be sufficiently broad to protect the Company's proprietary rights, will be commercially valuable or will provide competitive advantages to the Company and its present or future collaborative partners or licensees. Further, there can be no assurance that patents will be granted with respect to any of the Company's pending patent applications or with respect to any patent applications filed by the Company in the future. There can be no assurance that any of the Company's issued or licensed patents would ultimately be held valid or that efforts to defend any of its patents, trade secrets, know-how or other intellectual property rights would be successful.
The field of gene discovery has become intensely competitive. A number of pharmaceutical companies, biotechnology companies, universities and research institutions have filed patent applications or received patents covering their gene discoveries. Some of these applications or patents may be competitive with the Company's applications or conflict in certain respect with claims made under the Company's applications. Moreover, because patent applications in the United States are maintained in secrecy until patents issue, because patent applications in certain other countries generally are not published until more than eighteen months after they are filed and because publication of technological developments in the scientific or patent literature often lags behind the date of such developments, the Company cannot be certain that it was the first to invent the subject matter covered by its patents or patent applications or that it was the first to file patent applications for such inventions. If an issue regarding priority of inventions were to arise with respect to any of the patents or patent applications of the Company or its licensors, the Company might have to participate in litigation or interference proceedings declared by the United States Patent and Trademark Office or similar agencies in other countries to determine priority of invention. Any such participation could result in substantial cost to the Company, even if the eventual outcome were favorable to the Company.
In some cases, litigation or other proceedings may be necessary to defend against or assert claims of infringement, to enforce patents issued to the Company or its licensors, to protect trade secrets, know-how or other intellectual property rights owned by the Company, or to determine the scope and validity of the proprietary rights of third parties. Such litigation could result in substantial costs to and diversion of resources by the Company. An adverse outcome in any such litigation or proceeding could subject the Company to significant liabilities, require the Company to cease using the subject technology or require the Company to license the subject technology from the third party, all of which could have a material adverse effect on the Company's business, financial condition and results of operations. If any licenses are required, there can be no assurance that the Company will be able to obtain any such license on commercially favorable terms, if at all, and if these licenses are not obtained, the Company might be prevented from using certain of its technologies. The Company's failure to obtain a license to any technology that it may require to continue its drug discovery efforts may have a material adverse effect on the Company's business, financial condition and results of operations.
COMPETITION
The biotechnology and pharmaceutical industries are intensely competitive. Many companies, including large, multinational biotechnology and pharmaceutical companies, are actively engaged in drug discovery similar to that of the Company. The Company's technology platform consists principally of genetically engineered yeast cells and certain signal transduction technologies, which it utilizes to determine the biological function of orphan receptors and signaling molecules. The Company is aware of other companies, such as American Home Products Corporation and Glaxo Wellcome, Plc, that may use yeast as a drug discovery medium, other companies, such as Merck & Co., Inc. and SmithKline Beecham, Plc, that may be engaged in efforts to determine the biological function of orphan receptors, and other companies such as Sandoz Ltd. and Pfizer Inc. that may be engaged in research and development efforts relating to signal transduction. In addition, there are several smaller companies pursuing these areas of research. Furthermore, many companies have potential drugs in various stages of development to treat asthma and small-cell lung carcinoma, two diseases targeted by the Company in its proprietary research programs. Many of the Company's competitors have greater financial and human resources, and more experience in research and development, preclinical and clinical testing, obtaining regulatory approvals, manufacturing and marketing than the Company. There can be no assurance that competitors of the Company will
not develop competing drug discovery technologies or drugs that are more effective than those developed by the Company and its collaborative partners or obtain regulatory approvals of their drugs more rapidly than the Company and its collaborative partners, thereby rendering the Company's and its collaborative partners' drug discovery technologies and/or drugs obsolete or noncompetitive. Moreover, there can be no assurance that the Company's competitors will not obtain patent protection or other intellectual property rights that would limit the Company's or its collaborative partners' ability to use the Company's drug discovery technologies or commercialize drugs, which could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, there can be no assurance that some of the Company's collaborative partners will not develop independently or with third parties drugs that could compete with drugs of the types covered by the collaboration or otherwise being developed by the Company. Furthermore, there is intense competition for access to libraries of compounds to use for screening and any inability of the Company to maintain access to sufficiently broad libraries of compounds for screening potential targets would have a material adverse effect on the Company's business, financial condition and results of operations.
The Company also expects to encounter significant competition with respect to any drugs that may be developed using its technologies. Companies that complete clinical trials, obtain required regulatory approvals and commence commercial sales of their drugs before their competitors may achieve a significant competitive advantage. In order to compete successfully, the Company's goal is to obtain patent protection for its gene discoveries and drug discovery technologies and to make these technologies available to pharmaceutical companies through collaborative and licensing arrangements for use in discovering drugs. There can be no assurance, however, that the Company will obtain patents covering its technologies that protect it against competitors. Moreover, there can be no assurance that the Company's competitors will not succeed in developing technologies that circumvent the Company's technologies or that such competitors will not succeed in developing technologies and drugs that are more effective than those developed by the Company and its collaborative partners or that would render technology or drugs of the Company and its collaborators less competitive or obsolete.
GOVERNMENT REGULATION
The development, manufacturing and marketing of drugs developed through the use of the Company's technologies are subject to regulation by numerous governmental agencies in the United States and in other countries. To date, none of the Company's technologies has resulted in any clinical drug candidates. The FDA and comparable regulatory agencies in other countries impose mandatory procedures and standards for the conduct of certain preclinical testing and clinical trials and the production and marketing of drugs for human therapeutic use. Product development and approval of a new drug are likely to take a number of years and involve the expenditure of substantial resources.
The steps required by the FDA before new drugs may be marketed in the United States include:(i) preclinical studies; (ii) the submission to the FDA of an investigational new drug (an "IND"); (iii) adequate and well-controlled clinical trials to establish the safety and efficacy of the drug for its intended use; (iv) submission to the FDA of a new drug application (an "NDA"); and (v) review and approval of the NDA by the FDA before the drug may be shipped or sold commercially.
In the United States, preclinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Laboratories involved in preclinical testing must comply with FDA regulations regarding Good Laboratory Practices. Preclinical testing results are submitted to the FDA as part of the IND and are reviewed by the FDA prior to the commencement of human clinical trials. Unless the FDA objects to an IND, the IND will become effective 30 days following its receipt by the FDA. There can be no assurance that submission of an IND will result in the commencement of human clinical trials.
Clinical trials, which involve the administration of the investigational drug to healthy volunteers or to patients under the supervision of a qualified principal investigator, are typically conducted in three sequential phases, although the phases may overlap with one another. Clinical trials must be conducted in accordance with Good Clinical Practices under protocols that detail the objectives of the study, the parameters to be used to monitor safety and the efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Further, each clinical study must be conducted under the auspices of an independent Institutional Review Board (the "IRB") at the institution where the study will be conducted. The IRB will consider, among other things,
ethical factors, the safety of human subjects and the possible liability of the institution. Compounds must be formulated according to the FDA's Good Manufacturing Practices ("GMP").
Phase I clinical trials represent the initial administration of the investigational drug to a small group of healthy human subjects or, more rarely, to a group of selected patients with the targeted disease or disorder. The goal of Phase I clinical trials is typically to test for safety (adverse effects), dose tolerance, absorption, bio-distribution, metabolism, excretion and clinical pharmacology and, if possible, to gain early evidence regarding efficacy.
Phase II clinical trials involve a small sample of the actual intended patient population and seek to assess the efficacy of the drug for specific targeted indications, to determine dose tolerance and the optimal dose range and to gather additional information relating to safety and potential adverse effects.
Once an investigational drug is found to have some efficacy and an acceptable safety profile in the targeted patient population, Phase III clinical trials are initiated to establish further clinical safety and efficacy of the investigational drug in a broader sample of the general patient population at geographically dispersed study sites in order to determine the overall risk-benefit ratio of the drug and to provide an adequate basis for all physician labeling. The results of the research and product development, manufacturing, preclinical testing, clinical trials and related information are submitted to the FDA in the form of an NDA for approval of the marketing and shipment of the drug.
Timetables for the various phases of clinical trials and NDA approval cannot be predicted with any certainty. The Company, its collaborative partners or the FDA may suspend clinical trials at any time if it is believed that individuals participating in such trials are being exposed to unacceptable health risks. Even assuming that clinical trials are completed and that an NDA is submitted to the FDA, there can be no assurance that the NDA will be reviewed by the FDA in a timely manner or that once reviewed, the NDA will be approved. The approval process is affected by a number of factors, including the severity of the targeted indications, the availability of alternative treatments and the risks and benefits demonstrated in clinical trials. The FDA may deny an NDA if applicable regulatory criteria are not satisfied, or may require additional testing or information with respect to the investigational drug. Even if initial FDA approval is obtained, further studies, including post-market studies, may be required in order to provide additional data on safety and will be required in order to gain approval for the use of a product as a treatment for clinical indications other than those for which the product was initially tested. The FDA will also require post-market reporting and may require surveillance programs to monitor the side effects of the drug. Results of post-marketing programs may limit or expand the further marketing of the drug. Further, if there are any modifications to the drug, including changes in indication, manufacturing process or labeling, an NDA supplement may be required to be submitted to the FDA.
Each manufacturing establishment for new drugs is also required to receive some form of approval by the FDA. Among the conditions for such approval is the requirement that the prospective manufacturer's quality control and manufacturing procedures conform to GMP, which must be followed at all times. In complying with standards set forth in these regulations, manufacturers must continue to expend time, monies and effort in the area of production and quality control to ensure full technical compliance. Manufacturing establishments, both foreign and domestic, are also subject to inspections by or under the authority of the FDA and may be subject to inspections by foreign and other Federal, state or local agencies.
There can be no assurance that the regulatory framework described above will not change or that additional regulations will not arise that may affect approval of or delay an IND or an NDA. The Company has no preclinical or clinical development expertise and intends to rely on its collaborative partners and third party clinical research organizations to design and conduct most of such activities if required. Moreover, because the Company's present collaborative partners are, and it is expected that the Company's future collaborative partners will be, responsible for preclinical testing, clinical trials, regulatory approvals, manufacturing and commercialization of drugs, the ability to obtain and the timing of regulatory approvals are not within the control of the Company.
Prior to the commencement of marketing a product in other countries, regulatory approval in such countries is required, whether or not FDA approval has been obtained for such product. The requirements governing the conduct of clinical trials and product approvals vary widely from country to country, and the time required for approval may be longer or shorter than the time required for FDA approval. Although there are some procedures for unified filings for certain European countries, in general, each country has its own procedures and requirements.
The Company is also subject to regulation under other Federal laws and regulation under state and local laws, including laws relating to occupational safety, laboratory practices, the use, handling and disposition of radioactive materials, environmental protection and hazardous substance control. Although the Company believes that its safety procedures for handling and disposing of radioactive compounds and other hazardous materials used in its research and development activities comply with the standards prescribed by Federal, state and local regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of any such accident, the Company could be held liable for any damages that result and any such liability could exceed the resources of the Company.
MANUFACTURING
The Company has no manufacturing facilities and intends to rely on its collaborative partners and contract manufacturers to produce the materials required for preclinical and clinical development purposes. If the Company were unable to contract for these services on acceptable terms, or if it should encounter delays or difficulties in its relationships with such providers, the Company's product development would be delayed, which could have a material adverse effect on the Company's business, financial condition and results of operations.
SCIENTIFIC CONSULTANTS
The Company has consulting arrangements with a number of leading academic scientists. The consultants routinely attend project meetings and are available to the scientific staff and management of the Company. Most of the Company's consultants are paid for their services on a per diem basis and are reimbursed for their travel expenses and other expenses incurred at the request of the Company pursuant to the terms of their consulting arrangements with the Company. Certain other consultants are paid fixed fees for their services on a monthly or quarterly basis. Several of the Company's consultants serve on the Company's Scientific Advisory Board. None of the consultants is an employee of the Company. Most of the consultants have other commitments to, or consulting or advisory contracts with, their employers and other institutions.
The Company is highly dependent on three consultants, Dr. James R. Broach, Dr. John C. Cambier and Dr. Gary L. Johnson, in the conduct of its research programs. Dr. Broach is the Director of Research, Dr. Cambier is the Director of Immunology and Dr. Johnson is the Director of Cell Biology at the Company. In December 1995, the Company granted Dr. Broach an option outside of its 1993 Stock Option Plan, as amended (the "1993 Stock Option Plan"), to purchase 141,667 shares of Common Stock. Such option will vest upon completion of this offering. In November 1994, the Company granted to each of Dr. Cambier and Dr. Johnson an option, outside of the 1993 Stock Option Plan, to purchase 166,667 shares of Common Stock. Each such option vests in equal annual installments of 41,667 shares over four years commencing March 11, 1996. The consulting agreement with Dr. Broach contains an exclusivity provision that restricts him from providing service to a competitor of the Company, without the Company's consent. The consulting agreements with Drs. Cambier and Johnson contain exclusivity provisions that restrict them from providing service to any pharmaceutical or other biotechnology company, without the Company's consent.
SCIENTIFIC ADVISORY BOARD
The Company has assembled a Scientific Advisory Board (the "SAB") presently comprised of five individuals (the "Scientific Advisors") who are leaders in the fields of drug discovery, molecular biology, yeast biology, immunology, oncology and pharmacology.
Members of the SAB review the Company's research, development and operating activities and are available for consultation with the Company's management and staff relating to their respective areas of expertise. The SAB holds regular meetings. Several of the individual Scientific Advisors meet more frequently, on an individual basis, with the Company's management and staff to discuss the Company's ongoing research and development projects. The Scientific Advisors are reimbursed for their expenses in connection with their service. In addition, the Scientific Advisors own Common Stock or hold options to purchase Common Stock. The Scientific Advisors are expected to devote only a small portion of their time to the business of the Company.
The Scientific Advisors are all employed by entities other than the Company. Each Scientific Advisor has entered into a consulting agreement with the Company that contains confidentiality and non-disclosure
provisions that prohibit the disclosure of confidential information to anyone outside the Company. Such consulting agreement also provides that all inventions, discoveries or other intellectual property that come to the attention of or are discovered by the Scientific Advisor while performing services under a consulting agreement with the Company will be assigned to the Company. The current members of the SAB are as follows:
Thomas F. Deuel, M.D., Chairman of the Scientific Advisory Board, is the Director of the Division of Growth Regulation at Beth Israel Hospital and Professor of Medicine at Harvard University. He is widely known for his work in cell growth and development and is an international expert on the biology of platelet derived growth factor and transforming growth factor beta. He conducted post-doctoral training at Harvard Medical School and the NIH and completed his M.D. at Columbia University's College of Physicians and Surgeons.
Norman R. Klinman, M.D., Ph.D. is a member of the Department of Immunology in the Research Institute of Scripps Clinic and an Adjunct Professor in the Department of Biology of the University of California at San Diego. Previously he served as Professor of Pathology and Microbiology in the School of Medicine at the University of Pennsylvania. He is widely known for his work on immunoregulation, humoral immunity and B cell maturation, and repertoire expression. Dr. Klinman has had numerous editorial appointments. He received his Ph.D. from the University of Pennsylvania and his M.D. from Jefferson Medical College.
Arnold J. Levine, Ph.D., a scientific founder of the Company, is Chairman and Weiss Professor in Life Sciences of the Department of Molecular Biology at Princeton University. Dr. Levine, a member of the National Academy of Sciences and the Institute of Medicine, is a world-renowned expert in the biology of tumor suppressor genes and oncogenes. He is noted for his fundamental research on the function of the p53 gene, implicated in a wide variety of human cancers. Dr. Levine is the recipient of many honors, including the Bristol-Myers Squibb Award for Distinguished Achievement in Cancer Research, and is a member of a number of scientific advisory boards including the Memorial Sloan Kettering Cancer Center and the Howard Hughes Medical Institute. He received his Ph.D. from the University of Pennsylvania.
Elliot M. Ross, Ph.D. is a Professor of Pharmacology at the University of Texas Southwestern Medical Center. Dr. Ross' research focuses on G protein-mediated signal transduction, where he is best known for direct biochemical studies of the mechanisms whereby receptors regulate G protein activation. His other interests include the structure of G protein-coupled receptors, the action of GTPase-activating proteins in G protein signaling pathways and the impact of the membrane environment on regulatory interactions among proteins. He received his Ph.D. in Biochemistry from Cornell University.
Jeremy W. Thorner, Ph.D. holds the William V. Power Endowed Chair in Biology and is a Professor in the Department of Molecular and Cell Biology at the University of California at Berkeley. He is coauthor, with R.J. Lefkowitz, of the seminal paper published in Science in 1990 that forms the basis of the initial yeast-related drug discovery technology within the Company. His research interests include the structure and function of peptide ligands, receptors and other components of signal transduction pathways and their role in the biology of saccharomyces cerevisiae (bakers yeast). Dr. Thorner is the Program Director for an NIH Training Grant in Cellular and Molecular Science. He conducted post-doctoral research at Stanford University School of Medicine and received his Ph.D. in Biochemistry from Harvard University.
EMPLOYEES
As of April 30, 1996, the Company had 62 full-time employees, 26 of whom hold Ph.D. or M.D. degrees. Of the Company's full-time employees, 51 are engaged directly in scientific research and 11 are engaged in general and administrative functions. The Company's scientific staff members have diversified experience and expertise in a wide variety of disciplines, including molecular and cell biology, biochemistry, molecular pharmacology and chemistry.
All employees have entered into agreements with the Company pursuant to which they are prohibited from disclosing to third parties the Company's proprietary information and they are obligated to assign to the Company all rights to inventions made by them during their employment with the Company. See "-Patents, Proprietary Technology and Trade Secrets."
The Company's employees are not covered by a collective bargaining agreement, and the Company believes that its relationship with its employees is good.
FACILITIES
The Company currently subleases approximately 25,776 square feet of laboratory and office space at 777 Old Saw Mill River Road in Tarrytown, New York, under an agreement expiring at the end of December 1997. The Company has the option to lease such facilities for a five year period commencing January 1, 1998, and a further option to renew such lease for a five year period commencing January 1, 2003. The Company also subleases 3,524 square feet of laboratory and office facilities at the Colorado Bio/Medical Venture Center in Lakewood, Colorado, under an agreement expiring on March 9, 1997. The Company plans to expand its facilities to accommodate additional staff and increased research activities as it expands its proprietary research, drug discovery and drug development activities and its activities with collaborative partners. See "Use of Proceeds."
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Information with respect to the executive officers, directors, key employees and consultants of the Company as of May 15, 1996 is set forth below:
NAME AGE POSITION
- ---- --- --------
Jeremy M. Levin, D.Phil., MB.BCHIR ...... 42 Chief Executive Officer,
President and Chairman of
the Board of Directors
David R. Webb, Ph.D. .................... 51 Vice President of Research
and Chief Scientific Officer
Philip N. Sussman ....................... 44 Vice President of Corporate
Development
James R. Broach, Ph.D. .................. 48 Director of Research
John C. Cambier, Ph.D. .................. 47 Director of Immunology
Gary L. Johnson, Ph.D. .................. 46 Director of Cell Biology
Arlindo L. Castelhano, Ph.D. ............ 43 Director of Chemistry
Algis Anilionis, Ph.D. .................. 45 Director of Intellectual
Property
James S. Rielly ......................... 33 Director of Finance,
Controller, Treasurer
and Secretary
Carl C. Icahn ........................... 60 Director
Theodore Altman ......................... 54 Director
Harold First (1)(2) ..................... 60 Director
Peter S. Liebert, M.D. .................. 60 Director
Robert J. Mitchell(2) ................... 49 Director
Lawrence D. Muschek, Ph.D. .............. 53 Director
Mark H. Rachesky, M.D. .................. 37 Director
William A. Scott, Ph.D. ................. 56 Director
Thomas E. Shenk, Ph.D. (1) .............. 49 Director
Samuel D. Waksal, Ph.D. (2) ............. 48 Director
Jack G. Wasserman (1) ................... 59 Director
- ----------
(1) Member of the Compensation Committee.
|
(2) Member of the Audit Committee.
Jeremy M. Levin, D.Phil., MB.BCHIR, Chief Executive Officer, President and Chairman of the Board of Directors, joined the Company in December 1992 as its Chief Executive Officer and became a Director in January 1993. In May 1995, Dr. Levin became a Co-Chairman of the Board of Directors and in May 1996, Dr. Levin became Chairman of the Board of Directors of the Company. From December 1990 to December 1992, Dr. Levin was Vice President of Corporate Development for Genzyme Corp.'s majority-owned subsidiary, IG Laboratories, Inc. Prior to that Dr. Levin served in a number of positions at biotechnology companies and at major teaching hospitals in Europe. Dr. Levin is a member of the Board of Directors of Xenometrix, Inc., a public biotechnology company, and Takhus, Inc., a private biotechnology company. Dr. Levin holds a D.Phil. in Molecular Biology from the University of Oxford and an MB. BCHIR from University of Cambridge.
David R. Webb, Ph.D., Vice President of Research and Chief Scientific Officer, joined the Company in such capacities in July 1995. From January 1987 to July 1995, Dr. Webb was a Distinguished Scientist at Syntex Inc. in the Department of Molecular Immunology. From April 1990 to January 1995, Dr. Webb was also Director of Syntex Inc.'s Institute of Immunology and Biological Sciences. Prior to that Dr. Webb was a member of the Department of Cell Biology at the Roche Institute of Molecular Biology. From January 1989 to the present, Dr. Webb has also been a Consulting Professor of Cancer Biology at Stanford University. Dr. Webb holds a Ph.D. in Microbiology from Rutgers University, an M.A. and a B.A. in Biology from California State University at Fullerton.
Philip N. Sussman, Vice President of Corporate Development, joined the Company in such capacity in September 1993. From December 1990 to September 1993, Mr. Sussman was Director of Strategy and Business Development for the Pharmaceuticals Division of Ciba-Geigy Corporation. Mr. Sussman holds an S.M. from the Sloan School of Management at the Massachusetts Institute of Technology and a B.S. from the State University of New York at Stony Brook.
James R. Broach, Ph.D., a scientific founder of the Company and inventor of the Company's yeast-based drug discovery technology, has been Director of Research of the Company since its inception. He is and has been since 1984 a Professor at Princeton University in the Department of Molecular Biology. In 1984, Dr. Broach and his collaborators were the first ones to demonstrate that human genes could be successfully implanted into yeast cells. He received his Ph.D. in Biochemistry from University of California at Berkeley and his B.S. from Yale University.
John C. Cambier, Ph.D., inventor of certain of the Company's signal transduction technologies, has been Director of Immunology of the Company since November 1994. He is Chief of the Division of Basic Sciences in the Department of Pediatrics at the National Jewish Center for Immunology and Respiratory Medicine. Dr. Cambier is also Professor of Immunology at the University of Colorado Health Sciences Center. He is internationally known for his work on transmembrane signal transduction, especially antigen and immunoglobulin Fc receptors. Dr. Cambier conducted his postdoctoral training at the University of Texas Southwestern Medical School, completed his Ph.D. in Immunology and Virology at the University of Iowa, and received his B.S. from Southwest Missouri State University.
Gary L. Johnson, Ph.D., inventor of certain of the Company's signal transduction technologies, has been Director of Cell Biology of the Company since November 1994. He is Director of the Program in Molecular Signal Transduction at the National Jewish Center for Immunology and Respiratory Medicine. He is also Professor of Pharmacology at the University of Colorado School of Medicine and a Senior Member of its Cancer Center where he serves on the executive board. Dr. Johnson's research focuses on receptor activation of G proteins and the integration of signal transduction pathways regulated by G proteins and tyrosine kinases. He received his Ph.D. in Pharmacology from the University of Colorado and his B.S. from California State University.
Arlindo L. Castelhano, Ph.D. has been Director of Chemistry of the Company since September 1995. He was a scientist at Syntex Inc. from 1982 to 1995 and served as Principal Scientist from 1993 to 1995. He received his Ph.D. in Chemistry from McMaster University and his B.A. from University of Toronto.
Algis Anilionis, Ph.D. has been Director of Intellectual Property of the Company since November 1994. He was Patent Manager at Oncogene Science Inc. from 1991 to 1994 and Manager of Molecular Biology and Genetics Research at Praxis Biologics, Inc. from 1986 to 1991. Dr. Anilionis has nine issued U.S. patents and four granted European patents. He is a registered Patent Agent. He received his Ph.D. in Molecular Biology from Edinburgh University and a B.A. Hons. degree from University of Oxford.
James S. Rielly, Director of Finance, Controller, Treasurer and Secretary, joined the Company in September 1992 as its Controller, became its Treasurer and Secretary in September 1993 and became its Director of Finance in February 1996. From November 1989 to September 1992, Mr. Rielly was the Controller and Treasurer of Baring Brothers & Co., Inc., an investment banking firm. Mr. Rielly is a certified public accountant and holds a B.S.B.A. from Bucknell University.
Carl C. Icahn became a director of the Company in July 1993. He was a Co-Chairman of the Board of Directors from May 1995 to May 1996. Mr. Icahn has been Chairman of the Board and Chief Executive Officer of ACF Industries Incorporated since 1984, ACF Industries Holding Corp. since August 1993, and, since 1968, Icahn & Co., Inc., a registered broker-dealer and until 1995 a member firm of the New York Stock Exchange, Inc. Since November 1990, Mr. Icahn has been Chief Executive Officer and Chairman of the Board of American Property Investors, Inc., the general partner of American Real Estate Partners, L.P. Since 1990, Mr. Icahn has been Chief Executive Officer and Chairman of the Board of Starfire Holding Corporation. From 1990 to January 1993, Mr. Icahn was Chief Executive Officer and Chairman of the Board of Trans World Airlines, Inc. Mr. Icahn also serves as a Director of Culligan Water Technologies, Inc. and Samsonite Corp. Mr. Icahn was the Chief Executive Officer and Chairman of the Board of Trans World Airlines, Inc. when it filed for reorganization under Chapter 11 of the United States Bankruptcy Code, as amended, in January 1992. Mr. Icahn received his B.A. from Princeton University.
Theodore Altman became a director of the Company in May 1996. For the past five years, Mr. Altman has been a senior partner in Gordon Altman Butowsky Weitzen Shalov & Wein, concentrating his areas of practice in securities law and litigation. Mr. Altman received a B.A. from Bucknell University and an LL.B. from New York University.
Harold First became a director of the Company in April 1995. Mr. First has been since January 1993 an independent financial consultant. From December 1990 through January 1993, Mr. First served as Chief Financial Officer of Icahn Holding Corp and related entities. He has been a director of Trump Taj Mahal Realty Corp. since October 1991; a member of the Supervisory Board of Directors of Memorex Telex N.V. since February 1992; and a director of Tel-Save Holdings, Inc. since September 1995. Mr. First was a director of Trans World Airlines, Inc. from December 1990 through January 1993; a director of ACF Industries, Inc. from February 1991 through December 1992; and Vice Chairman of the Board of Directors of American Property Investors, Inc., the general partner of American Real Estate Partners, L.P., from March 1991 through December 1992. Mr. First was a director of Trans World Airlines, Inc. when it filed for reorganization under Chapter 11 of the United States Bankruptcy Code, as amended, in January 1992. He is a certified public accountant and holds a B.S. from Brooklyn College.
Peter S. Liebert, M.D. became a director of the Company in April 1995. Dr. Liebert has been a pediatric surgeon in private practice since 1968 and is affiliated with Babies Hospital of Columbia Presbyterian. He is also Clinical Associate Professor of Surgery, College of Physicians and Surgeons, Columbia University. Dr. Liebert holds an M.D. from Harvard University Medical School and a B.A. from Princeton University.
Robert J. Mitchell became a director of the Company in May 1996. Mr. Mitchell has been Senior Vice President-Finance of ACF Industries Inc. since March 1995 and was Treasurer of ACF Industries Inc. from December 1984 to March 1995. Mr. Mitchell has also served as President and Treasurer of ACF Industries Holdings Inc. since August 1993 and as Vice President, Liaison Officer of Icahn & Co., Inc. since November 1984. From 1987 to January 1993, Mr. Mitchell served as Treasurer of Trans World Airlines, Inc. and was the Treasurer of Trans World Airlines, Inc. when it filed for reorganization under Chapter 11 of the United States Bankruptcy Code, as amended, in January 1992.
Lawrence D. Muschek, Ph.D. became a director of the Company in February 1996. Dr. Muschek has been the Senior Vice President for Research and Development of the Human Health Division of Solvay S.A. since 1994 and has worldwide responsibilities for research and development for Solvay S.A. From April 1990 to January 1994, Dr. Muschek served as the Senior Vice President for Research and Development of Solvay Pharmaceuticals, Inc. Prior to joining Solvay Pharmaceuticals, Inc., Dr. Muschek spent 18 years in pharmaceutical research and development at Johnson & Johnson. Dr. Muschek conducted post-doctoral research in Pharmacology at Michigan State University and holds a Ph.D. in Biochemistry from Michigan State University and a B.Sc. from The Philadelphia College of Pharmacy and Science.
Mark H. Rachesky, M.D. became a director of the Company in July 1993. In February 1990, Dr. Rachesky became senior investment advisor to Carl C. Icahn and since shortly thereafter has acted as his chief investment officer. Since May 1990, Dr. Rachesky has been the sole Managing Director of Starfire Holding Corp., which is responsible for substantially all of Mr. Icahn's investment activities. Dr. Rachesky has been a director of Samsonite Corp. since June 1993 and a director of Culligan Water Technologies, Inc. since its spin-off from Samsonite Corp. in December 1995. Since November 1990, Dr. Rachesky has served as a director and officer of American Property Investors, Inc., the general partner of American Real Estate Partners, L.P., a public limited partnership. From June 1987 to February 1990, Dr. Rachesky was employed by an affiliate of the Robert M. Bass Group, Inc. Dr. Rachesky received an M.D. and an M.B.A. from Stanford University and his B.S. from the University of Pennsylvania.
William A. Scott, Ph.D. became a director of the Company in July 1994. Dr. Scott has been Senior Vice President of Exploratory and Drug Discovery Research at Bristol-Myers Squibb's Pharmaceutical Research Institute since March 1991. From March 1990 to March 1991, Dr. Scott was Senior Vice President of Drug Discovery Research at Bristol-Myers Squibb's Pharmaceutical Research Institute. From September 1983 to March 1990, he held a number of senior positions at The Squibb Institute for Medical Research. Dr. Scott has been since 1983 an Adjunct Professor at The Rockefeller University and was the Associate Dean at the Rockefeller University from 1979 to 1982. Dr. Scott conducted post-doctoral research at The Rockefeller University and holds a Ph.D. in Biochemistry from California Institute of Technology and a B.S. from the University of Illinois.
Thomas E. Shenk, Ph.D. a scientific founder of the Company, has been a director of the Company since its inception. In 1996 he was elected to the U.S. National Academy of Science. Dr. Shenk has been a Professor of Molecular Biology at Princeton University since 1984. He is currently endowed Professor of Molecular Biology at Princeton University, an American Cancer Society Professor and Investigator for the Howard Hughes Medical Institute. He also serves as a Director of Somatix Therapy Corporation, a public biotechnology company. Dr. Shenk conducted post-doctoral research at Stanford University and holds a Ph.D. in Virology from Rutgers University and received his B.S. from the University of Detroit.
Samuel D. Waksal, Ph.D., a founder of the Company, has been a director of the Company since its inception and was a Co-Chairman of the Board of Directors from May 1995 to May 1996. Dr. Waksal was Chief Executive Officer of the Company from June 1992 to December 1992 and was its Chairman of the Board of Directors from June 1992 to May 1995. Dr. Waksal has been the Chief Executive Officer and a director of ImClone Systems Incorporated since 1985.Dr. Waksal is a member of the Board of Directors of Somatix Therapy Corporation, a public biotechnology company. Dr. Waksal received his Ph.D. in Immunology from Ohio State University College of Medicine.
Jack G. Wasserman became a director of the Company in May 1996. For the past five years, Mr. Wasserman has been a senior partner in Wasserman, Schneider & Babb, a New York law firm which concentrates its practice in legal matters relating to international trade. Mr. Wasserman is a director of American Property Investors, Inc., the general partner of American Real Estate Partners, L.P., a public limited partnership. Mr. Wasserman received a B.A. from Adelphi University, a J.D. from Georgetown University and a Diploma from the Johns Hopkins University School of Advanced International Studies.
Directors are elected by the stockholders of the Company at each annual meeting of stockholders and serve until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier removal or resignation. A Voting Agreement among the Company, High River Limited Partnership, Carl C. Icahn, The Global Health Sciences Fund, Bristol-Myers Squibb and the Solvay Subsidiary requires the signatories thereto (other than Bristol-Myers Squibb) to vote their shares for a Board of Directors comprised of the following: up to a majority designated by High River Limited Partnership (presently Messrs. Altman, First, Icahn, Mitchell and Wasserman and Drs. Liebert and Rachesky); the Chief Executive Officer of the Company (presently, Dr. Levin); an individual (presently undesignated) designated by The Global Health Sciences Fund; an individual (presently Dr. Scott) designated by Bristol-Myers Squibb; an individual (presently Dr. Muschek) designated by the Solvay Subsidiary; and an individual (presently Dr. Shenk) designated by certain founders of the Company. The number of directors comprising the entire Board of Directors has been fixed at twelve by resolution of the Board of Directors. The Voting Agreement will terminate upon the closing of this offering.
Dr. Rachesky has agreed to tender his resignation as a director of the Company upon ceasing to be affiliated with Mr. Icahn, if so requested.
ImClone Systems Incorporated ("ImClone") has agreed with High River Limited Partnership to vote all shares of Common Stock it acquires from High River Limited Partnership pursuant to the option to acquire 1,079,395 shares of Common Stock granted to it by High River Limited Partnership as directed by High River Limited Partnership.
The Board of Directors has (i) a Compensation Committee, consisting of Messrs. First and Wasserman and Dr. Shenk, which makes recommendations regarding salaries and incentive compensation for employees of and consultants to the Company and which administers the 1993 Stock Option Plan and the 1996 Incentive Plan and (ii) an Audit Committee, consisting of Messrs. First and Mitchell and Dr. Waksal, which oversees actions taken by the Company's independent auditors and reviews the Company's internal accounting controls.
In September 1995, the Board of Directors granted to each director then in office a 30-day option to purchase 8,334 shares of Common Stock at an exercise price of $2.25 per share. In October 1995, each of Harold First, Carl C. Icahn, Peter S. Liebert, Mark H. Rachesky, Thomas E. Shenk and Samuel D. Waksal exercised his option and purchased 8,334 shares of Common Stock at $2.25 per share. To date, directors have not received any other compensation for serving on the Board of Directors and have not been reimbursed for expenses incurred by them in attending meetings of the Board of Directors or any committee thereof.
EXECUTIVE COMPENSATION
The following tables set forth certain information concerning the compensation paid or accrued by the Company for services rendered to the Company in all capacities for the fiscal year ended December 31, 1995, by its Chief Executive Officer and each of the Company's other executive officers whose total salary and bonus exceeded $100,000 during such fiscal year (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#) ($)
- --------------------------- ---------- --------- ----------- ------------
Jeremy M. Levin ................................. $175,260 $65,000 -- $ 12,842(1)
President and Chief Executive Officer
Philip N. Sussman ............................... 110,260 70,000 -- 12,563(2)
Vice President of Corporate Development
David R. Webb ................................... 94,868(3) 30,000 -- 128,021(4)
Vice President of Research and
Chief Scientific Officer
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(1) All Other Compensation includes: (i) $11,725 in health care premiums and reimbursements paid by the Company and (ii) $1,117 in short-term and long-term disability premiums and life insurance premiums paid by the Company.
(2) All Other Compensation includes: (i) $11,725 in health care premiums and reimbursements paid by the Company and (ii) $838 in short-term and long-term disability premiums and life insurance premiums paid by the Company.
(3) Dr. Webb joined the Company in June 1995 and receives a salary at the rate of $175,000 per annum.
(4) All Other Compensation includes: (i) $121,754 of relocation expenses, (ii)
$5,880 in healthcare premiums and reimbursements paid by the Company and
(iii) $387 in short term and long-term disability premiums and life
insurance premiums paid by the Company.
EMPLOYMENT AGREEMENTS
Dr. Jeremy M. Levin
Dr. Levin is employed as Chief Executive Officer under a two-year employment agreement with the Company entered into effective as of December 12, 1995. Pursuant to his agreement, Dr. Levin receives a minimum annual base salary of $225,000, is guaranteed an annual bonus equal to 20% of his base salary, and is eligible to receive an additional annual bonus at the discretion of the Compensation Committee of the Board of Directors. If the Company terminates Dr. Levin's employment without "cause," as defined in his agreement, or if the Company fails to renew his agreement upon terms acceptable to him and Dr. Levin terminates his employment with the Company after December 12, 1997, the Company will pay to Dr. Levin a lump sum severance payment equal to one year's base salary then in effect and guaranteed bonus and all unvested stock options issued to him will immediately vest as of the date of termination. If Dr. Levin's employment with the Company is terminated under certain circumstances in connection with a "change in control" (as defined in the employment agreement), the Company will pay to Dr. Levin a lump sum severance payment equal to one year's base salary then in effect and guaranteed bonus and all unvested stock options issued to him will immediately vest as of the date of termination.
Philip N. Sussman
Mr. Sussman is an employee at will but has a severance agreement with the Company which provides that if he is terminated without cause (i) the Company will continue to pay him his then salary and provide him with medical benefits until the earlier of twelve months from the date of termination or his commencement of comparable new employment with another company and (ii) all unvested stock options issued to him will immediately vest as of the date of termination.
Dr. David R. Webb
Dr. Webb is an employee at will but has a severance agreement with the Company which provides that if he is terminated without cause he will receive severance equal to (i) one year's salary if such termination is within twelve
months of commencement, (ii) 9 months' salary if such termination is after 12 months but before the 25th month after commencement, (iii) 6 months' salary if such termination is after 24 months but before the 37th month after commencement, or (iv) whatever is deemed appropriate for other officers of the Company at the time of termination if such termination is more than 36 months after commencement.
OPTION GRANTS
The following table sets forth certain information regarding options granted during the fiscal year ended December 31, 1995 by the Company to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERMS ($)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- ------------------------- --------- -------- -- ---
Jeremy M. Levin ............. -- -- -- -- -- --
Philip N. Sussman ........... 33,333 13.01 3.60 12/19/05 75,468 191,253
David R. Webb ............... 66,666 26.03 2.25 5/5/05 94,334 239,062
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OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information concerning each exercise of stock options during the fiscal year ended December 31, 1995, by the Named Executive Officers and unexercised stock options held by the Named Executive Officers as of the end of such fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
ACQUIRED ON AGGREGATE VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ------------ ----------- ------------- ----------- -------------
Jeremy M. Levin ....... -- -- 281,159 33,912 $435,497 $50,868
Philip N. Sussman ..... -- -- 16,667 50,001 27,150 27,150
David R. Webb ......... -- -- -- 66,667 -- 50,000
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(1) Based on the deemed fair market value of the Common Stock at December 31, 1995 ($3.00 per share as determined by the Board of Directors) less the exercise price per share.
INCENTIVE PLANS
1993 Stock Option Plan
The 1993 Stock Option Plan provides for the grant of options to purchase shares of Common Stock to officers, employees and consultants of the Company. The maximum number of shares of Common Stock that may be issued pursuant to the 1993 Stock Option Plan is 666,667 (plus any shares that are the subject of canceled or forfeited awards). Effective as of May 10, 1996, the 1993 Stock Option Plan was replaced by the 1996 Incentive Planwith respect to all future awards to the Company's employees and consultants. See "-- 1996 Incentive Plan."
The 1993 Stock Option Plan was adopted by the Board of Directors on January 13, 1993 and approved by the stockholders of the Company in April, 1993. The 1993 Stock Option Plan was amended by the Board of Directors on July 28, 1993 in order to increase the number of shares of Common Stock covered thereby to its current level, which amendment was approved by the stockholders of the Company as of July 28, 1993.
The 1993 Stock Option Plan is currently administered by the Compensation Committee which is presently comprised of Harold First, Thomas E. Shenk and Jack G. Wasserman. The Compensation Committee determines which of the Company's officers, employees and consultants will be granted options, the time or times when grants will be made, whether options to be granted will be options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or non-qualified stock options, the terms governing the grants, the exercise date of any options and the number of shares for which options are to be granted. Directors who are neither employees of nor consultants to the Company and members of the Compensation Committee are not eligible to receive awards under the 1993 Stock Option Plan. In addition, incentive stock options may be granted only to officers and employees.
Under the 1993 Stock Option Plan, the Compensation Committee may establish with respect to each option granted such vesting provisions as it determines to be appropriate or advisable. In general, options granted under the 1993 Stock Option Plan have a ten-year term, and such options vest or have vested over four-year periods at various rates. Unexercised options automatically terminate upon the termination of the holder's relationship with the Company. However, the Committee may accelerate a vesting schedule and/or extend the time for exercise of all or any part of an option in the event of the termination of the holder's relationship with the Company. In addition, the 1993 Stock Option Plan includes a provision authorizing the Compensation Committee to adjust the number of shares of Common Stock available for grant, the number of shares of Common Stock subject to outstanding awards thereunder and the per share exercise price thereof in the event of any stock dividend, stock split, recapitalization, merger or certain other events. The Compensation Committee may terminate the 1993 Stock Option Plan at any time but any such termination will not adversely affect options previously granted.
The exercise price of options granted and the purchase price of shares sold under the 1993 Stock Option Plan are determined by the Compensation Committee, but may not, (i) in the case of incentive stock options, be less than the fair market value of the Common Stock on the date of grant (or, in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, 110% of such fair market value), or (ii) in the case of non-qualified stock options, be less than 85% of the fair market value of the Common Stock on the date of grant, as determined by the Compensation Committee.
Options granted under the 1993 Stock Option Plan are nontransferable except by will or the laws of descent and distribution.
During 1995, stock options to purchase an aggregate of 84,337 shares of Common Stock at an exercise price of $2.25 per share and an aggregate of 40,523 shares of Common Stock at an exercise price of $3.00 per share were granted under the 1993 Stock Option Plan to officers, employees and consultants of the Company. As of April 30, 1996, all of such stock options were outstanding, of which options to purchase 6,864 shares were exercisable at such time.
As of April 30, 1996, an aggregate of 642,734 shares of Common Stock were subject to outstanding stock options granted under the 1993 Stock Option Plan. As of April 30, 1996, options to purchase 427,005 shares were exercisable at prices ranging from $1.37 to $3.51 per share.
Stock Option Agreements
In addition to stock options granted under the 1993 Stock Option Plan, the Company has also granted non-qualified stock options to directors, officers, employees and consultants of the Company by means of stock option agreements. During 1995, stock options to purchase an aggregate of 141,667 shares of Common Stock at an exercise price of $2.57 per share and an aggregate of 171,300 shares of Common Stock at an exercise price of $3.60 per share were granted pursuant to stock option agreements to officers, employees and consultants of the Company. As of April 30, 1996, all of such stock options were outstanding and none of such options were exercisable. As of April 30, 1996, an aggregate of 646,301 shares of Common Stock were subject to outstanding stock options granted under stock option agreements. As of April 30, 1996 options to purchase 83,334 shares under such option agreements were exercisable at $1.50 per share.
1996 Incentive Plan
The Company's 1996 Incentive Plan (the "1996 Incentive Plan") was adopted by the Board of Directors and approved by the stockholders of the Company in May 1996. The 1996 Incentive Plan replaced the 1993 Stock
Option Plan, effective as of May 10, 1996, with respect to all future awards by the Company to its employees and consultants. However, while all future awards will be made under the 1996 Incentive Plan, awards made under the 1993 Stock Option Plan will continue to be administered in accordance with the 1993 Stock Option Plan. See "Incentive Plans -- 1993 Stock Option Plan." The maximum number of shares of Common Stock that may be the subject of awards under the 1996 Incentive Plan is 333,334 (plus any shares that are the subject of canceled or forfeited awards).
The 1996 Incentive Plan is administered by the Compensation Committee, which has the power and authority under the 1996 Incentive Plan to determine which of the Company's employees and consultants will receive awards, the time or times at which awards will be made, the nature and amount of the awards, the exercise or purchase price, if any, of such awards, and such other terms and conditions applicable to awards as it determines to be appropriate or advisable.
Options granted under the 1996 Incentive Plan may be either non-qualified
stock options or options intended to qualify as incentive stock options under
Section 422 of the Code. The term of incentive stock options granted under the
1996 Incentive Plan cannot extend beyond ten years from the date of grant (or
five years in the case of a holder of more than 10% of the total combined voting
power of all classes of stock of the Company on the date of grant).
Shares of Common Stock may either be awarded or sold under the 1996 Incentive Plan and may be issued or sold with or without vesting and other restrictions, as determined by the Compensation Committee.
Under the 1996 Incentive Plan, the Compensation Committee may establish with respect to each option or shares awarded or sold such vesting provisions as it determines to be appropriate or advisable. Unvested options will automatically terminate within a specified period of time following the termination of the holder's relationship with the Company and in no event beyond the expiration of the term. The Company may either repurchase unvested shares of Common Stock at their original purchase price upon the termination of the holder's relationship with the Company or cause the forfeiture of such shares, as determined by the Compensation Committee. All options granted and shares sold under the 1996 Incentive Plan to employees of the Company may, in the discretion of the Compensation Committee, become fully vested upon the occurrence of certain corporate transactions if the holders thereof are terminated in connection therewith.
The exercise price of options granted and the purchase price of shares sold under the 1996 Incentive Plan are determined by the Compensation Committee, but may not, in the case of incentive stock options, be less than the fair market value of the Common Stock on the date of grant (or, in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, 110% of such fair market value), as determined by the Compensation Committee.
The Compensation Committee may also grant, in combination with non-qualified stock options and incentive stock options, stock appreciation rights ("Tandem SARs"), or may grant Tandem SARs as an addition to outstanding non-qualified stock options. A Tandem SAR permits the participant, in lieu of exercising the corresponding option, to elect to receive any appreciation in the value of the shares subject to such option directly from the Company in shares of Common Stock. The amount payable by the Company upon the exercise of a Tandem SAR is measured by the difference between the market value of such shares at the time of exercise and the option exercise price. Generally, Tandem SARs may be exercised at any time after the underlying option vests. Upon the exercise of a Tandem SAR, the corresponding portion of the related option must be surrendered and cannot thereafter be exercised. Conversely, upon exercise of an option to which a Tandem SAR is attached, the Tandem SAR may no longer be exercised to the extent that the corresponding option has been exercised. Nontandem stock appreciation rights ("Nontandem SARs") may also be awarded by the Compensation Committee. A Nontandem SAR permits the participant to elect to receive from the Company that number of shares of Common Stock having an aggregate market value equal to the excess of the market value of the shares covered by the Nontandem SAR on the date of exercise over the aggregate base price of such shares as determined by the Compensation Committee. With respect to both Tandem and Nontandem SARs, the Compensation Committee may determine to cause the Company to settle its obligations arising out of the exercise of such rights in cash or a combination of cash and shares, in lieu of issuing shares only.
Under the 1996 Incentive Plan, the Compensation Committee may also award tax offset payments to assist employees in paying income taxes incurred as a result of their participation in the 1996 Incentive Plan. The
amount of the tax offset payments will be determined by applying a percentage established from time to time by the Compensation Committee to all or a portion of the taxable income recognizable by the employee upon: (i) the exercise of a non-qualified stock option or an SAR; (ii) the disposition of shares received upon exercise of an incentive stock option; (iii) the lapse of restrictions on Restricted Shares; or (iv) the award of unrestricted shares.
The number and class of shares available under the 1996 Incentive Plan may be adjusted by the Compensation Committee to prevent dilution or enlargement of rights in the event of various changes in the capitalization of the Company. At the time of grant of any award, the Compensation Committee may provide that the number and class of shares issuable in connection with such award be adjusted in certain circumstances to prevent dilution or enlargement of rights.
The Board of Directors may suspend, amend, modify or terminate the 1996 Incentive Plan. However, the Company's stockholders must approve any amendment that would (i) materially increase the aggregate number of shares issuable under the 1996 Incentive Plan, (ii) materially increase the benefits accruing to employees under the 1996 Incentive Plan or (iii) materially modify the requirements for eligibility to participate in the 1996 Incentive Plan. Awards made prior to the termination of the 1996 Incentive Plan shall continue in accordance with their terms following such termination. No amendment, suspension or termination of the 1996 Incentive Plan shall adversely affect the rights of an employee or consultant in awards previously granted without such employee's or consultant's consent.
Since the adoption of the 1996 Incentive Plan on May 10, 1996, no stock options were granted under the 1996 Incentive Plan.
401(K) PLAN
In November, 1993, the Company adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering the Company's employees. Generally,
employees may elect to contribute to the 401(k) Plan, through payroll
deductions, up to 20% of their compensation for services rendered in any year,
not to exceed a statutorily prescribed annual limit. The trustee under the
401(k) Plan, at the direction of each participant, invests the assets of the
401(k) Plan in any of seven investment options. The 401(k) Plan is intended to
qualify under Section 401 of the Code so that contributions by employees to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn. The Company has not made matching contributions to
participants under the 40l(k) Plan.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of the Common Stock as of May 15, 1996, on a pro forma basis to reflect the automatic conversion of all outstanding shares of Convertible Preferred Stock into Common Stock upon the closing of this offering, and as adjusted to reflect the sale of the shares of Common Stock offered hereby, with respect to (i) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each of the Company's directors, (iii) each of the Named Executive Officers and (iv) all directors and officers as a group.
NUMBER OF SHARES
AMOUNT AND NATURE OF PERCENTAGES OF TOTAL(2)
BENEFICIAL -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP BEFORE OFFERING AFTER OFFERING
--------------------------------------- -------------------- --------------- --------------
Carl C. Icahn ..............................
114 West 47th Street 3,361,216(3) 38.49% 29.27%
New York, New York 10036
Bristol-Myers Squibb Company ............... 1,607,143 18.41% 14.00%
P.O. Box 4000
Route 206 and Province Line Road
Princeton, New Jersey 08543-4000
Physica B.V.(4) ............................ 833,334 9.54% 7.26%
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
The Global Health Sciences Fund ............ 729,395(5) 8.35% 6.35%
c/o INVESCO Trust Company
7800 East Union Ave, Suite 800
Denver, Colorado 80237
ImClone Systems Incorporated ............... 1,079,395(6) 11.01% 8.60%
180 Varick Street
New York, New York 10014
Jeremy M. Levin, D. Phil., MB. BCHIR ....... 281,159(7) 3.12% 2.39%
Philip N. Sussman .......................... 16,667(8) * *
David R. Webb, Ph.D. ....................... 16,667(9) * *
Theodore Altman ............................ -- * *
Harold First ............................... 8,334 * *
Peter S. Liebert, M.D. ..................... 8,334 * *
Robert J. Mitchell ......................... -- * *
Lawrence D. Muschek, Ph.D. ................. 833,334(10) 9.54% 7.26%
Mark H. Rachesky, M.D. ..................... 190,683 2.18% 1.66%
William A Scott, Ph.D. ..................... 1,607,143(11) 18.41% 14.00%
Thomas E. Shenk, Ph.D. ..................... 175,001(12) 2.00% 1.53%
Samuel D. Waksal, Ph.D. .................... 1,087,729(13) 11.09% 8.66%
Jack G. Wasserman .......................... -- * *
All executive officers and directors as a .. 7,591,267(14) 74.93% 58.93%
group (15 persons)
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(1) Except as otherwise indicated above, the address of each stockholder identified above is c/o the Company, 777 Old Saw Mill River Road, Tarrytown, NY 10591-6705. Except as indicated in the other footnotes to this table, the persons named in this table have sole voting and investment power with respect to all shares of Common Stock.
(2) Share ownership in the case of each person listed above includes shares issuable upon the exercise of options held by such person as of May 15, 1996, that may be exercised within 60 days after such date for purposes of computing the percentage of Common Stock owned by such person, but not for purposes of computing the percentage of Common Stock owned by any other person.
(3) Includes 2,258,790 shares of Common Stock held by High River Limited Partnership (including the 1,079,395 shares of Common Stock owned by High River Limited Partnership that ImClone has the right to acquire). Mr. Icahn is the sole shareholder of the sole general partner of High River Limited Partnership.
(4) Physica B.V. is referred to in this Prospectus as the Solvay Subsidiary.
(5) Consists of 729,395 shares of Common Stock held by The Global Health Sciences Fund. INVESCO Trust Company acts as the investment adviser to the Global Health Sciences Fund and therefore may be deemed to share beneficial ownership of these shares.
(6) Consists of 1,079,395 shares of Common Stock which ImClone currently has the right to acquire from High River Limited Partnership, upon exercise of an option granted to it by High River Limited Partnership.
(7) Consists of 281,159 shares of Common Stock which Dr. Levin currently has the right to acquire upon the exercise of stock options. See "Management--Incentive Plans."
(8) Consists of 16,667 shares of Common Stock which Mr. Sussman currently has the right to acquire upon the exercise of a stock option. See "Management--Incentive Plans."
(9) Consists of 16,667 shares of Common Stock which Dr. Webb currently has the right to acquire upon the exercise of a stock option. See "Management--Incentive Plans."
(10) Consists of 833,334 shares of Common Stock held by Physica B.V., an indirect wholly owned subsidiary of Solvay S.A. Dr. Muschek is the Senior Vice President for Research and Development of the Human Health Division of Solvay S.A. Dr. Muschek may be deemed the beneficial owner of the 833,334 shares of Common Stock held by Physica B.V., but disclaims such beneficial ownership.
(11) Consists of 1,607,143 shares of Common Stock held by Bristol-Myers Squibb.
Dr. Scott is Senior Vice President of Exploratory and Drug Discovery
Research at Bristol-Myers Squibb's Pharmaceutical Research Institute. Dr.
Scott may be deemed the beneficial owner of the 1,607,143 shares of Common
Stock held by Bristol-Myers Squibb, but disclaims such beneficial
ownership.
(12) Consists of (a) 91,667 shares of Common Stock held by Dr. Shenk, a director of the Company, and (b) 83,334 shares of Common Stock held by Susan Shenk, Dr. Shenk's wife.
(13) Consists of (a) 8,334 shares of Common Stock held by Dr. Waksal, and (b) 1,079,395 shares of Common Stock which ImClone has the right to acquire. Dr. Waksal is the Chief Executive Officer and a director of ImClone. Dr. Waksal may be deemed the beneficial owner of the 1,079,395 shares which ImClone has the right to acquire, but disclaims such beneficial ownership.
(14) Includes (a) 319,493 shares of Common Stock issuable upon exercise of
options, (b) 1,607,143 shares of Common Stock held by Bristol-Myers Squibb,
(c) 833,334 shares of Common Stock held by Physica B.V., and (d) 1,079,395
shares of Common Stock owned by High River Limited Partnership that ImClone
has the right to acquire. See footnotes (3), (6), (7), (8), (9), (10), (11)
and (13).
CERTAIN TRANSACTIONS
In July 1992, founders of the Company purchased an aggregate of 1,400,005 shares of the Company's Common Stock at a price of $.003 share. Dr. Shenk, a director of the Company, and his wife purchased an aggregate of 166,668 of such shares of Common Stock. ImClone, whose Chief Executive Officer, Dr. Waksal, is a director of the Company, purchased 700,000 of such shares of Common Stock. Dr. Broach, a consultant to the Company and a member of the SAB, and members of his family purchased an aggregate of 166,669 of such shares of Common Stock. Drs. Dana Fowlkes and Jeffry Stock, former members of the SAB, each purchased 166,667 of such shares of Common Stock. Dr. Arnold Levine, a member of the SAB, purchased 33,334 of such shares of Common Stock.
In July 1993, the Company issued and sold an aggregate of 14,879,651 shares of Series A Convertible Preferred Stock, $.001 par value (the "Series A Preferred Stock), at $0.457 per share, to a group of 34 new and existing investors as part of a private financing. The shares were sold for an aggregate consideration of $6,800,000. An affiliate of Carl C. Icahn, a director of the Company, purchased 3,282,276 of such shares of Series A Preferred Stock. Two daughters of Samuel D. Waksal, a director of the Company, purchased an aggregate of 328,228 of such shares of Series A Preferred Stock. ImClone purchased 4,376,368 of such shares of Series A Preferred Stock through the cancellation of $2,000,000 of debt owed to it by the Company. The Global Health Sciences Fund purchased 2,188,184 of such shares of Series A Preferred Stock.
In July 1994, the Company entered into a research collaboration with Bristol-Myers Squibb. In connection with such collaboration, the Company issued and sold 3,571,429 shares of Series B Preferred Stock at $3.50 per share to Bristol-Myers Squibb. In August and September 1995, the Company issued and sold an aggregate of 1,250,000 shares of Series B Preferred Stock at $4.00 per share to Bristol-Myers Squibb, when Bristol-Myers Squibb became obligated to purchase such shares upon the Company's achievement of a research milestone. Bristol-Myers Squibb became a beneficial owner of more than five percent of the shares of Common Stock to be outstanding upon completion of this offering when it purchased the 3,571,429 shares of Series B Preferred Stock in July 1994. During the period from July 1994 through December 1994 and for the fiscal year ended December 31, 1995, Bristol-Myers Squibb provided research funding to the Company in an amount which constituted in excess of five percent of the Company's gross revenues for each of such periods. In connection with its sale of Series B Preferred Stock to Bristol-Myers Squibb, the Company granted to Bristol-Myers Squibb certain registration rights with respect to the shares of Common Stock issuable upon the conversion of the shares of Series B Preferred Stock owned by it. See "Business -- Collaborative Arrangements -- The Bristol-Myers Squibb Collaboration." Dr. Scott, a director of the Company, is the Senior Vice President of Exploratory and Drug Discovery Research at Bristol-Myers Squibb's Pharmaceutical Research Institute.
In September 1995, the Board of Directors granted to each director then in office a 30-day option to purchase 8,334 shares of Common Stock at an exercise price of $2.25 per share. In October 1995, each of Harold First, Carl C. Icahn, Peter S. Liebert, Mark H. Rachesky, Thomas E. Shenk and Samuel D. Waksal exercised his option and purchased 8,334 shares of Common Stock at $2.25 per share.
In November 1995, the Company entered into a research collaboration with
Solvay Duphar. In connection with such collaboration, the Company issued and
sold an aggregate of 2,500,000 shares of Series B Preferred Stock at $4.00 per
share to the Solvay Subsidiary, which then became a beneficial owner of more
than five percent of the shares of Common Stock to be outstanding upon
completion of this offering. During the period from November 1995 through
December 1995, Solvay Duphar provided research funding to the Company in an
amount which constituted in excess of five percent of the Company's gross
revenues for fiscal year 1995. In connection with its sale of Series B Preferred
Stock to the Solvay Subsidiary, the Company granted to the Solvay Subsidiary
registration rights with respect to the shares of Common Stock issuable upon the
conversion of the shares of Series B Preferred Stock owned by it. See "Business
- -- Collaborative Arrangements -- the Solvay Duphar Collaboration." Dr. Muschek,
a director of the Company, is Senior Vice President for Research and Development
of the Solvay Human Health Division.
In December 1994, the Company prepaid in full a $408,648 debt to ImClone with a payment of $250,000.
DESCRIPTION OF CAPITAL STOCK
Upon the consummation of this offering, the authorized capital stock of the Company will consist of 35,000,000 shares of Common Stock, par value $0.01 per share.
COMMON STOCK
As of April 30, 1996, there were 8,732,052 shares of Common Stock outstanding (assuming the conversion of all outstanding shares of Convertible Preferred Stock into Common Stock) and held of record by 55 stockholders. As of April 30, 1996, options to purchase an aggregate of 1,289,035 shares of Common Stock were also outstanding. See "Management--Incentive Plans."
Holders of Common Stock are entitled to receive such dividends as may from time to time be declared by the Board of Directors of the Company out of funds legally available therefor. Holders of Common Stock are entitled to one vote per share on all matters on which the holders of Common Stock are entitled to vote and do not have any cumulative voting rights. Holders of Common Stock have no preemptive, conversion, redemption or sinking fund rights. In the event of a liquidation, dissolution or winding-up of the Company, holders of Common Stock are entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company. The outstanding shares of Common Stock are, and the shares of Common Stock offered hereby when issued will be, fully paid and nonassessable.
At present, there is no established trading market for the Common Stock. Upon completion of this offering, the Common Stock will be approved for listing on the Nasdaq National Market under the symbol "KDUS."
DELAWARE TAKEOVER STATUTE
Section 203 of the Delaware General Corporation Law (the "DGCL") prevents an "interested stockholder" (defined in Section 203, generally, as a person owning 15% or more of a corporation's outstanding voting stock) from engaging in a "business combination" (as defined in Section 203, generally, to include mergers or consolidations between a Delaware corporation and an "interested stockholder," transactions with an "interested stockholder" involving the assets or stock of the corporation or its majority-owned subsidiaries and transactions which increase an interested stockholder's percentage ownership of stock) with a publicly-held Delaware corporation for three years following the date such person became an interested stockholder unless (i) before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination, (ii) upon consummation of the transaction that resulted in the interested stockholder's becoming an interested stockholder, the interested stockholder owns at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding voting stock held by directors who are also officers of the corporation and by employee benefit plans that do not provide employees with the right to determine confidentially whether shares held by the plan will be voted or tendered in a tender or exchange offer) or (iii) following the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and ratified at a meeting of stockholders by the affirmative vote of the holders of two-thirds of the outstanding voting stock of the corporation not owned by the interested stockholder.
CHARTER AND BY-LAW PROVISIONS
The Certificate of Incorporation of the Company, as amended, contains provisions which eliminate the personal liability of directors for monetary damages resulting from breaches of their fiduciary duty other than liability for breaches of the duty of loyalty to the Company or its stockholders, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, violations under Section 174 of the DGCL or any transaction from which the director derived an improper personal benefit. The Certificate of Incorporation of the Company, as amended, and the By-Laws, as amended, contain provisions requiring the indemnification of the Company's directors and officers to the fullest extent permitted by Section 145 of the DGCL, including circumstances in which indemnification is otherwise discretionary. The Company believes that these provisions are necessary to attract and retain qualified persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Registrar and Transfer Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding 11,482,052 shares of Common Stock (including shares to be issued upon conversion of the Convertible Preferred Stock upon completion of this offering), assuming no exercise of the Underwriters' over-allotment option or currently outstanding options. All of the shares sold in this offering (plus any additional shares sold upon exercise of the Underwriters' over-allotment option) will be freely transferable as of the date of this Prospectus by persons other than "affiliates" of the Company without restriction or further registration under the Securities Act. The remaining 8,732,052 shares of Common Stock to be outstanding (the "Restricted Shares") are held by officers, directors, employees, consultants and other stockholders of the Company. The Restricted Shares were sold by the Company in reliance on exemptions from the registration requirements of the Securities Act, are "restricted securities" within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available including an exemption contained in Rule 144 or Rule 701 under the Securities Act. In addition to the shares of Common Stock offered hereby, up to 475,004 of the Restricted Shares may currently be eligible for sale in the public market pursuant to Rule 144(k) under the Securities Act (of which at least 398,335 shares are subject to the lock-up agreements described below).
Beginning 90 days after the Effective Date, at least 5,176,500 additional shares of Common Stock (including 579,913 shares of Common Stock issuable pursuant to the exercise of vested options) will be or will become eligible for sale in the public market, subject to the provisions of Rule 144 or Rule 701 (of which at least 5,014,414 shares are subject to the agreements not to sell described below). The officers, directors, employees, consultants and certain stockholders of the Company, who together hold at least 8,623,714 Restricted Shares, have agreed not to sell or otherwise dispose of their shares without the prior written prior written consent of Hambrecht & Quist LLC, subject to certain limited exceptions, for a period of 180 days from the Effective Date. At the end of such 180-day period, at least 6,896,412 shares of Common Stock (including approximately 662,094 shares issuable upon exercise of vested options) will be eligible for immediate resale, subject to compliance with Rule 144 and Rule 701. The remainder of the shares held by existing stockholders will become eligible for sale at various times thereafter, subject to the provisions of Rule 144 or Rule 701.
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including any person who may be deemed an "affiliate" of the Company, is entitled to sell within any three-month period a number of restricted securities that does not exceed the greater of 1% of the then outstanding shares of Common Stock and the average weekly trading volume in the over-the-counter market during the four calendar weeks preceding such sale, provided that at least two years have elapsed since such shares were acquired from the Company and certain manner of sale, notice requirements and requirements as to the availability of current public information about the Company are satisfied. Any person who is deemed to be an affiliate of the Company must comply with the provisions of Rule 144 (other than the two-year holding period requirement) in order to sell shares of Common Stock which are not restricted securities (such as shares acquired by affiliates in this offering). In addition, under Rule 144(k), a person who is not an affiliate of the Company, and who has not been an affiliate of the Company at any time during the 90 days preceding any sale, is entitled to sell such shares without regard to the foregoing limitations, provided at least three years have elapsed since the shares were acquired from the Company.
Subject to certain limitations on the aggregate offering price of a transaction and other conditions, Rule 701 may be relied upon with respect to the resale of Common Stock originally purchased from the Company, or issuable upon the exercise of options originally granted by the Company, by its employees, directors, officers, consultants or advisers before the date the Company becomes subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to written compensatory benefit plans or written contracts relating to the compensation of such persons. Securities issued in reliance on Rule 701 are deemed to be restricted securities within the meaning of Rule 144 and, beginning 90 days after the Effective Date (unless subject to the lock-up agreements described above), may be sold by persons other than affiliates without having to comply with the public-information, holding-period, volume limitation or notice provisions of Rule 144 and by affiliates without having to comply with the two-year minimum holding-period provision ofRule 144.
The Company intends to file a registration statement on Form S-8 under the Securities Act after the expiration of 180 days following the Effective Date registering approximately 1,300,000 shares of Common Stock subject to outstanding stock options or reserved for issuance under the Company's stock option plans.
Such registration statement will automatically become effective upon filing. Accordingly, shares registered under such registration statement will be available for sale in the open market, subject to vesting conditions contained in the option agreements to which they are subject and, in certain cases, to the lock-up agreements referred to above. At April 30, 1996, options to purchase 642,734 shares of Common Stock were outstanding under the 1993 Stock Option Plan, of which 427,005 were exercisable at such time. At April 30, 1996, no options were outstanding under the 1996 Incentive Plan. In addition, at April 30, 1996, options to purchase 646,301 shares of Common Stock were outstanding under stock option agreements with officers, employees and consultants, of which 83,334 were exercisable at such time.
Prior to the Offering, there has been no public market for the Common Stock and no predictions can be made as to the effect, if any, that public sales of shares or the availability of shares for sale will have on the market price prevailing from time to time. Nevertheless, sales of substantial amounts of the Common Stock in the public market, or the perception that such sales could occur, could have an adverse impact on the market price.
REGISTRATION RIGHTS
The holders of an aggregate of 7,400,376 shares of Common Stock (including shares to be issued upon the conversion of all outstanding shares of Convertible Preferred Stock upon completion of this offering) have certain registration rights under agreements among such holders and the Company which will continue to apply to the shares of Common Stock into which any such shares will be converted upon completion of this offering.
Subject to certain conditions, the holders of 20% or more of the aggregate
of the shares of Common Stock issued or issuable upon the conversion of the
Series A Preferred Stock (the "Series A Holders") may request that the Company
file a registration statement under the Securities Act covering their shares. In
addition, subject to certain conditions, Bristol-Myers Squibb and the Solvay
Subsidiary may each make the same request of the Company. Upon its receipt of
any such request, the Company generally will be required to use its best efforts
to effect the registration of the shares owned by all persons who have
registration rights and who request inclusion of their shares in such
registration. The Company is not required to effect any registration requested
by the Series A Holders if it has effected a registration statement requested by
the Series A Holders within the previous twelve months, or any registration
(other than on Form S-3 or any successor form relating to secondary offerings)
within six months prior to such request. The Company is only obligated to effect
two registrations requested by the Series A Holders, except that the two Series
A Holders that purchased more than $1,000,000 worth of Series A Preferred Stock
have the right to request one additional registration and, in certain instances,
a second additional registration. The Company is not required to effect any
registration requested by Bristol-Myers Squibb or the Solvay Subsidiary if it
has effected two registration statements requested by Bristol-Myers Squibb or
the Solvay Subsidiary, as the case may be, a registration statement requested by
Bristol-Myers Squibb or the Solvay Subsidiary, as the case may be, within the
previous twelve months, or any registration (other than on Form S-3 or any
successor form relating to secondary offerings) within six months prior to such
request. The Company is generally obligated to bear the expenses, other than
underwriting discounts and sales commissions, of all such registrations.
The stockholders who are parties to such agreements also have certain piggyback registration rights. Accordingly, if the Company proposes to register any of its securities, either for its own account or for the account of other stockholders, with certain exceptions, the Company is required to so notify such stockholders and to include in such registration all of the shares of Common Stock requested to be included by them, subject to rejection of such shares under certain circumstances by an underwriter. The Company has so notified such stockholders and none of them has exercised its registration rights with respect to this offering.
Each of Dr. John C. Cambier and Dr. Gary L. Johnson is the holder of an option to purchase 166,667 shares of Common Stock. As of April 30, 1996, each of such options was exercisable with respect to 41,667 shares. The Company has agreed that if it grants registration rights to its scientific founders or to any of its officers, it will grant the same registration rights to Drs. Cambier and Johnson. The Company has not granted registration rights to its scientific founders or its officers. The Company has also agreed to include in any registration statement on Form S-8 that it files, on a pro rata basis with securities owned by or securities subject to options owned by employees of the Company, any such shares if they are then registrable on Form S-8.
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement, the Underwriters named below through their Representatives, Hambrecht & Quist LLC, Montgomery Securities and Genesis Merchant Group Securities, have severally agreed to purchase from the Company the following respective number of shares of Common Stock:
NUMBER OF
NAME SHARES
- ---- ------
Hambrecht & Quist LLC .......................................
Montgomery Securities .......................................
Genesis Merchant Group Securities ...........................
---------
Total ..................................................... 2,750,000
=========
|
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent, including the absence of any material adverse change in the Company's business and the receipt of certain certificates, opinions and letters from the Company and its counsel and independent auditors. The nature of the Underwriters' obligation is such that they are committed to purchase all shares of Common Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the public at the initial public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $_______ per share. The Underwriters may allow and such dealers may reallow a concession not in excess of $_______ per share to certain other dealers. After the initial public offering of the shares, the offering price and other selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later than 30 days after the date of this Prospectus, to purchase up to 412,500 additional shares of Common Stock at the initial public offering price, less the underwriting discount, set forth on the cover page of this Prospectus. To the extent that the Underwriters exercise this option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased by it shown in the above table bears to the total number of shares of Common Stock offered hereby. The Company will be obligated, pursuant to the option, to sell shares to the Underwriters to the extent the option is exercised. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by the Underwriters and subject to prior sale and to withdrawal, cancellation or modification of the offering without notice. The Underwriters reserve the right to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make in respect thereof.
The officers, directors, consultants and certain stockholders of the Company who will own an aggregate of 8,623,714 shares of Common Stock after the offering have agreed that they will not, without the prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable for or convertible into shares of Common Stock owned by them during the 180 day period following the date of this Prospectus. The Company has agreed that it will not, without the prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable for or convertible into shares of Common Stock during the 180 day period following the date of this Prospectus, except that the Company may issue shares upon the exercise of options granted prior to the date hereof and may grant
additional options under its stock option plans, provided that without the prior written consent of Hambrecht & Quist LLC, such additional options shall not be exercisable during such period.
The Underwriters do not intend to confirm sales of Common Stock offered hereby to accounts over which they exercise discretionary authority.
Prior to the offering there has been no public market for the Common Stock. The initial public offering price for the Common Stock will be determined by negotiation among the Company and the Representatives. Among the factors to be considered in determining the initial public offering price are prevailing market and economic conditions, revenues and earnings of the Company, market valuation of other companies engaged in activities similar to the Company, estimates of the business potential and prospects of the Company, the present state of the Company's business operation, the Company's management and other factors deemed relevant. The estimated initial public offering price range set forth on the cover of this preliminary prospectus is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain legal matters will be passed upon for the Company by Morrison Cohen Singer & Weinstein, LLP, New York, New York. Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts, has acted as counsel for the Underwriters in connection with this offering.
EXPERTS
The financial statements of Cadus Pharmaceutical Corporation (a development stage corporation) as of December 31, 1995 and 1994, and for each of the years in the three-year period ended December 31, 1995, and for the period from January 23, 1992 (date of inception) to December 31, 1995, have been included herein and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The statements in this Prospectus relating to patents under the captions "Risk Factors -- Uncertainty of Protection of Patents and Proprietary Rights" and "Business -- Patents, Proprietary Technology and Trade Secrets" and other references herein concerning patents have been examined by and passed upon for the Company by LaHive & Cockfield, and are included in reliance upon such examination and upon the authority of such counsel as experts on patents.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement under the Securities Act with respect to the Common Stock offered hereby. This Prospectus, which is part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Common Stock, reference is hereby made to the Registration Statement and such exhibits and schedules filed as a part thereof, which may be inspected, without charge, at the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its New York Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048 and its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of all or any portion of the Registration Statement may be obtained from the Public Reference Section of the Commission, upon payment of prescribed fees.
Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference.
The Company intends to distribute to its stockholders annual reports containing financial statements audited by its independent auditors and will make available copies of quarterly reports for the first three quarters of each fiscal year containing unaudited financial information.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report ................................. F-2 Balance Sheets ............................................... F-3 Statements of Operations ..................................... F-4 Statements of Stockholders' Equity ........................... F-5 Statements of Cash Flows ..................................... F-6 Notes to Financial Statements ................................ F-7 |
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Cadus Pharmaceutical Corporation:
We have audited the accompanying balance sheets of Cadus Pharmaceutical Corporation (a development stage corporation) as of December 31, 1995 and 1994, and the related statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995 and the period from January 23, 1992 (date of inception) to December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cadus Pharmaceutical Corporation (a development stage corporation) as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995 and the period from January 23, 1992 (date of inception) to December 31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
March 29, 1996,
except as to note 15,
which is as of May 10, 1996
CADUS PHARMACEUTICAL CORPORATION
(a development stage corporation)
BALANCE SHEETS
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, MARCH 31,
------------------- MARCH 31, 1996
1995 1994 1996 (NOTE 15)
---- ---- ---- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ............................................ $25,682,920 $14,405,678 $25,085,978
Restricted cash (note 5) ............................................. 2,380,000 187,000 2,380,000
Prepaid and other current assets ..................................... 76,810 87,137 405,932
----------- ----------- -----------
Total current assets .............................................. 28,139,730 14,679,815 27,871,910
Restricted cash (note 5) .............................................. 118,000 118,000 118,000
Fixed assets, net of accumulated depreciation and
amortization of $649,016 at December 31, 1995, $144,257
at December 31, 1994 and $825,501 at March 31, 1996 (note 3) ......... 2,219,851 846,318 2,241,323
Deferred tax asset, less valuation allowance of $2,621,000
at December 31, 1995, $2,033,000 at December 31, 1994 and
$2,638,000 at March 31, 1996 (note 6) ................................ -- -- --
Due from stockholder (note 4) ......................................... 13,736 21,499 11,796
Other assets, net (note 2) ............................................ 233,874 73,980 342,011
----------- ----------- -----------
Total assets ...................................................... $30,725,191 $15,739,612 $30,585,040
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue (note 7) ............................................ $ -- $ 645,381 $ --
Accounts payable and accrued expenses (note 10) ...................... 575,618 311,224 471,421
Line of credit and loans payable to bank-current portion (note 5) .... 2,397,459 203,403 2,397,459
Total current liabilities ......................................... 2,973,077 1,160,008 2,868,880
Loans payable to bank (note 5) ........................................ 29,002 45,999 24,790
----------- ----------- -----------
Total liabilities ................................................. 3,002,079 1,206,007 2,893,670
=========== =========== ===========
Commitments and contingencies (note 11)
Stockholders' equity (notes 7 and 8):
Preferred Stock, $.001 par value. Authorized 22,201,080 shares at
December 31, 1995 and March 31, 1996, issuable in series.
Convertible Preferred Stock, Series A. 14,879,651 shares designated;
issued and outstanding at December 31, 1995 and 1994 and March 31, 1996,
14,879,651 shares (preference in liquidation, $6,800,000); no shares
authorized, issued and outstanding on a pro forma basis ........... 14,880 14,880 14,880 $ --
Convertible Preferred Stock, Series B. 7,321,429 shares designated;
issued and outstanding at December 31, 1995 and March 31, 1996, 7,321,429
shares, (preference in liquidation, $27,500,000); at December 31, 1994,
3,571,429 shares; no shares authorized, issued and outstanding on a
pro forma basis ................................................... 7,321 3,571 7,321 --
Common stock, $.01 par value. Authorized 35,000,000 shares at December 31,
1995 and March 31, 1996; issued 1,465,009 shares at December 31, 1995,
1,405,005 shares at December 31, 1994 and 1,473,343 shares at March 31,
1996; outstanding 1,323,342 shares at December 31, 1995, 1,380,005 shares
at December 31, 1994 and 1,331,676 shares at March 31, 1996;
issued 8,873,719 shares and outstanding 8,732,052 shares on a pro
forma basis ......................................................... 14,650 14,050 14,733 88,737
Additional paid-in capital ........................................... 33,976,940 19,009,293 33,988,282 33,936,479
Deficit accumulated during the development stage (note 1) ............ (5,990,604) (4,508,114) (6,033,771) (6,033,771)
Treasury stock, 141,667 shares of common stock at December 31, 1995
and March 31, 1996, 25,000 shares of common stock at December 31, 1994,
at cost; 141,667 shares of common stock on a pro forma basis ........ (300,075) (75) (300,075) (300,075)
----------- ----------- ----------- -----------
Total stockholders' equity ........................................ 27,723,112 14,533,605 27,691,370 $27,691,370
=========== =========== =========== ===========
Total liabilities and stockholders' equity ........................ $30,725,191 $15,739,612 $30,585,040
=========== =========== ===========
|
See accompanying notes to financial statements.
CADUS PHARMACEUTICAL CORPORATION
(a development stage corporation)
STATEMENTS OF OPERATIONS
JANUARY 23, JANUARY 23,
1992 1992
(DATE OF THREE MONTHS (DATE OF
INCEPTION) TO ENDED MARCH 31, INCEPTION) TO
DECEMBER 31, ----------------- MARCH 31,
1995 1994 1993 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(Unaudited)
Revenues (note 2) ............. $ 4,417,809 $(1,354,619 $ -- $ 5,772,428 $1,625,001 $1,000,000 $ 7,397,429
----------- ----------- ----------- ----------- ---------- --------- -----------
Costs and expenses:
Research and development
costs ....................... 5,383,285 2,246,207 1,645,552 10,028,522 1,654,391 1,040,375 11,682,913
General and administrative
expenses .................... 1,376,126 936,762 549,571 3,076,390 317,677 317,165 3,394,067
----------- ----------- ----------- ----------- ---------- --------- -----------
Total costs and expenses ... 6,759,411 3,182,969 2,195,123 13,104,912 1,972,068 1,357,540 15,076,980
----------- ----------- ----------- ----------- ---------- --------- -----------
Operating loss ................ (2,341,602) (1,828,350) (2,195,123) (7,332,484) (347,067) (357,540) (7,679,551)
----------- ----------- ----------- ----------- ---------- --------- -----------
Interest income ............... 980,567 318,868 48,038 1,347,473 359,335 215,511 1,706,808
Interest expense .............. 77,866 5,063 -- 82,929 37,855 6,328 120,784
----------- ----------- ----------- ----------- ---------- --------- -----------
Interest income, net ....... 902,701 313,805 48,038 1,264,544 321,480 209,183 1,586,024
----------- ----------- ----------- ----------- ---------- --------- -----------
Loss before income taxes
and extraordinary item ....... (1,438,901) (1,514,545) (2,147,085) (6,067,940) (25,587) (148,357) (6,093,527)
State and local taxes (note 6) 43,589 36,994 729 81,312 17,580 6,470 98,892
----------- ----------- ----------- ----------- ---------- --------- -----------
Loss before extraordinary item (1,482,490) (1,551,539) (2,147,814) (6,149,252) (43,167) (154,827) (6,192,419)
Extraordinary gain from early
extinguishment of debt
(note 4) ..................... -- 158,648 -- 158,648 -- -- 158,648
----------- ----------- ----------- ----------- ---------- --------- -----------
Net loss ...................... $(1,482,490) $(1,392,891) $(2,147,814) $(5,990,604) $ (43,167) $(154,827) $(6,033,771)
=========== =========== =========== =========== ========== ========= ===========
Pro forma net loss per share
(unaudited--note 2) .......... $ (0.16) $ 0.00
=========== ==========
Shares used in calculation of
pro forma net loss per share
(unaudited--note 2) .......... 9,043,609 8,987,992
=========== ==========
|
See accompanying notes to financial statements.
CADUS PHARMACEUTICAL CORPORATION
(a development stage corporation)
STATEMENTS OF STOCKHOLDERS' EQUITY
DEFICIT
CONVERTIBLE CONVERTIBLE ACCUMULATED
PREFERRED STOCK, PREFERRED STOCK, ADDITIONAL DURING THE
SERIES A SERIES B COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
---------- ------- --------- ------- --------- ------- ----------- -----------
Shares issued from January 23, 1992
(date of inception) to December 31,
1992 at $.01 per share in connection
with initial offering .................... 1,400,005 $14,000 $ (9,800)
Net loss for period January 23, 1992 to
December 31, 1992 ........................ $ (967,409)
---------- ------- --------- ------- --------- ------- ----------- -----------
Balance at December 31, 1992 .............. 1,400,005 14,000 (9,800) (967,409)
Repurchase of stock from founder for cash . (25,000)
Issuance of common stock for cash in
connection with exercise of options ...... 1,667 17 2,483
Issuance of Convertible Preferred Stock,
Series A for cash, net of issuance
costs of $200,299 in July 1993 ........... 14,879,651 $14,880 6,584,821
Net loss for year ended December 31, 1993 . (2,147,814)
---------- ------- --------- ------- --------- ------- ----------- -----------
Balance at December 31, 1993 .............. 14,879,651 14,880 1,376,672 14,017 6,577,504 (3,115,223)
Issuance of Convertible Preferred Stock,
Series B for cash, net of issuance
costs of $72,742, in connection with
corporate partnering transaction in
July 1994 ................................ 3,571,429 $ 3,571 12,423,687
Issuance of common stock for cash in
connection with exercise of options 3,333 33 8,102
Net loss for year ended December 31, 1994 . (1,392,891)
---------- ------- --------- ------- --------- ------- ----------- -----------
Balance at December 31, 1994 .............. 14,879,651 14,880 3,571,429 3,571 1,380,005 14,050 19,009,293 (4,508,114)
Issuance of Convertible Preferred Stock,
Series B for cash, in connection with
achievement of scientific milestone ...... 1,250,000 1,250 4,998,750
Issuance of Convertible Preferred Stock,
Series B for cash, net of issuance
costs of $154,858, in connection with
corporate partnering transaction in
November 1995 ............................ 2,500,000 2,500 9,842,642
Issuance of common stock for cash in
connection with exercise of options ...... 60,004 600 126,255
Repurchase of stock from founder for cash . (116,667)
Net loss for year ended December 31, 1995 . (1,482,490)
---------- ------- --------- ------- --------- ------- ----------- -----------
Balance at December 31, 1995 .............. 14,879,651 14,880 7,321,429 7,321 1,323,342 14,650 33,976,940 (5,990,604)
Issuance of common stock for cash in
connection with exercise of options
(Unaudited) .............................. 8,334 83 11,342
Net loss for three months ended March 31, .
1996 (Unaudited) (43,167)
---------- ------- --------- ------- --------- ------- ----------- -----------
Balance at March 31, 1996 (Unaudited) ..... 14,879,651 $14,880 7,321,429 $ 7,321 1,331,676 $14,733 $33,988,282 $(6,033,771)
========== ======= ========= ======= ========= ======= =========== ==========
|
TREASURY STOCK
SHARES AMOUNT TOTAL
-------- --------- -----------
Shares issued from January 23, 1992
(date of inception) to December 31,
1992 at $.01 per share in connection
with initial offering .................... $ 4,200
Net loss for period January 23, 1992 to
December 31, 1992 ........................ (967,409)
-------- --------- -----------
Balance at December 31, 1992 .............. (963,209)
Repurchase of stock from founder for cash . (25,000) $ (75) (75)
Issuance of common stock for cash in
connection with exercise of options ...... 2,500
Issuance of Convertible Preferred Stock,
Series A for cash, net of issuance
costs of $200,299 in July 1993 ........... 6,599,701
Net loss for year ended December 31, 1993 . (2,147,814)
-------- --------- -----------
Balance at December 31, 1993 .............. (25,000) (75) 3,491,103
Issuance of Convertible Preferred Stock,
Series B for cash, net of issuance
costs of $72,742, in connection with
corporate partnering transaction in
July 1994 ................................ 12,427,258
Issuance of common stock for cash in
connection with exercise of options 8,135
Net loss for year ended December 31, 1994 . (1,392,891)
-------- --------- -----------
Balance at December 31, 1994 .............. (25,000) (75) 14,533,605
Issuance of Convertible Preferred Stock,
Series B for cash, in connection with
achievement of scientific milestone ...... 5,000,000
Issuance of Convertible Preferred Stock,
Series B for cash, net of issuance
costs of $154,858, in connection with
corporate partnering transaction in
November 1995 ............................ 9,845,142
Issuance of common stock for cash in
connection with exercise of options ...... 126,855
Repurchase of stock from founder for cash . (116,667) (300,000) (300,000)
Net loss for year ended December 31, 1995 . (1,482,490)
-------- --------- -----------
Balance at December 31, 1995 .............. (141,667) (300,075) 27,723,112
Issuance of common stock for cash in
connection with exercise of options
(Unaudited) .............................. 11,425
Net loss for three months ended March 31, .
1996 (Unaudited) (43,167)
-------- --------- -----------
Balance at March 31, 1996 (Unaudited) ..... (141,667) $(300,075) $27,691,370
======== ========= ===========
|
See accompanying notes to financial statements.
CADUS PHARMACEUTICAL CORPORATION
(a development stage corporation)
Statements of Cash Flows
January 23,
1992
(date of
inception)
to December 31,
1995 1994 1993 1995
---- ---- ---- ----
Cash flows from operating activities:
Net loss ................................. $ (1,482,490)$ (1,392,891)$ (2,147,814) $(5,990,604)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .......... 544,855 103,428 94,123 745,218
Extraordinary gain from early
extinguishment of debt ................ -- (158,648) -- (158,648)
Changes in assets and liabilities:
Decrease (increase) in prepaid and
other current assets ................. 10,327 (69,717) (17,420) (76,810)
Increase in other assets .............. (187,082) (23,346) (56,875) (267,303)
Decrease (increase) in due from
stockholder .......................... 7,763 (1,626) (19,873) (13,736)
Increase in restricted cash ........... (2,193,000) (287,000) (18,000) (2,498,000)
(Decrease) increase in deferred
revenue .............................. (645,381) 645,381 -- --
Increase (decrease) in accounts
payable and accrued expenses ......... 264,394 267,116 (4,514) 575,618
----------- ----------- ----------- -----------
Net cash used in operating
activities .......................... (3,680,614) (917,303) (2,170,373) (7,684,265)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets .............. (1,893,858) (605,096) (249,274) (2,859,298)
Loss on trade in of equipment ............ 2,658 -- -- 2,658
----------- ----------- ----------- -----------
Net cash used in investing
activities ........................... (1,891,200) (605,096) (249,274) (2,856,640)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from bank line of credit ........ 2,193,000 187,000 -- 2,380,000
Payments on bank loan .................... (15,941) (12,598) -- (28,539)
(Payment to) proceeds from stockholder ... -- (250,000) 1,381,454 2,158,648
Proceeds from issuance of common stock
and exercise of stock options ........... 126,855 8,135 2,500 141,690
Net proceeds from issuance of convertible
preferred stock ......................... 14,845,142 12,427,258 4,599,701 31,872,101
Purchase of treasury stock ............... (300,000) -- (75) (300,075)
----------- ----------- ----------- -----------
Net cash provided by financing
activities ........................... 16,849,056 12,359,795 5,983,580 36,223,825
----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents ..................... 11,277,242 10,837,396 3,563,933 25,682,920
Cash and cash equivalents at beginning
of period ................................ 14,405,678 3,568,282 4,349 --
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $25,682,920 $14,405,678 $ 3,568,282 $25,682,920
=========== =========== =========== ===========
|
January 23,
Three Months 1992
Ended (date of
March 31, inception)
------------------ to March 31,
1996 1995 1996
---- ---- ----
----------(Unaudited)------------
Cash flows from operating activities:
Net loss ................................. $ (43,167) $ (154,827)$ (6,033,771)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .......... 157,198 57,900 902,416
Extraordinary gain from early
extinguishment of debt ................ -- -- (158,648)
Changes in assets and liabilities:
Decrease (increase) in prepaid and
other current assets ................. (329,122) (56,792) (405,932)
Increase in other assets .............. (88,850) (35,739) (356,153)
Decrease (increase) in due from
stockholder .......................... 1,940 1,941 (11,796)
Increase in restricted cash ........... -- (640,000) (2,498,000)
(Decrease) increase in deferred
revenue .............................. -- (493,751) --
Increase (decrease) in accounts
payable and accrued expenses ......... (104,197) 252,217 471,421
----------- ----------- -----------
Net cash used in operating
activities .......................... (406,198) (1,069,051) (8,090,463)
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets .............. (197,957) (892,807) (3,057,255)
Loss on trade in of equipment ............ -- -- 2,658
----------- ----------- -----------
Net cash used in investing
activities ........................... (197,957) (892,807) (3,054,597)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from bank line of credit ........ -- 640,000 2,380,000
Payments on bank loan .................... (4,212) (3,879) (32,751)
(Payment to) proceeds from stockholder ... -- -- 2,158,648
Proceeds from issuance of common stock
and exercise of stock options ........... 11,425 -- 153,115
Net proceeds from issuance of convertible
preferred stock ......................... -- -- 31,872,101
Purchase of treasury stock ............... -- -- (300,075)
----------- ----------- -----------
Net cash provided by financing
activities ........................... 7,213 636,121 36,231,038
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents ..................... (596,942) (1,325,737) 25,085,978
Cash and cash equivalents at beginning
of period ................................ 25,682,920 14,405,678 --
----------- ----------- -----------
Cash and cash equivalents at end of period $25,085,978 $13,079,941 $25,085,978
=========== =========== ===========
|
See accompanying notes to financial statements.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(1) ORGANIZATION AND BASIS OF PREPARATION
Cadus Pharmaceutical Corporation (the "Company") was incorporated on January 23, 1992 under the laws of the State of Delaware. The Company is focused on the development and application of novel yeast-based and signal transduction drug discovery technologies.
The Company has accumulated a loss of $6,033,771 from January 23, 1992 (date of inception) to March 31, 1996. Management intends to continue research toward the development of commercial products in order to generate future revenues from license fees, royalties, direct sales and performance of contract research. The Company has financed its operations through the sale of convertible preferred stock and through revenues resulting from research funding provided by its collaborative partners (note 7).
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Development Stage Enterprise
The efforts of the Company since inception have been devoted to research and development and raising capital. Accordingly, the financial statements are presented under the guidelines stipulated by the Financial Accounting Standards Board's Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises."
(b) Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. At March 31, 1996, December 31, 1995 and 1994, cash equivalents consist of $24,849,377, $25,324,631 and $14,353,359, respectively.
(c) Fixed Assets
Fixed assets are stated at cost. Depreciation of equipment and furniture and fixtures is calculated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful lives of the improvements or the remaining term of the lease.
(d) Other Assets, Net
"Other assets, net" include capitalized patent costs which are amortized on a straight-line basis over fifteen years. At March 31, 1996, December 31, 1995 and 1994, accumulated amortization is $14,142, $33,429 and $6,237, respectively.
(e) Income Taxes
The Company accounts for income taxes in accordance with the principles set forth in SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires that the Company recognize deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(2) SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(f) Research and Development
Research and development costs are expensed as incurred and include direct costs of research scientists and equipment and an allocation of shared facilities and services.
(g) Revenue Recognition
The Company has entered into research agreements which provide for the payment of nonrefundable fees during the term of the research programs. In addition, the agreements provide for payment of fees when both parties concur that certain milestone events have occurred. These fees are reflected as revenue when earned as related costs are incurred or when agreement is reached that milestone events have occurred.
Revenue recognized in the accompanying statements of operations is not subject to repayment. Revenue received that is related to future performance under such contracts is deferred and recognized as revenue when earned.
(h) Pro Forma Net Loss Per Share (Unaudited)
All common share data has been restated to give effect to a one-for-three reverse stock split to be effected immediately prior to closing of the proposed initial public offering (see note 15). Except as noted below, pro forma net loss per share is computed using the weighted average number of shares of common stock outstanding. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, the Series B Convertible Preferred Stock (using the if-converted method) and stock options (using the treasury stock method and the anticipated initial public offering price) issued at prices substantially below the anticipated public offering price during the 12-month period prior to the proposed offering have been included in the calculation as if they were outstanding for all periods presented. Furthermore, common equivalent shares from convertible preferred stock issued prior to the 12-month period preceding the proposed offering that will convert upon the completion of the Company's proposed initial public offering are included in the calculation (using the if-converted method) from the original date of issuance. Common equivalent shares from stock options issued prior to the 12-month period preceding the proposed offering are excluded from the computation as their effect is anti-dilutive. Historical earnings per share have not been presented because such amounts are not meaningful due to the significant change in the Company's capital structure that will occur in connection with the Company's proposed initial public offering.
(i) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(j) Fair Value of Financial Instruments
For cash, due from stockholder, accounts payable and accrued expenses and line of credit, the carrying amount approximates the fair value because of the short maturities of those instruments.
For loans payable to bank the difference between the carrying value and fair value is not material.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(2) SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
(k) Unaudited Interim Financial Information
The financial information at March 31, 1996 and for the three-month periods ended March 31, 1996 and 1995 and for the period from January 23, 1992 (date of inception) to March 31, 1996 is unaudited but includes all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the financial position at such date and the operating results and cash flows for those periods. Results for the three-month period ended March 31, 1996 are not necessarily indicative of results that may be expected for the year ending December 31, 1996.
(3) FIXED ASSETS
Fixed assets, at cost, are summarized as follows:
DECEMBER 31,
DECEMBER 31,
-------------------- MARCH 31,
1995 1994 1996
---- ---- ----
(UNAUDITED)
Equipment ........................................................... $2,123,959 $964,928 $2,318,334
Furniture and fixtures .............................................. 167,875 25,647 168,240
Leasehold improvements .............................................. 577,033 -- 580,250
---------- -------- ----------
2,868,867 990,575 3,066,824
Less accumulated depreciation and amortization ...................... 649,016 144,257 825,501
---------- -------- ----------
$2,219,851 $846,318 $2,241,323
========== ======== ==========
|
(4) DUE FROM STOCKHOLDER AND RELATED PARTY TRANSACTIONS
A stockholder of the Company funded the Company's operations until the
Company was able to support its own activities. At the closing of the
convertible preferred stock offering in July 1993, $2 million in debt to such
stockholder was cancelled as consideration for the issuance of 4,376,368 shares
of Series A Convertible Preferred Stock (the "Series A Preferred Stock") (note
7). The remaining debt of $408,648 continued interest free until December 1994
when such debt was repaid for $250,000. As a result of this early extinguishment
of indebtedness, the Company recorded an extraordinary gain of $158,648 in the
1994 statement of operations.
In addition, this stockholder and certain of its directors and executive officers (who were also directors and officers of the Company) provided certain services to the Company for the period ended December 31, 1992 and for the first three months in the year ended December 31, 1993. These services included purchase ordering, bookkeeping and legal counsel, and have been provided to the Company at no cost, other than direct expense reimbursement.
A founder of the Company entered into an agreement pursuant to which he was entitled to borrow up to $25,000, drawn at a maximum rate of $5,000 per month, beginning April 1993. Interest accrues on outstanding borrowings at 8% per annum. The outstanding balance was $11,796 at March 31, 1996, $13,736 at December 31, 1995 and $21,499 at December 31, 1994. The loan is currently being repaid at $646 per month. The loan is secured by 13,334 shares of the founder's common stock in the Company.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(5) LINE OF CREDIT AND LOANS PAYABLE TO BANK
The Company obtained an $18,000 loan from a bank for the purchase of equipment in December 1993. The loan bears interest at the rate of 9.50% per annum. Principal and interest payments of approximately $560 per month commenced in January 1994 and continue for a period of 36 months. As of March 31, 1996, December 31, 1995 and 1994, the balance of this loan was $5,349, $6,866 and $12,555, respectively. The loan is secured by cash on deposit with such bank, which is reflected as restricted cash in the accompanying balance sheet.
The Company obtained a $57,000 loan from a bank for the purchase of equipment in March 1994. The loan bears interest at the rate of 8% per annum. Principal and interest payments of approximately $1,156 per month commenced in April 1994 and continue for a period of 60 months. As of March 31, 1996, December 31, 1995 and 1994, the balance of this loan was $36,900, $39,595 and $49,847, respectively. The loan is secured by a certificate of deposit with such bank, which is reflected as restricted cash in the accompanying balance sheet.
In September 1994, the Company obtained a $1,500,000 secured line of credit with the Bank of New York. In June 1995, the Company increased this secured line of credit from $1,500,000 to $2,500,000. Advances under the line of credit bear interest at a rate of 1% above the rate earned on the collateral. All obligations of the Company with respect to this line of credit are secured pursuant to a security agreement granting the bank a first and prior security interest in the Company's negotiable certificates of deposit held by the bank. The line of credit is cancelable at any time by the Company or the bank. The line of credit expires June 30, 1996.
Advances under this line of credit at March 31, 1996, December 31, 1995 and 1994 totaled $2,380,000, $2,380,000 and $187,000, respectively. The advances are secured by certificates of deposit with varying maturities which are reflected as restricted cash in the accompanying balance sheet.
The aggregate maturities of the line of credit and loans payable to the
bank for each of the five years subsequent to December 31, 1995 are as follows:
1996, $2,397,459; 1997, $11,787; 1998, $12,766; 1999, $4,449; 2000, $0.
(6) INCOME TAXES
Deferred tax assets of approximately $2,638,000, $2,621,000 and $2,033,000 at March 31, 1996, December 31, 1995 and 1994, respectively, relate principally to tax net operating loss carryforwards of $5,434,000, $5,391,000 and $4,333,500 and research credit carryforwards of $431,400, $431,400 and $290,400 at March 31, 1996,December 31, 1995 and 1994, respectively. An offsetting valuation allowance has been established for the full amount of the deferred tax assets to reduce such assets to zero, as a result of the significant uncertainty regarding their ultimate realization. The aggregate valuation allowance increased $17,000, $588,000 and $455,000 during the periods ended March 31, 1996, December 31, 1995 and 1994, respectively.
The Company's net operating loss carryforwards and research and development tax credit carryforwards noted above expire in various years from 2007 to 2011. The Company's ability to utilize such net operating loss and research and development tax credit carryforwards is subject to certain limitations due to ownership changes, as defined by rules enacted with the Tax Reform Act of 1986.
The Company is subject to New York State and City tax on capital.
(7) PREFERRED STOCK PURCHASE AND RESEARCH COLLABORATION AND LICENSE AGREEMENTS
In September 1995, the Company increased its authorized capitalization to 7,321,429 shares of Series B Convertible Preferred Stock ("Series B Preferred Stock"), par value $.001 per share, and 35,000,000 shares of Common Stock, par value $.01 per share. The authorized capitalization of the Series A Preferred Stock was
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(7) PREFERRED STOCK PURCHASE AND RESEARCH COLLABORATION AND LICENSE AGREEMENTS--(CONTINUED)
14,879,651 shares at December 31, 1995. As of December 31, 1995, the Company had reserved 4,959,899 shares of Common Stock for the conversion of the Series A Preferred Stock and 2,440,477 shares of Common Stock for the conversion of the Series B Preferred Stock.
On July 30, 1993, the Company issued 14,879,651 shares of Series A Preferred Stock, $.001 par value, at a purchase price of $.0457 per share for aggregate consideration of $4,800,000 in cash and $2,000,000 in satisfaction of indebtedness to a stockholder, before issuance costs of approximately $200,000.
On July 26, 1994, the Company entered into a Preferred Stock Purchase Agreement with Bristol-Myers Squibb Company ("BMS") and issued 3,571,429 shares of Series B Preferred Stock to BMS at a purchase price of $3.50 per share for aggregate consideration of $12,500,000, before issuance costs of approximately $73,000.
In accordance with a related Research Collaboration and License Agreement, BMS has agreed to provide funding to the Company for the conduct of research programs in the amount of up to $4,000,000 each year during the term of the research programs. For the year ended December 31, 1995, the Company received $3,354,619 in cash and recorded revenue of $4,000,000 pursuant to this agreement. For the year ended December 31, 1994, the Company received $2,000,000 pursuant to this agreement and recorded revenue of $1,354,619 and deferred revenue of $645,381. In August and September 1995, the Company issued an aggregate of 1,250,000 shares of Series B Preferred Stock at $4.00 per share for $5,000,000 in cash to BMS upon the Company's achievement of a research milestone. In addition, BMS is obligated to make payments to the Company upon the achievement of certain scientific and commercial milestones and to pay royalties on sales of products developed under the agreement.
In November 1995, the Company entered into a Preferred Stock Purchase Agreement with Physica B.V., a subsidiary of Solvay Duphar B.V. ("Solvay Duphar"), and issued 2,500,000 shares of Series B Preferred Stock at a purchase price of $4.00 per share for aggregate consideration of $10,000,000 before issuance costs of approximately $155,000.
In accordance with a related Research Collaboration and License Agreement, Solvay Duphar will provide funding to the Company for the conduct of research programs in an amount of up to $2,500,000 each year, adjusted for inflation, during the term of the research programs. For the year ended December 31, 1995, the Company received and recorded revenue of $417,809 pursuant to this agreement. In addition, Solvay is obligated to make payments to the Company upon the achievement of certain scientific and commercial milestones and to pay royalties on sales of products developed under the agreement. No such payments were received during 1995.
The holders of Series A and Series B Preferred Stock are entitled to receive non-cumulative cash dividends on the same basis as dividends declared on the common stock. Holders also have one vote per share of stock, and can request that their shares be registered at any time after the earlier of an initial public offering or three years after the closing of the respective Preferred Stock Purchase Agreement, if certain conditions are met.
The holders of Series A and Series B Preferred Stock have the right to convert such shares into Common Stock; the current conversion rate (assuming the consummation of the one-for-three reverse stock split of the Company's Common Stock to be effected immediately prior to closing of this offering) is three shares of Series A or Series B Preferred Stock are convertible into one share of Common Stock. Should the Company file a public offering for its Common Stock at any price in excess of $4.14 per share, resulting in aggregate proceeds to the Company of at least $7,500,000, the Series A and Series B Preferred Stock will automatically convert to Common Stock at the then applicable conversion rate. The conversion price is subject to certain anti-dilution provisions.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(8) STOCK OPTIONS
The 1993 Stock Option Plan ("Plan") was adopted in January 1993. The Plan provides for the grant of options to reward executives, consultants and employees in order to foster in such personnel an increased personal interest in the future growth and prosperity of the Company. The options granted under this Plan may be either incentive stock options or nonqualified options. An aggregate of 666,667 common shares were reserved for issuance under this Plan.
Options granted under this Plan expire no later than ten years from the date of grant. The option price is required to be at least 100% and 85% of the fair market value on the date of grant as determined by the Board of Directors for incentive stock options and nonqualified options, respectively. The options generally become exercisable according to a schedule of vesting as determined by the Compensation Committee of the Board of Directors. The schedule prescribes the date or dates on which the options become exercisable, and may provide that the option rights accrue or become exercisable in installments over a period of months or years.
Activity under the Plan through March 31, 1996 is as follows:
OPTIONS OUTSTANDING
--------------------------
NUMBER OPTION
OF PRICE RANGE
SHARES PER SHARE
------- -----------
Balance at December 31, 1992 ............ -- $ --
1993 activity:
Granted ................................. 453,346 1.37-3.51
Exercised ............................... (1,667) 1.50
Cancelled ............................... (5,000) 1.50
------- ---------
Balance at December 31, 1993 ............ 446,679 1.37-3.51
------- ---------
1994 activity:
Granted ................................. 115,490 1.50
Exercised ............................... (3,334) 1.37-3.51
Cancelled ............................... (10,334) 1.37-3.51
------- ---------
Balance at December 31, 1994 ............ 548,501 1.37-3.51
------- ---------
1995 activity:
Granted ................................. 124,860 2.25-3.00
Exercised ............................... (10,000) 1.37-1.50
Cancelled ............................... (11,668) 1.37-1.50
------- ---------
Balance at December 31, 1995 ............ 651,693 1.37-3.51
------- ---------
1996 activity (unaudited):
Granted ................................. -- --
Exercised ............................... (8,334) 1.37
Cancelled ............................... (625) --
------- ---------
Balance at March 31, 1996 (unaudited) ... 642,734 $1.37-3.51
======= =========
|
At March 31, 1996 and December 31, 1995, options pursuant to the Plan to purchase 422,422 and 426,159 shares, respectively, were exercisable.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(8) STOCK OPTIONS--(CONTINUED)
The Company entered into stock option agreements not pursuant to the Plan with certain employees, founders and consultants. These options generally become exercisable according to a schedule of vesting as determined by the Compensation Committee of the Board of Directors. The options become exercisable in installments over a period of months or years. As of December 31, 1995, an aggregate of 475,001 shares of common stock were reserved for issuance pursuant to stock option agreements.
In September 1995, the Board of Directors granted to each director then in office a 30-day option to purchase 8,334 shares of Common Stock at an exercise price of $2.25 per share. In October 1995, six directors exercised their options and purchased 8,334 shares each of Common Stock at $2.25 per share.
Activity for all of the above grants through March 31, 1996 is as follows:
OPTIONS OUTSTANDING
--------------------------
NUMBER OPTION
OF PRICE RANGE
SHARES PER SHARE
------- ----------
Balance at December 31, 1993 ............ -- $ --
1994 activity:
Granted ................................. 333,334 1.50
Exercised ............................... -- --
Cancelled ............................... -- --
------- ---------
Balance at December 31, 1994 ............ 333,334 1.50
------- ---------
1995 activity:
Granted ................................. 379,639 2.25-3.60
Exercised ............................... (50,004) 2.25
Cancelled ............................... (16,668) --
------- ---------
Balance at December 31, 1995 ............ 646,301 1.50-3.60
------- ---------
1996 activity (unaudited):
Granted ................................. -- --
Exercised ............................... -- --
Cancelled ............................... -- --
------- ---------
Balance at March 31, 1996 ............... 646,301 $1.50-3.60
======= =========
|
At March 31, 1996 and December 31, 1995, options to purchase 83,334 and no shares, respectively, under such stock option agreements were exercisable.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(9) LICENSE AND SPONSORED RESEARCH AGREEMENTS
The Company has entered into several agreements with third parties as part of its program to develop novel classes of therapeutics that target cellular signal transduction pathways. Generally, the agreements provide that the Company will make research payments and will pay license fees and/or maintenance payments, in return for the use of technology and information and the right to manufacture, use and sell future products. These agreements provide for payments based on the completion of milestone events, as well as royalty payments based upon a percentage of product or assay sales. License fees and maintenance payments for the years ended December 31, 1995, 1994 and 1993, and the period from January 23, 1992 (date of inception) to December 31, 1995 amounted to approximately $250,000, $236,000, $57,000 and $593,000, respectively.
(10) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses include the following:
DECEMBER 31,
------------------- MARCH 31,
1995 1994 1996
-------- -------- --------
(UNAUDITED)
Accounts payable .............................. $154,463 $257,058 $211,928
Accrued rent .................................. 130,845 -- 114,489
Accrued bonuses ............................... 100,000 -- --
Other accrued expenses and current liabilities 190,310 54,166 145,004
-------- -------- --------
$575,618 $311,224 $471,421
======== ======== ========
(11) COMMITMENTS AND CONTINGENCIES
|
Lease Commitments
In October 1994, the Company entered into a sublease agreement with Union Carbide Corporation to sublease approximately 18,400 rentable square feet of laboratory/office space in Tarrytown, New York. The term of this agreement is for a period of approximately three years commencing on May 15, 1995 and expiring on December 30, 1997. Pursuant to this agreement, the Company received the first four months rent free, which is being amortized so as to produce a level amount of rent expense over the life of the lease. The unamortized portion has been included in accounts payable and accrued expenses in the accompanying balance sheet. In addition, the Company delivered an irrevocable letter of credit to Union Carbide in the amount of $40,000 as security for the Company's performance of its obligations under this lease. The letter of credit is secured by a one-year certificate of deposit, which is reflected as restricted cash in the accompanying balance sheet. The Company has the option to lease these facilities directly from the landlord for a five-year period commencing January 1, 1998 and a further option to renew such lease for a five-year period commencing on January 1, 2003.
In October 1994, the Company entered into an agreement to sublease approximately 4,567 rentable square feet of laboratory/office space on a month-to-month basis in Tarrytown, New York. In December 1994, the Company entered into an agreement to lease approximately 3,299 rentable square feet of office space and approximately 1,265 square feet of storage space in Tarrytown, New York. On May 15, 1995, each of these agreements terminated with the exception of the agreement for storage space which expires in December 1997.
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
(11) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
In November 1994, the Company entered into an agreement to sublease 2,989 square feet of laboratory/office space, in Lakewood, Colorado, from Colorado Biomedical Venture Center, Inc. ("CBVC") for a period of 21 months ending on July 9, 1996. In March 1996, the Company extended the sublease agreement for eight additional months.
Future minimum lease payments are as follows:
1996 .............................. $ 575,782
1997 .............................. 539,867
----------
$1,115,649
==========
|
Until October 1994, the Company did not have a long-term rental agreement.
Rent expense for the years ended December 31, 1995, 1994 and 1993, and the period from January 23, 1992 (date of inception) to December 31, 1995 amounted to approximately $434,600, $100,500, $72,000 and $614,300, respectively.
In May 1996, the Company amended its sublease agreement with Union Carbide Corporation and the landlord to sublease an additional 7,376 square feet of laboratory/office space in Tarrytown, New York and agreed to sublease an additional 535 square feet under its sublease with CBVC. Future minimum lease payments for the years ending December 31, 1996 and 1997 of $107,945 and $208,066, respectively, relating to these amendments are not included in the amounts enumerated above.
Employment Agreements
The Company entered into a two-year employment agreement with its Chief Executive Officer effective as of December 12, 1995. Pursuant to this agreement, the Chief Executive Officer receives a minimum annual base salary of $225,000, is guaranteed an annual bonus equal to 20% of his base salary, and is eligible to receive an additional annual bonus at the discretion of the Compensation Committee of the Board of Directors. The Chief Executive Officer and certain other officers are entitled to termination benefits under certain circumstances.
Consulting Agreements
The Company has entered into various consulting agreements, the terms of which do not exceed four years. These agreements generally require the Company to pay consulting fees on a quarterly or per diem basis. These agreements are generally terminable at the Company's or the consultant's option.
(12) SUPPLEMENTAL CASH FLOW INFORMATION
THREE MONTHS
PERIOD FROM ENDED PERIOD FROM
JANUARY 23, 1992 MARCH 31, JANUARY 23, 1992
(DATE OF INCEPTION) TO ---------------- (DATE OF INCEPTION) TO
1995 1994 1993 DECEMBER 31, 1995 1996 1995 MARCH 31, 1996
------- ------- ---- --------------------- ------- ------ ----------------------
(UNAUDITED) (UNAUDITED)
Cash payments for:
Interest ............. $77,866 $ 5,063 $ -- $82,929 $37,855 $6,328 $120,784
======= ======= ==== ======= ======= ====== ========
Income taxes ......... $21,694 $36,994 $729 $81,312 $17,580 $6,470 $ 98,892
======= ======= ==== ======= ======= ====== ========
|
In 1993, in connection with the issuance of the Series A Preferred Stock, $2 million in debt to a stockholder was canceled as consideration for issuance of 4,376,368 shares of Series A Preferred Stock. The remaining debt of
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
$408,648 was converted into a long-term note payable at that time. In December 1994, such debt was settled in full for a cash payment of $250,000.
In 1994 and 1993, the Company obtained financing of $57,000 and $18,000, respectively, for the purchase of equipment.
(13) RISKS AND UNCERTAINTIES
The Company is at an early stage of development and therefore faces certain risks and uncertainties which are present in a young biotechnology company. The Company's yeast-based and signal transduction technologies are novel as drug discovery methods and have not yet been shown to be successful in the development of any commercialized drug. The Company has not completed development of any drugs and does not expect that any drugs resulting from its and its collaborative partners' research and development efforts will be commercially available for a significant number of years, if at all. The Company is dependent on its collaborative partners to fund a substantial portion of its activities over the next several years. To date, the Company has entered into two collaborative arrangements, however there can be no assurance that the Company will be able to establish additional collaborative arrangements, or that these contracts will be renewed, or that any renewal will be made on terms as favorable to the Company as those contained in the existing contracts. Commencing in July 1998, the research provisions of the Solvay Duphar contract may be terminated for nonperformance under certain circumstances, which termination would result in the Company losing its research funding from such collaborative partner. The termination or expiration of the research provisions of these contracts, or failure by BMS or Solvay Duphar to provide research funding to the Company in breach of its obligations under its contract, could have a material adverse effect on the Company.
In addition, the Company faces risks and uncertainties regarding the future profitability of the Company, ability to obtain additional funding, protection of patents and property rights, competition and technological change, government regulations including the need for product approvals and the changing health care marketplace, and attracting and retaining key officers, employees and consultants.
(14) RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" was issued which establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain intangibles to be disposed of. SFAS No. 121 requires that long-lived assets and certain intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. SFAS No. 121 must be implemented by the Company no later than the year ended December 31, 1996. The adoption of SFAS No. 121 is not expected to have material impact on the Company's financial position or operating results.
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued which establishes financial accounting and reporting standards for stock-based employee compensation plans. SFAS No. 123 defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, SFAS No. 123 permits the Company to continue to measure compensation costs for its stock option plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". If the Company elects to remain with its current accounting, in 1996 the Company must make pro forma disclosures of 1995 and 1996 net income (loss) and earnings (loss) per share as if the fair value based method of accounting had been applied. The Company has not yet determined the valuation method it will employ or the effect on operating results of implementing SFAS No. 123. In addition, SFAS No. 123 requires that transactions whereby the Company issues its equity instruments to acquire goods or services from nonemployees entered into after December 15, 1995 must be accounted for based on the fair value
CADUS PHARMACEUTICAL CORPORATION
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993 AND MARCH 31, 1996
(INFORMATION AS OF MARCH 31, 1996 AND FOR THE THREE-MONTH
PERIODS ENDED MARCH 31, 1996 AND 1995 IS UNAUDITED)
of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measured.
(15) SUBSEQUENT EVENTS
Proposed Public Offering of Common Stock
On May 10, 1996, the Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of the Company's Common Stock. If the offering is consummated under the terms presently anticipated, all outstanding shares of the Series A and Series B Preferred Stock will be converted into an aggregate of 7,400,376 shares of Common Stock, and the entire class of Convertible Preferred Stock of the Company will be canceled and withdrawn from the authorized capital stock of the Company. As a result, upon completion of the offering, the Company's authorized capital stock will consist of 35,000,000 shares of Common Stock.
Reverse Stock Split
On May 10, 1996, the Board of Directors authorized a one-for-three reverse Common Stock split and changed the par value of the Common Stock to $.01 from $.001 which will be effected immediately prior to closing of the proposed initial public offering. All Common Stock data have been restated to give effect to this reverse stock split and change in par value for all periods presented.
DRUG DISCOVERY PROCESS
[GRAPHIC REPRESENTATION OF DRUG DISCOVERY PROCESS]
GENE IDENTIFICATION
Informatics
Cloning
Sequencing
Orphan receptors
GENE FUNCTION
Yeast genetics
Human genetics
Self Selecting Combinatorial
Library (SSCL)
Ligand identification
TARGET VALIDATION
Signal transduction
technology
BIOASSAY & SCREENING
Yeast systems
Mammalian cell systems
Cell free systems
Animal models
Robotics
CHEMISTRY
Automated synthesis
Combinatorial chemistry
Rational drug design
Medicinal chemistry
THERAPEUTIC PROGRAM AREAS
Inflammation
Immunology
Cancer
Cardiovascular
Central Nervous System
Gastroenterology
Endocrinology
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
Prospectus Summary ........................................................ 3 Risk Factors .............................................................. 5 Use of Proceeds ........................................................... 13 Dividend Policy ........................................................... 13 Capitalization ............................................................ 14 Dilution .................................................................. 15 Selected Financial Data ................................................... 16 Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................................... 17 Business .................................................................. 20 Management ................................................................ 35 Principal Stockholders .................................................... 44 Certain Transactions ...................................................... 46 Description of Capital Stock .............................................. 47 Shares Eligible for Future Sale ........................................... 48 Underwriting .............................................................. 50 Legal Matters ............................................................. 51 Experts ................................................................... 51 Additional Information .................................................... 51 Index to Financial Statements ............................................. F-1 |
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,750,000 SHARES
[LOGO]
CADUS
PHARMACEUTICAL
CORPORATION
COMMON STOCK
HAMBRECHT & QUIST
MONTGOMERY SECURITIES
GENESIS MERCHANT GROUP
SECURITIES
, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses expected to be incurred by the Registrant in connection with the sale and distribution of the securities being registered hereby, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee and the National Association of Securities Dealers, Inc. filing fee.
SEC registration fee .......................................... $ 13,631
National Association of Securities Dealers, Inc. filing fee ... 4,453
Blue Sky fees and expenses .................................... 15,000
Nasdaq listing fee ............................................ 46,205
Accounting fees and expenses .................................. 100,000
Legal fees and expenses ....................................... 225,000
Printing and engraving expenses ............................... 75,000
Registrar and Transfer Agent's fees ........................... 1,000
Miscellaneous fees and expenses ............................... 89,711
--------
Total ....................................................... $570,000
========
|
ITEM 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors, and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement of expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article Twelfth of the Registrant's Certificate of Incorporation, as amended, and Section 6.4 of the Registrant's By-Laws provides for indemnification to the fullest extent authorized by the Delaware General Corporation Law. The Registrant has also entered into agreements with each of its directors that provide forthe indemnification of and the advancement of expenses to such persons to the greatest extent permitted by Delaware law.
At present, there is no pending litigation or proceeding involving a director, officer, employee or other agent of the Registrant where indemnification will be required or permitted. The Registrant is not aware of any threatened litigation or proceeding that may result in a claim for indemnification by any director, officer, employee or other agent.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the Underwriters of the Registrant and its directors and officers for certain liabilities, including liabilities arising under the Act.
ITEM 15. Recent Sales of Unregistered Securities
Within the past three years, the Registrant has sold and issued the following securities that were not registered under the Act:
(1) On July 30, 1993, the Registrant issued an aggregate of 14,879,651 shares of its Series A Preferred Stock to investors at a price of $0.457 per share for an aggregate consideration of $6,800,000.50.
(2) On July 26, 1994, the Registrant issued 3,571,429 shares of its Series B Preferred Stock to Bristol-Myers at a price of $3.50 per share for an aggregate consideration of $12,500,001.00.
(3) In August 1995 and September 1995, the Registrant issued an aggregate of 1,250,000 shares of its Series B Preferred Stock at a price of $4.00 per share to Bristol-Myers for an aggregate consideration of $5,000,000.00.
(4) In September 1995, the Board of Directors granted to each director then in office a 30-day option to purchase 8,334 shares of Common Stock at an exercise price of $2.25 per share. In October 1995, six directors
II-1
exercised their options and purchased an aggregate of 50,000 shares of Common Stock at $2.25per share.
(5) On November 1, 1995, the Registrant issued 2,500,000 shares of its Series B Preferred Stock at a price of $4.00 per share to Physica B.V. for an aggregate consideration of $10,000,000.00.
(6) At April 30, 1996, options to acquire 23,335 shares of the Registrant's Common Stock had been exercised pursuant to the Registrant's 1993 Stock Option Plan. The exercise price of such options ranged from $1.371 to $3.51.
The sale and issuance of securities in the transactions described above in paragraphs (1) through (5) were deemed to be exempt from registration under the Act by virtue of Section 4(2) thereof or Regulation D thereunder as transactions not involving any public offering. The purchasers of the above-described shares represented their intention to acquire the shares for investment only and not with a view to the distribution thereof. Appropriate legends were affixed to the certificates representing securities issued in such transactions. Similar representations of investment intent were obtained and similar legends imposed in connection with any subsequent sales of any such securities. All purchasers had adequate access, through employment or other relationships, to information about the Registrant. No registration was required with respect to the grants of the options described above in paragraph (6) (and other options granted under the Registrant's 1993 Stock Option Plan, 1996 Incentive Plan or otherwise) because no sale under Section 2(3) of the Act was involved; however, sales pursuant to the exercise of options granted under the 1993 Stock Option Plan, including all sales described above in paragraph (6), were deemed to be exempt from registration under the Act by virtue of Rule 701 thereunder (note that no shares have yet been issued pursuant to the exercise of options granted under the 1996 Incentive Plan.)
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Cadus Pharmaceuticals Corporation,
as amended.
3.2 Proposed Certificate of Amendment of Certificate of Incorporation of
Cadus Pharmaceutical Corporation, as amended.
3.3 Proposed Restated Certificate of Incorporation of Cadus
Pharmaceutical Corporation.
3.4 By-laws of Cadus Pharmaceutical Corporation, as amended.
4.1* Specimen of Common Stock Certificate of Cadus Pharmaceutical
Corporation.
5.1* Opinion of Morrison Cohen Singer & Weinstein, LLP.
10.1 Form of Indemnification Agreement entered into between Cadus
Pharmaceutical Corporation and its directors and officers.
10.2 1993 Cadus Pharmaceutical Corporation Stock Option Plan.
10.3 1996 Cadus Pharmaceutical Corporation Incentive Plan.
10.4 Form of Agreement Regarding Assignment of Inventions,
Confidentiality and Non-Competition.
10.5 The 401(k) Plan of Cadus Pharmaceutical Corporation.
10.6 Employment Agreement between Jeremy M. Levin and Cadus
Pharmaceutical Corporation dated December 12, 1995.
10.7 Preferred Stock Purchase Agreement dated as of July 30, 1993 between
Cadus Pharmaceutical Corporation and the purchasers of Series A
Preferred Stock (exhibits have been omitted and Cadus Pharmaceutical
Corporation agrees to furnish copies thereof to the Commission upon
its request), together with the First and Second Amendments thereto
dated as of July 26, 1994 and October 31, 1995, respectively.
|
II-2
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
10.8 Preferred Stock Purchase Agreement dated as of July 26, 1994 between
Cadus Pharmaceutical Corporation and Bristol-Myers Squibb Company
("Bristol-Myers") concerning Series B Preferred Stock (exhibits have
been omitted and Cadus Pharmaceutical Corporation agrees to furnish
copies thereof to the Securities and Exchange Commission upon its
request), together with the First Amendment thereto dated as of
October 31, 1995.
10.9(+) Preferred Stock Purchase Agreement dated as of November 1, 1995
between Cadus Pharmaceutical Corporation and Physica B.V. concerning
Series B Preferred Stock (exhibits have been omitted and Cadus
Pharmaceutical Corporation agrees to furnish copies thereof to the
Securities and Exchange Commission upon its request).
10.10(+) Research Collaboration and License Agreement, dated as of July 26,
1994, between Cadus Pharmaceutical Corporation and Bristol-Myers.
10.11(+) Screening and Option Agreement, dated as of July 26, 1994, between
Cadus Pharmaceutical Corporation and Bristol-Myers.
10.12(+) Research Collaboration and License Agreement, dated as of November
1, 1995, between Cadus Pharmaceutical Corporation and Solvay Duphar
B.V.
10.13 Voting Agreement, dated as of April 26, 1995, among Cadus
Pharmaceutical Corporation and certain stockholders, together with
the First Amendment thereto dated as of November 1, 1995.
10.14 Co-Sale Agreement, dated as of July 30, 1993, among Cadus
Pharmaceutical Corporation and certain stockholders.
10.15 Sublease Agreement, dated as of October 19, 1994, between Cadus
Pharmaceutical Corporation and Union Carbide Corporation.
10.16 Lease, dated as of June 20, 1995, between Cadus Pharmaceutical
Corporation and Keren Limited Partnership.
10.17 Letter, dated September 28, 1994 from The Bank of New York to Cadus
Pharmaceutical Corporation confirming a $1,500,000 secured line of
credit; Promissory Note, dated January 9, 1995, issued by Cadus
Pharmaceutical Corporation to The Bank of New York in the amount of
$1,500,000 and a letter dated June 22, 1995 from The Bank of New
York to Cadus Pharmaceutical Corporation increasing the secured line
of credit to $2,500,000.
10.18(+) Consulting Agreement between Cadus Pharmaceutical Corporation and
James R. Broach, dated February 1, 1994.
10.19(+) Amended and Restated License Agreement between Cadus Pharmaceutical
Corporation and Duke University, dated May 10, 1994.
10.20(+) License Agreement between Cadus Pharmaceutical Corporation and
National Jewish Center for Immunology and Respiratory Medicine dated
November 1, 1994.
10.21(+) Stock Option Agreement, dated as of November 1, 1994, between Cadus
Pharmaceutical Corporation and John C. Cambier.
10.22(+) Stock Option Agreement, dated as of November 1, 1994, between Cadus
Pharmaceutical Corporation and Gary L. Johnson.
10.23(+) Consulting Agreement, dated as of November 1, 1994, between Cadus
Pharmaceutical Corporation and John C. Cambier.
10.24(+) Consulting Agreement, dated as of November 1, 1994, between Cadus
Pharmaceutical Corporation and Gary L. Johnson.
10.25(+) Research Collaboration Agreement, dated as of January 9, 1995,
between Cadus Pharmaceutical Corporation and Houghten
Pharmaceuticals, Inc., together with the Amendment thereto dated as
of March 1996.
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II-3
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
10.26(+) Stock Option Agreement, dated as of December 18, 1995, between Cadus
Pharmaceutical Corporation and James R. Broach.
10.27 Waiver, dated May 17, 1996, of Section 1.05 of the Preferred Stock
Purchase Agreement dated as of July 26, 1994 between Cadus
Pharmaceutical Corporation and Bristol-Myers Squibb Company, as
amended by the First Amendment thereto dated as of October 31, 1995.
10.28 Waiver, dated May 17, 1996, of Section 1.04 of the Preferred Stock
Purchase Agreement dated as of November 1, 1995 between Cadus
Pharmaceutical Corporation and Physica B.V.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Morrison Cohen Singer & Weinstein, LLP.
24 Powers of Attorney of the Board of Directors.
27 Financial Data Schedule
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(+) The Registrant has requested confidential treatment of certain portions of these agreements.
ITEM 17. Undertakings
The Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 24, 1996.
CADUS PHARMACEUTICAL CORPORATION
BY /s/ JEREMY M. LEVIN
-------------------------------------
JEREMY M. LEVIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ JEREMY M. LEVIN
- ------------------------ President and Chief Executive May 24, 1996
JEREMY M. LEVIN Officer (Principal Executive
Officer) and Chairman of
the Board of Directors
/s/ JAMES S. RIELLY
- ------------------------ Director of Finance, Controller, May 24, 1996
JAMES S. RIELLY Treasurer and Secretary (Principal
Financial and Accounting Officer)
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- ------------------------ Director May , 1996
CARL C. ICAHN
- ------------------------ Director May , 1996
THEODORE ALTMAN
*
- ------------------------ Director May 24, 1996
HAROLD FIRST
*
- ------------------------ Director May 24, 1996
PETER LIEBERT
*
- ------------------------ Director May 24, 1996
ROBERT MITCHELL
*
- ------------------------ Director May 24, 1996
LAWRENCE MUSCHEK
|
- ------------------------ Director May , 1996
MARK H. RACHESKY
*
- ------------------------ Director May 24, 1996
WILLIAM A. SCOTT
*
- ------------------------ Director May 24, 1996
THOMAS E. SHENK
*
- ------------------------ Director May 24, 1996
SAMUEL D. WAKSAL
*
- ------------------------ Director May 24, 1996
JACK G. WASSERMAN
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*By /s/ JEREMY M. LEVIN
------------------------------
JEREMY M. LEVIN
Attorney-in-Fact
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II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ----
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Cadus Pharmaceuticals
Corporation, as amended.
3.2 Proposed Certificate of Amendment of Certificate of
Incorporation of Cadus Pharmaceutical Corporation, as
amended.
3.3 Proposed Restated Certificate of Incorporation of Cadus
Pharmaceutical Corporation.
3.4 By-laws of Cadus Pharmaceutical Corporation, as amended.
4.1* Specimen of Common Stock Certificate of Cadus
Pharmaceutical Corporation.
5.1* Opinion of Morrison Cohen Singer & Weinstein, LLP.
10.1 Form of Indemnification Agreement entered into between
Cadus Pharmaceutical Corporation and its directors and
officers.
10.2 1993 Cadus Pharmaceutical Corporation Stock Option Plan.
10.3 1996 Cadus Pharmaceutical Corporation Incentive Plan.
10.4 Form of Agreement Regarding Assignment of Inventions,
Confidentiality and Non-Competition.
10.5 The 401(k) Plan of Cadus Pharmaceutical Corporation.
10.6 Employment Agreement between Jeremy M. Levin and Cadus
Pharmaceutical Corporation dated December 12, 1995.
10.7 Preferred Stock Purchase Agreement dated as of July 30,
1993 between Cadus Pharmaceutical Corporation and the
purchasers of Series A Preferred Stock (exhibits have been
omitted and Cadus Pharmaceutical Corporation agrees to
furnish copies thereof to the Commission upon its
request), together with the First and Second Amendments
thereto dated as of July 26, 1994 and October 31, 1995,
respectively.
10.8 Preferred Stock Purchase Agreement dated as of July 26,
1994 between Cadus Pharmaceutical Corporation and
Bristol-Myers Squibb Company ("Bristol-Myers") concerning
Series B Preferred Stock (exhibits have been omitted and
Cadus Pharmaceutical Corporation agrees to furnish copies
thereof to the Securities and Exchange Commission upon its
request), together with the First Amendment thereto dated
as of October 31, 1995.
10.9(+) Preferred Stock Purchase Agreement dated as of November 1,
1995 between Cadus Pharmaceutical Corporation and Physica
B.V. concerning Series B Preferred Stock (exhibits have
been omitted and Cadus Pharmaceutical Corporation agrees
to furnish copies thereof to the Securities and Exchange
Commission upon its request).
10.10(+) Research Collaboration and License Agreement, dated as of
July 26, 1994, between Cadus Pharmaceutical Corporation
and Bristol-Myers.
10.11(+) Screening and Option Agreement, dated as of July 26, 1994,
between Cadus Pharmaceutical Corporation and
Bristol-Myers.
10.12(+) Research Collaboration and License Agreement, dated as of
November 1, 1995, between Cadus Pharmaceutical Corporation
and Solvay Duphar B.V.
10.13 Voting Agreement, dated as of April 26, 1995, among Cadus
Pharmaceutical Corporation and certain stockholders,
together with the First Amendment thereto dated as of
November 1, 1995.
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ----
10.14 Co-Sale Agreement, dated as of July 30, 1993, among Cadus
Pharmaceutical Corporation andcertain stockholders.
10.15 Sublease Agreement, dated as of October 19, 1994, between
Cadus Pharmaceutical Corporation and Union Carbide
Corporation.
10.16 Lease, dated as of June 20, 1995, between Cadus
Pharmaceutical Corporation and Keren Limited Partnership.
10.17 Letter, dated September 28, 1994 from The Bank of New York
to Cadus Pharmaceutical Corporation confirming a
$1,500,000 secured line of credit; Promissory Note, dated
January 9, 1995, issued by Cadus Pharmaceutical
Corporation to The Bank of New York in the amount of
$1,500,000 and a letter dated June 22, 1995 from The Bank
of New York to Cadus Pharmaceutical Corporation increasing
the secured line of credit to $2,500,000.
10.18(+) Consulting Agreement between Cadus Pharmaceutical
Corporation and James R. Broach, dated February 1, 1994.
10.19(+) Amended and Restated License Agreement between Cadus
Pharmaceutical Corporation and Duke University, dated May
10, 1994.
10.20(+) License Agreement between Cadus Pharmaceutical Corporation
and National Jewish Center for Immunology and Respiratory
Medicine dated November 1, 1994.
10.21(+) Stock Option Agreement, dated as of November 1, 1994,
between Cadus Pharmaceutical Corporation and John C.
Cambier.
10.22(+) Stock Option Agreement, dated as of November 1, 1994,
between Cadus Pharmaceutical Corporation and Gary L.
Johnson.
10.23(+) Consulting Agreement, dated as of November 1, 1994,
between Cadus Pharmaceutical Corporation and John C.
Cambier.
10.24(+) Consulting Agreement, dated as of November 1, 1994,
between Cadus Pharmaceutical Corporation and Gary L.
Johnson.
10.25(+) Research Collaboration Agreement, dated as of January 9,
1995, between Cadus Pharmaceutical Corporation and
Houghten Pharmaceuticals, Inc., together with the
Amendment thereto dated as of March 1996.
10.26(+) Stock Option Agreement, dated as of December 18, 1995,
between Cadus Pharmaceutical Corporation and James R.
Broach.
10.27 Waiver, dated May 17, 1996, of Section 1.05 of the
Preferred Stock Purchase Agreement dated as of July 26,
1994 between Cadus Pharmaceutical Corporation and
Bristol-Myers Squibb Company, as amended by the First
Amendment thereto dated as of October 31, 1995.
10.28 Waiver, dated May 17, 1996, of Section 1.04 of the
Preferred Stock Purchase Agreement dated as of November 1,
1995 between Cadus Pharmaceutical Corporation and Physica
B.V.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Morrison Cohen Singer & Weinstein, LLP.
24 Powers of Attorney of the Board of Directors.
27 Financial Data Schedule
- ----------
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* To be filed by amendment.
(+) The Registrant has requested confidential treatment of certain portions of these agreements.
CADUS PHARMACEUTICAL CORPORATION
2,750,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
________ __, 1996
HAMBRECHT & QUIST LLC
MONTGOMERY SECURITIES
GENESIS MERCHANT GROUP SECURITIES
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
Cadus Pharmaceutical Corporation, a Delaware corporation (herein called the Company), proposes to issue and sell 2,750,000 shares of its authorized but unissued Common Stock, $.01 par value (herein called the Common Stock) (said shares of Common Stock being herein called the Underwritten Stock). The Company also proposes to grant to the Underwriters (as hereinafter defined) an option to purchase up to 412,500 additional shares of Common Stock (herein called the Option Stock and with the Underwritten Stock herein collectively called the Stock). The Common Stock is more fully described in the Registration Statement and the Prospectus hereinafter mentioned.
The Company hereby confirms its agreements made with respect to the purchase of the Stock by the several underwriters, for whom you are acting, named in Schedule I hereto (herein collectively called the Underwriters, which term shall also include any underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and warrant that you have been authorized by each of the other Underwriters to enter into this Agreement on its behalf and to act for it in the manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and Exchange Commission (herein called the Commission) a registration statement on Form S-1 (No. 333-_____), including the related preliminary prospectus, for the registration under the Securities Act of 1933, as amended (herein called the Securities Act) of the Stock. Copies of such registration statement and of each amendment thereto, if any, including the related preliminary prospectus (meeting the requirements of Rule 430A of the rules and regulations of the
Commission) heretofore filed by the Company with the Commission have been delivered to you and are identical to the electronically transmitted copies thereof filed with the Commission pursuant to the Commission's Electronic Data Gathering, Analysis and Retrieval System (herein called EDGAR), except to the extent permitted by Regulation S-T.
The term Registration Statement as used in this Agreement shall mean such registration statement, including all exhibits and financial statements, all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, in the form in which it became effective, and any registration statement filed pursuant to Rule 462(b) of the rules and regulations of the Commission with respect to the Stock (herein called a Rule 462(b) registration statement), and, in the event of any amendment thereto after the effective date of such registration statement (herein called the Effective Date), shall also mean (from and after the effectiveness of such amendment) such registration statement as so amended (including any Rule 462(b) registration statement). The term Prospectus as used in this Agreement shall mean the prospectus relating to the Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as included in the Registration Statement) and, in the event of any supplement or amendment to such prospectus after the Effective Date, shall also mean (from and after the filing with the Commission of such supplement or the effectiveness of such amendment) such prospectus as so supplemented or amended. The term Preliminary Prospectus as used in this Agreement shall mean each preliminary prospectus included in such registration statement prior to the time it becomes effective. For the purposes of this Agreement, all references to the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to EDGAR.
The Registration Statement has been declared effective under the Securities Act, and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. The Company has caused to be delivered to you copies of each Preliminary Prospectus and has consented to the use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants as follows:
(a) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has full corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement and the Prospectus and as being conducted, and is duly qualified as a foreign corporation and in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary (except where the failure to be so qualified would not have a material adverse effect on the business, properties, financial condition or results of operations of the Company).
(b) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change, or any development for which the Company has a reasonable basis to believe may result in a prospective material adverse change, in the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, other than as set forth in the Registration Statement and the Prospectus, and since such dates, except in the ordinary course of business, neither the Company nor any of its subsidiaries has entered into any material transaction not referred to in the Registration Statement and the Prospectus.
(c) The Registration Statement and the Prospectus comply, and on the Closing Date (as hereinafter defined) and any later date on which Option Stock is to be purchased, the Prospectus will comply as to form, in all material respects, with the provisions of the Securities Act and the rules and regulations of the Commission thereunder. On the Effective Date, the Registration Statement did not contain any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; on the Effective Date, the Prospectus did not and, on the Closing Date and any later date on which Option Stock is to be purchased, will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Prospectus, and any amendments or supplements thereto, delivered to you for use in connection with the offering of the Stock is identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T; provided, however, that none of the representations and warranties in this subparagraph (c) shall apply to statements in, or omissions from, the Registration Statement or the Prospectus made in reliance upon and in conformity with information herein or otherwise furnished in writing to the Company by or on behalf of the Underwriters expressly for use in the Registration Statement or the Prospectus.
(d) The Stock is duly and validly authorized, will be, when issued and sold to the Underwriters as provided herein, duly and validly issued, fully paid and nonassessable and conforms to the description thereof in the Prospectus. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Stock as contemplated herein.
(e) The Stock has been duly authorized for listing on The Nasdaq Stock Market, subject to official notice of issuance.
(f) The Company owns, or possesses adequate rights to use and sublicense, all patents, patent rights, inventions, trade secrets, licenses, know-how, proprietary techniques, including processes, trademarks, service marks, trade names, copyrights and other intellectual property described or referred to in the Registration Statement and the Prospectus as owned or used by it or which are necessary for the conduct of its business as now conducted and as described in the Registration Statement and the Prospectus. All such patents, patent rights, licenses, trademarks, service marks and copyrights are (i) valid and enforceable and (ii) not
being infringed by any third parties which infringement could, whether singly or in the aggregate, materially and adversely affect the business, properties, operations, condition (financial or otherwise), results of operations, income or business prospects of the Company, as presently being conducted or as proposed to be conducted in the Prospectus. The Company has no knowledge of, nor has it received any notice of, infringement of or conflict with asserted rights of others with respect to any patents, patent rights, inventions, trade secrets, licenses, know-how, proprietary techniques, including processes and substances, trademarks, service marks, trade names, copyrights or other intellectual property which, singly or in the aggregate, is, or is reasonably likely to be, the subject of an unfavorable decision, ruling or finding that could have a material adverse affect the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole.
(g) The capitalization of the Company is, and upon consummation of the transactions contemplated hereby will be, as set forth in the Prospectus under the caption "Capitalization" plus such additional number of shares as have been issued after March 31, 1996 and prior to the Closing Date pursuant to the exercise of options granted under the Company's 1993 Stock Option Plan, 1996 Incentive Plan and the nonstatutory options to purchase up to 1,289,035 shares of Common Stock granted by the Company prior to the date hereof (herein called the Options); the Company has no subsidiaries; the capital stock of the Company conforms to the description thereof in the Registration Statement under the caption "Description of Capital Stock"; and there are no outstanding options, warrants or other rights granted to or by the Company to purchase shares of Common Stock or other securities of the Company, or any subsidiary, other than as described in the Prospectus, and, to the best knowledge of the Company, no such option, warrant or other right has been granted to any person, the exercise of which would cause such person to own more than five percent of the Common Stock outstanding immediately after the offering other than as described in the Prospectus. No person or entity holds a right to require or participate in a registration under the Securities Act of shares of Common Stock of the Company which right has not been waived by the holder thereof as of the date hereof with respect to the registration of shares pursuant to the Registration Statement, and except as set forth in the Prospectus, no person holds a right to require registration under the Securities Act of shares of Common Stock of the Company at any other time. No person or entity has a right of first refusal or participation with respect to the sale of shares of the Stock by the Company which right has not been waived by the holder thereof as of the date hereof.
(h) The financial statements of the Company, together with related notes and schedules as set forth in the Registration Statement, present fairly the financial position, results of operations and cash flows of the Company at the indicated dates and for the indicated periods. Such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, and all adjustments necessary for a fair presentation of results for such periods have been made. The summary financial and other data included in the Registration Statement present fairly the information shown therein and have been compiled on a basis consistent with the financial statements presented therein.
(i) KPMG Peat Marwick, LLP, which has certified certain of the financial statements filed with the Commission as part of the Registration Statement, are independent public accountants as required by the Securities Act and the Rules and Regulations thereunder.
(j) The Company confirms as of the date hereof that it is in compliance with all provisions of Section 1 of laws of Florida, Chapter 92-198, An Act Relating to Disclosure of Doing Business with Cuba, and the Company further agrees that if it commences engaging in business with the government of Cuba or with any person or affiliate located in Cuba after the date the Registration Statement becomes or has become effective with the Commission or with the Florida Department of Banking and Finance (the "Department"), whichever date is later, or if the information reported or incorporated by reference in the Prospectus, if any, concerning the Company's business with Cuba or with any person or affiliate located in Cuba changes in any material way, the Company will provide the Department notice of such business or change, as appropriate, in a form acceptable to the Department.
(k) The Company is familiar with the Investment Company Act of 1940, as amended, and has in the past conducted its affairs in such a manner to ensure that the Company was not and is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
(l) There are no legal or governmental proceedings pending to which the Company is a party or to which any property or assets of the Company is the subject which, if determined adversely to the Company, might have a material adverse effect on the business, properties, financial conditions or results of operations of the Company; and to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell 2,750,000 shares of the Underwritten Stock to the several Underwriters and each of the Underwriters agrees to purchase from the Company the respective aggregate number of shares of Underwritten Stock set forth opposite its name in Schedule I. The price at which such shares of Underwritten Stock shall be sold by the Company and purchased by the several Underwriters shall be $____ per share. In making this Agreement, each Underwriter is contracting severally and not jointly; except as provided in paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is to purchase only the respective number of shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for the number of shares of the Stock agreed to be purchased by such Underwriter or Underwriters, the Company shall immediately give notice thereof to you, and the non-defaulting Underwriters shall have the right within 24 hours after the
receipt by you of such notice to purchase, or procure one or more other Underwriters to purchase, in such proportions as may be agreed upon between you and such purchasing Underwriter or Underwriters and upon the terms herein set forth, all or any part of the shares of the Stock which such defaulting Underwriter or Underwriters agreed to purchase. If the non-defaulting Underwriters fail so to make such arrangements with respect to all such shares and portion, the number of shares of the Stock which each non-defaulting Underwriter is otherwise obligated to purchase under this Agreement shall be automatically increased on a pro rata basis to absorb the remaining shares and portion which the defaulting Underwriter or Underwriters agreed to purchase; provided, however, that the non-defaulting Underwriters shall not be obligated to purchase the shares and portion which the defaulting Underwriter or Underwriters agreed to purchase if the aggregate number of such shares of the Stock exceeds 10% of the total number of shares of the Stock which all Underwriters agreed to purchase hereunder. If the total number of shares of the Stock which the defaulting Underwriter or Underwriters agreed to purchase shall not be purchased or absorbed in accordance with the two preceding sentences, the Company shall have the right, within 24 hours next succeeding the 24-hour period above referred to, to make arrangements with other underwriters or purchasers satisfactory to you for purchase of such shares and portion on the terms herein set forth. In any such case, either you or the Company shall have the right to postpone the Closing Date determined as provided in Section 5 hereof for not more than seven business days after the date originally fixed as the Closing Date pursuant to said Section 5 in order that any necessary changes in the Registration Statement, the Prospectus or any other documents or arrangements may be made. If neither the non-defaulting Underwriters nor the Company shall make arrangements within the 24-hour periods stated above for the purchase of all the shares of the Stock which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall be terminated without further act or deed and without any liability on the part of the Company or the Selling Securityholders to any non-defaulting Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company or the Selling Securityholders. Nothing in this paragraph (b), and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase the Option Stock at the same price per share as the Underwriters shall pay for the Underwritten Stock. The maximum aggregate number of shares of Option Stock to be sold by the Company is 412,500. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Stock by the Underwriters and may be exercised in whole or in part at any time (but not more than once) on or before the thirtieth day after the date of this Agreement upon written or telegraphic notice by you to the Company setting forth the aggregate number of shares of the Option Stock as to which the several Underwriters are exercising the option. Delivery of certificates for the shares of Option Stock, and payment therefor, shall be made as provided in Section 5 hereof. The number of shares of the Option Stock to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Stock to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Stock, as adjusted by you in such manner as you deem advisable to avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the Stock to be purchased by them shall be as set forth in the Prospectus. The Underwriters may from time to time change the public offering price after the closing of the initial public offering and increase or decrease the concessions and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover page and under "Underwriting" in the Registration Statement, any Preliminary Prospectus and the Prospectus relating to the Stock filed by the Company (insofar as such information relates to the Underwriters) constitutes the only information furnished by the Underwriters to the Company for inclusion in the Registration Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of the respective Underwriters represent and warrant to the Company that the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock and the Option Stock (if the option granted by Section 3(c) hereof shall have been exercised not later than 7:00 A.M., San Francisco time, on the date two business days preceding the Closing Date), and payment therefor, shall be made at the office of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110, at 7:00 a.m., San Francisco time, on the third business day after the date of this Agreement, or at such time on such other day, not later than seven full business days after such third business day, as shall be agreed upon in writing by the Company and you. The date and hour of such delivery and payment (which may be postponed as provided in Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised after 7:00 a.m., San Francisco time, on the date two business days preceding the Closing Date, delivery of certificates for the shares of Option Stock, and payment therefor, shall be made at the office of Testa, Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110, at 7:00 a.m., San Francisco time, on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to the Company or its order by a certified or official bank check or checks in next day funds (and the Company agrees not to deposit any such check in the bank on which drawn until the day following the date of its delivery to the Company). Such payment shall be made upon delivery of certificates for the Stock to you for the respective accounts of the several Underwriters against receipt therefor signed by you. Certificates for the Stock to be delivered to you shall be registered in such name or names and shall be in such denominations as you may request at least one business day before the Closing Date, in the case of Underwritten Stock, and at least one business day prior to the purchase thereof, in the case of the Option Stock. Such certificates will be made available to the Underwriters for inspection, checking and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New York, New York 10004 on the business day
prior to the Closing Date or, in the case of the Option Stock, by 3:00 p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the Underwriters, may (but shall not be obligated to) make payment to the Company for shares to be purchased by any Underwriter whose check shall not have been received by you on the Closing Date or any later date on which Option Stock is purchased for the account of such Underwriter. Any such payment by you shall not relieve such Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission under Rule 424(b) a Prospectus containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A and (ii) not file any amendment to the Registration Statement or supplement to the Prospectus of which you shall not previously have been advised and furnished with a copy or to which you shall have reasonably objected in writing or which is not in compliance with the Securities Act or the rules and regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the event of (i) the request by the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, (iii) the institution or notice of intended institution of any action or proceeding for that purpose, (iv) the receipt by the Company of any notification with respect to the suspension of the qualification of the Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the initiation or threatening of any proceeding for such purpose. The Company will make every reasonable effort to prevent the issuance of such a stop order and, if such an order shall at any time be issued, to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you four signed copies of the Registration Statement as originally filed and of each amendment thereto filed prior to the time the Registration Statement becomes effective and, promptly upon the filing thereof, a signed copy of each post-effective amendment, if any, to the Registration Statement (together with, in each case, all exhibits thereto unless previously furnished to you) and will also deliver to you, for distribution to the Underwriters, a sufficient number of additional conformed copies of each of the foregoing (but without exhibits) so that one copy of each may be distributed to each Underwriter, (ii) as promptly as possible deliver to you and send to the several Underwriters, at such office or offices as you may designate, as many copies of the Prospectus as you may reasonably request, and (iii) thereafter from time to time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, likewise send to the Underwriters as many additional copies of the Prospectus and as many copies of any supplement to the Prospectus and of any amended prospectus, filed by the Company with the Commission, as you may reasonably request for the purposes contemplated by the Securities Act. The Registration
Statement, the Prospectus and any amendments or supplements thereto furnished to you will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) If at any time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer any event relating to or affecting the Company, or of which the Company shall be advised in writing by you, shall occur as a result of which it is necessary, in the opinion of counsel for the Company or of counsel for the Underwriters, to supplement or amend the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Stock, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus so that the Prospectus as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time such Prospectus is delivered to such purchaser, not misleading. If, after the initial public offering of the Stock by the Underwriters and during such period, the Underwriters shall propose to vary the terms of offering thereof by reason of changes in general market conditions or otherwise, you will advise the Company in writing of the proposed variation, and, if in the opinion either of counsel for the Company or of counsel for the Underwriters such proposed variation requires that the Prospectus be supplemented or amended, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus setting forth such variation. The Company authorizes the Underwriters and all dealers to whom any of the Stock may be sold by the several Underwriters to use the Prospectus, as from time to time amended or supplemented, in connection with the sale of the Stock in accordance with the applicable provisions of the Securities Act and the applicable rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will submit to you, for your information, a copy of any post-effective amendment to the Registration Statement and any supplement to the Prospectus or any amended prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the qualification of the Stock for offer and sale under the securities or blue sky laws of such jurisdictions as you may designate and, during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, in keeping such qualifications in good standing under said securities or blue sky laws; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. The Company will, from time to time, prepare and file such statements, reports, and other documents as are or may be required to continue such qualifications in effect for so long a period as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the Company will furnish to you, and to each Underwriter who may so request in writing, copies of all periodic and special reports furnished to stockholders of the Company and of all information, documents and reports filed with the Commission (including the Report on Form SR required by Rule 463 of the Commission under the Securities Act). If applicable, any such document furnished to you will be
identical to the electronically transmitted copy thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(h) Not later than the 45th day following the end of the fiscal quarter first occurring after the first anniversary of the Effective Date, the Company will make generally available to its stockholders an earnings statement in accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the
performance of the obligations of the Company under this Agreement, including
all costs and expenses incident to (i) the preparation, printing and filing with
the Commission and the National Association of Securities Dealers, Inc. ("NASD")
of the Registration Statement, any Preliminary Prospectus and the Prospectus,
(ii) the furnishing to the Underwriters of copies of any Preliminary Prospectus
and of the several documents required by paragraph (c) of this Section 6 to be
so furnished, (iii) the printing of this Agreement and related documents
delivered to the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph (d) of
this Section 6, (v) the furnishing to you and the Underwriters of the reports
and information referred to in paragraph (g) of this Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees.
(j) The Company agrees to reimburse you, for the account of the several Underwriters, for blue sky fees and related disbursements (including counsel fees and disbursements and cost of printing memoranda for the Underwriters) paid by or for the account of the Underwriters or their counsel in qualifying the Stock under state securities or blue sky laws and in the review of the offering by the NASD.
(k) The Company hereby agrees that, without the prior written consent of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will not, for a period of 180 days following the date of the Prospectus, (i) sell, offer, contract to sell, make any short sale, pledge, transfer or otherwise dispose of, directly or indirectly, any shares of Common Stock (including any stock appreciation right or similar right with an exercise or conversion privilege at a price related to, or derived from, the market price of the Common Stock) or any securities convertible into or exchangeable or exercisable for shares of Common Stock or (ii) engage in any hedging transaction with respect to any shares of Common Stock that may have an impact on the market price of the Common Stock, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares of Common Stock issued by the Company upon the exercise of the Options and any other options granted under the stock option plans of the Company and (C) options to purchase Common Stock granted under the Option Plans.
(l) If at any time during the 25-day period after the Registration Statement becomes effective any rumor, publication or event relating to or affecting the Company shall occur as a result of which in your opinion the market price for the Stock has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written notice from you advising the Company to the effect set forth above, forthwith prepare, consult with you concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to you, responding to or commenting on such rumor, publication or event.
(m) The Company will in the future conduct its affairs in such a manner to ensure that the Company will not be an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter and each person (including each partner or officer thereof) who controls any Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Securities Exchange Act of 1934, as amended (herein called the Exchange Act), or the common law or otherwise, and the Company agrees to reimburse each such Underwriter and controlling person for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) registration statement) or any post-effective amendment thereto (including any Rule 462(b) registration statement) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus or the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that (1) the indemnity agreements of the Company contained in this paragraph (a) shall not apply to any such losses, claims, damages, liabilities or expenses if such statement or omission was made in reliance upon and in conformity with information furnished as herein stated or otherwise furnished in writing to the Company by or on behalf of any Underwriter for use in any Preliminary Prospectus or the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto and (2) the indemnity agreement contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages, liabilities or expenses purchased the Stock which is the subject thereof (or to the benefit of any person controlling such Underwriter) if at or prior to the written confirmation of the sale of such Stock a copy of the Prospectus (or the Prospectus as amended or supplemented) was not sent or delivered to such person and the untrue statement or omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented) unless the failure is the result of noncompliance by the Company with paragraph (c) of Section 6 hereof. The indemnity agreements of the Company contained in this paragraph (a) and the representations and warranties of the Company contained in Section 2 hereof shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless the Company, each of its officers who signs the Registration Statement on his own behalf or pursuant to a power of attorney, each of its directors, each other Underwriter and each person (including each partner or officer thereof) who controls the Company or any such other Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Exchange Act, or the common law or otherwise and to reimburse each of them for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) registration statement) or any post-effective amendment thereto (including any Rule 462(b) registration statement) or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished as herein stated or otherwise furnished in writing to the Company by or on behalf of such indemnifying Underwriter for use in the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto. The indemnity agreement of each Underwriter contained in this paragraph (b) shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and (b) of this Section 7 agrees that, upon the service of a summons or other initial legal process upon it in any action or suit instituted against it or upon its receipt of written notification of the commencement of any investigation or inquiry of, or proceeding against, it in respect of which indemnity may be sought on account of any indemnity agreement contained in such paragraphs, it will promptly give written notice (herein called the Notice) of such service or notification to the party or parties from whom indemnification may be sought hereunder. No indemnification provided for in such paragraphs shall be available to any party who shall fail so to give the Notice if the party to whom such Notice was not given was unaware of the action, suit, investigation, inquiry or
proceeding to which the Notice would have related and was prejudiced by the failure to give the Notice, but the omission so to notify such indemnifying party or parties of any such service or notification shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of such indemnity agreement. Any indemnifying party shall be entitled at its own expense to participate in the defense of any action, suit or proceeding against, or investigation or inquiry of, an indemnified party. Any indemnifying party shall be entitled, if it so elects within a reasonable time after receipt of the Notice by giving written notice (herein called the Notice of Defense) to the indemnified party, to assume (alone or in conjunction with any other indemnifying party or parties) the entire defense of such action, suit, investigation, inquiry or proceeding, in which event such defense shall be conducted, at the expense of the indemnifying party or parties, by counsel chosen by such indemnifying party or parties and reasonably satisfactory to the indemnified party or parties; provided, however, that (i) if the indemnified party or parties reasonably determine that there may be a conflict between the positions of the indemnifying party or parties and of the indemnified party or parties in conducting the defense of such action, suit, investigation, inquiry or proceeding or that there may be legal defenses available to such indemnified party or parties different from or in addition to those available to the indemnifying party or parties, then counsel for the indemnified party or parties shall be entitled to conduct the defense to the extent reasonably determined by such counsel to be necessary to protect the interests of the indemnified party or parties and (ii) in any event the indemnified party or parties shall be entitled to have counsel chosen by such indemnified party or parties participate in, but not conduct, the defense. If, within a reasonable time after receipt of the Notice, an indemnifying party gives a Notice of Defense and the counsel chosen by the indemnifying party or parties is reasonably satisfactory to the indemnified party or parties, the indemnifying party or parties will not be liable under paragraphs (a) through (c) of this Section 7 for any legal or other expenses subsequently incurred by the indemnified party or parties in connection with the defense of the action, suit, investigation, inquiry or proceeding, except that (A) the indemnifying party or parties shall bear the, legal and other expenses incurred in connection with the conduct of the defense as referred to in clause (i) of the proviso to the preceding sentence and (B) the indemnifying party or parties shall bear such other expenses as it or they have authorized to be incurred by the indemnified party or parties. If, within a reasonable time after receipt of the Notice, no Notice of Defense has been given, the indemnifying party or parties shall be responsible for any legal or other expenses incurred by the indemnified party or parties in connection with the defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each indemnifying party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, or actions in
respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Stock received by the Company and the total underwriting discount received by the Underwriters, as set forth in the table on the cover page of the Prospectus, bear to the aggregate public offering price of the Stock. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by each indemnifying party and the parties' relative intent knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities, or actions in respect thereof, referred to in the first sentence
of this paragraph (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigation,
preparing to defend or defending against any action or claim which is the
subject of this paragraph (d). Notwithstanding the provisions of this paragraph
(d), no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Stock purchased by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this paragraph (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it will promptly give written notice of such service to the party or parties from whom contribution may be sought, but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought from any obligation it may have hereunder or otherwise (except as specifically provided in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each Underwriter, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Underwriter or any person who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) unless such settlement compromise or consent includes an unconditional release of such Underwriter and each such controlling person from all liability arising out of such claim, action, suit or proceeding.
8. TERMINATION. This Agreement may be terminated by you at any time prior
to the Closing Date by giving written notice to the Company if after the date of
this Agreement trading in the Common Stock shall have been suspended, or if
there shall have occurred (i) the engagement in hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States would, in the Underwriters' reasonable judgment, make the
offering or delivery of the Stock impracticable, (iii) suspension of trading in
securities generally or a material adverse decline in value of securities
generally on the New York Stock Exchange, the American Stock Exchange, or The
Nasdaq Stock Market or limitations on prices (other than limitations on hours or
numbers of days of trading) for securities on either such exchange or system,
(iv) the enactment, publication, decree or other promulgation of any federal or
state statute, regulation, rule or order of, or commencement of any proceeding
or investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all actual, accountable,
out-of-pocket costs and expenses incident to the performance of the obligations
of the Company and the Selling Securityholders under this Agreement, including
all actual, accountable, out-of-pocket costs and expenses referred to in
paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several Underwriters to purchase and pay for the Stock shall be subject to the performance by the Company of all their respective obligations to be performed hereunder at or prior to the Closing Date or any later date on which Option Stock is to be purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop order suspending the effectiveness thereof shall have been issued and no proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder and the validity and form of the certificates representing the Stock, all corporate proceedings and other legal matters incident to the foregoing, and the form of the Registration Statement and of the Prospectus (except as to the financial statements contained therein), shall have been approved at or prior to the Closing Date by Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters.
(c) You shall have received from Morrison Cohen Singer & Weinstein L.L.P., counsel for the Company, an opinion, addressed to the Underwriters and dated the Closing Date, covering the matters set forth in Annex A hereto, and if Option Stock is purchased at any date after the Closing Date, additional opinions from such counsel, addressed to the Underwriters and dated such later date, confirming that the statements expressed as of the Closing Date in such opinion remain valid as of such later date.
(d) You shall have received from Lahive & Cockfield, patent counsel for the Company, an opinion, addressed to the Underwriters and dated the Closing Date, to the effect that they serve a patent counsel to the Company with respect to the issued patents, pending and contemplated patent applications, trade secrets and the proprietary technology that the Company owns or has rights to, and covering the matters set forth in Annex B hereto, and if Option Stock is purchased at any date after the Closing Date, additional opinions from such counsel, addressed to the Underwriters and dated such later date, confirming that the statements expressed as of the Closing Date, in such opinion remain valid as of such later date.
(e) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading, (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company, whether or not arising from
transactions in the ordinary course of business, and, since such dates, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained therein,
(iv) the Company has no material contingent obligations which are not disclosed
in the Registration Statement and the Prospectus, (v) there are no pending or
known threatened legal proceedings to which the Company is a party or of which
property of the Company is the subject which are material and which are not
disclosed in the Registration Statement and the Prospectus, (vi) there are no
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required,
(vii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Option Stock is to be purchased, as the case may be, and (viii) there has
not been any material change in the market for securities in general or in
political, financial or economic conditions from those reasonably foreseeable
that would render it impracticable in your reasonable judgment to make a public
offering of the Stock, or a material adverse change in market levels for
securities in general (or those of companies such as the Company in particular)
or financial or economic conditions which render it inadvisable to proceed.
(f) You shall have received on the Closing Date and on any later date on
which Option Stock is purchased a certificate, dated the Closing Date or such
later date, as the case may be, and signed by the Chief Executive Officer,
President and the Chief Financial Officer of the Company, stating that the
respective signers of said certificate have carefully examined the Registration
Statement in the form in which it originally became effective and the Prospectus
contained therein and any supplements or amendments thereto, and that the
statements included in clauses (i) through (vii) of paragraph (e) of this
Section 9 are true and correct.
(g) You shall have received from KPMG Peat Marwick, LLP a letter or letters, addressed to the Underwriters and dated the Closing Date and any later date on which Option Stock is purchased, confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder and based upon the procedures described in their letter delivered to you concurrently with the execution of this Agreement (herein called the Original Letter), but carried out to a date not more than three business days prior to the Closing Date or such later date on which Option Stock is purchased (i) confirming, to the extent true, that the statements and conclusions set forth in the Original Letter are accurate as of the Closing Date or such later date, as the case may be, and (ii) setting forth any revisions and additions to the statements and conclusions set forth in the Original Letter which are necessary to reflect any changes in the facts described in the Original Letter since the date of the Original Letter or to reflect the availability of more recent financial statements, data or information. The letters shall not disclose any change, or any development involving a prospective change, in or affecting the business or properties of the Company or any of its subsidiaries which, in your sole judgment makes it impractical or inadvisable to proceed with the public offering of the Stock or the purchase of the Option Stock as contemplated by the Prospectus.
(h) You shall have received from KPMG Peat Marwick, LLP a letter stating that their review of the Company's system of internal accounting controls, to the extent they deemed necessary in establishing the scope of their examination of the Company's financial statements as at March 31, 1996, did not disclose any weakness in internal controls that they considered to be material weaknesses.
(i) You shall have been furnished evidence in usual written or telegraphic form from the appropriate authorities of the several jurisdictions, or other evidence satisfactory to you, of the qualification referred to in paragraph (f) of Section 6 hereof.
(j) Prior to the Closing Date, the Stock to be issued and sold by the Company shall have been duly authorized for listing by The Nasdaq Stock Market upon official notice of issuance.
(k) On or prior to the Closing Date, you shall have received from all directors, officers, and beneficial holders of more than one percent of the outstanding Common Stock, agreements, in form reasonably satisfactory to Hambrecht & Quist LLC, stating that without the prior written consent of Hambrecht & Quist LLC on behalf of the Underwriters, such person or entity will not, for a period of 180 days after the date of the Prospectus, (i) sell, offer, contract to
sell, make any short sale, pledge, transfer or otherwise dispose of, directly or indirectly, any shares of Common Stock (including any stock appreciation right or similar right with an exercise or conversion privilege at a price related to, or derived from, the market price of the Common Stock) or any securities convertible into or exchangeable or exercisable for shares of Common Stock owned directly by the undersigned or with respect to which the undersigned has the power of disposition (including, without limitation, shares of Common Stock which the undersigned may be deemed to beneficially own in accordance with the rules and regulations promulgated under the Securities and Exchange Act of 1934, as amended), or (ii) engage in any hedging transaction with respect to any shares of Common Stock that may have an impact on the market price of the Common Stock, whether any such transaction is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. In addition, you shall have received from Morrison Cohen Singer & Weinstein L.L.P., counsel to the Company, evidence satisfactory to you, that all other beneficial owners of Common Stock and options to purchase Common Stock have been notified that the Company has exercised its lock-up option with respect to such shares contained in the Company's 1993 Stock Option Plan, 1996 Incentive Plan and the nonstatutory options to purchase up to 1,289,035 shares of Common Stock granted by the Company prior to the date hereof.
All the agreements, opinions, certificates and letters mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company; provided,
however, that (i) in the event of such termination, the Company agrees to
indemnify and hold harmless the Underwriters from all actual, accountable,
out-of-pocket costs and expenses incident to the performance of the obligations
of the Company under this Agreement, including all actual, accountable,
out-of-pocket costs and expenses referred to in paragraphs (i) and (j) of
Section 6 hereof, and (ii) if this Agreement is terminated by you because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein, to fulfill any of the conditions herein, or to comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all
actual, accountable, out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by them in connection
with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the Company to deliver the Stock shall be subject to the conditions that (a) the Registration Statement shall have become effective and (b) no stop order suspending the effectiveness thereof shall be in effect and no proceedings therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be fulfilled, this Agreement may be terminated by the Company by giving notice to you. Any such termination
shall be without liability of the Company to the Underwriters and without liability of the Underwriters to the Company; provided, however, that in the event of any such termination the Company agrees to indemnify and hold harmless the Underwriters from all actual, accountable, out-of-pocket costs and expenses incident to the performance of the obligations of the Company under this Agreement including all actual, accountable, out-of-pocket costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other obligations under Section 7 of this Agreement, the Company hereby jointly and severally agree to reimburse on a quarterly basis the Underwriters for all reasonable legal and other expenses incurred in connection with investigating or defending any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this Section 11 and the possibility that such payments might later be held to be improper; provided, however, that (i) to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them and (ii) such persons shall provide to the Company, upon request, reasonable assurances of their ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of the Company and the several Underwriters and, with respect to the provisions of Section 7 hereof, the several parties (in addition to the Company and the several Underwriters) indemnified under the provisions of said Section 7, and their respective personal representatives, successors and assigns. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable remedy or claim under or in respect of this Agreement or any provision herein contained. The term "successors and assigns" as herein used shall not include any purchaser, as such purchaser, of any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications hereunder shall be in writing or by telegraph and, if to the Underwriters, shall be mailed, telecopied or delivered to Hambrecht & Quist LLC, One Bush Street, San Francisco, California 94104; and if to the Company, shall be mailed, telegraphed or delivered to it at its office, 777 Old Saw Mill River Road, Tarrytown, NY 10591, Attention: Chief Executive Officer. All notices given by telecopy shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or their respective directors or officers, and (c) delivery and
payment for the Stock under this Agreement; provided, however, that if this
Agreement is terminated prior to the Closing Date, the provisions of paragraphs
(k) and (l) of Section 6 hereof shall be of no further force or effect.
This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.
Please sign and return to the Company the enclosed duplicates of this letter, whereupon this letter will become a binding agreement among the Company and the several Underwriters in accordance with its terms.
Very Truly Yours,
CADUS PHARMACEUTICAL CORPORATION
By:_________________________________________
Jeremy M. Levin, M.D., Ph.D.
President and Chief Executive Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
HAMBRECHT & QUIST LLC
MONTGOMERY SECURITIES
GENESIS MERCHANT GROUP SECURITIES
By Hambrecht & Quist LLC
By:____________________________
Managing Director
Acting on behalf of the several
Underwriters, including themselves,
named in Schedule I hereto.
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES OF
UNDERWRITTEN STOCK
UNDERWRITERS TO BE PURCHASED
------------ ------------------
Hambrecht & Quist LLC.....................................
Montgomery Securities.....................................
|
Genesis Merchant Group Securities.........................
ANNEX A
Matters to be Covered in the Opinion of
Counsel for the Company
1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing as a foreign corporation in New York and Colorado. The Company has all corporate power and authority necessary to own or hold its properties and conduct the business in which it is presently engaged.
2. Upon the filing of its Amended and Restated Certificate of Incorporation (the "Restated Certificate") with the Delaware Secretary of State, the Company's authorized capitalization will consist of 35,000,000 shares of Common Stock, $.01 par value per share. We have been advised by National Corporate Research Ltd. that the Restated Certificate has been filed with the Delaware Secretary of State. All of the issued and outstanding shares of capital stock of the Company have been, and the shares of the Stock being delivered on the date hereof, upon issuance and delivery and payment therefor in the manner described in the Underwriting Agreement, will be, duly and validly authorized and issued, fully paid and non-assessable with no personal liability attaching to the ownership thereof. The statements made in the Prospectus under the caption "Description of Capital Stock," insofar as they purport to constitute summaries of the terms of the Company's capital stock (including the Stock), constitute accurate summaries of the terms of such capital stock in all material respects and fairly present in all material respects the information called for with respect thereto by Item 202 of Regulation S-K.
3. Upon the consummation of the initial public offering, there will be no preemptive or other rights to subscribe for or to purchase any shares of the Stock pursuant to the Company's charter or by-laws or any agreement or other instrument known to us. Except as described in the Prospectus and as provided in the Company charter and by-laws, there are no restrictions upon the voting or transfer of any shares of the Common Stock pursuant to any agreement or other instrument known to us.
4. To our knowledge, and except as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or to which any property or assets of the Company or any of its subsidiaries is subject which, if determined adversely to the Company or any of its subsidiaries, are reasonably likely to have a material adverse effect on the business or prospects of the Company and its subsidiaries taken as a whole; and, to our knowledge, no such proceedings are threatened by governmental authorities or by others.
5. The Registration Statement was declared effective under the Securities Act and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the Commission.
6. The Registration Statement and the Prospectus and any further amendments or supplements thereto made by the Company prior to the date hereof (other than the financial statements, financial and statistical information, pro forma financial information and related schedules and notes thereto, as to which we express no opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations. In passing upon the form of such documents, we have not independently verified and are not passing upon, and have assumed the correctness and completeness of, the statements made therein.
7. To our knowledge, there are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described or filed as exhibits to the Registration Statement (including, without limitation, by means of incorporation by reference).
8. The Company has full right, power, and authority to execute and deliver the Underwriting Agreement and to perform its obligations thereunder; and all corporate action required to be taken for the due and proper authorization, issuance, sale and delivery of the Common Stock to be sold by the Company under the Underwriting Agreement and the consummation of the transactions contemplated thereby to be effected by the Company have been duly and validly taken by the Company.
9. The Underwriting Agreement has been duly authorized, executed, and delivered by the Company.
10. The issuance and sale of the shares of Stock being delivered on the date hereof by the Company, the compliance by the Company with all of the provisions of the Underwriting Agreement and the consummation of the transactions contemplated thereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default, an event of default, or an event which, with notice or lapse of time or both, would constitute a default or event of default under, any indenture, mortgage, deed of trust, loan agreement, or other agreement or instrument filed as an exhibit to the Registration Statement, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any material statute or any order, rule or regulation or, to our knowledge, any judgment, order or decree of any court or governmental agency or body having jurisdiction over the Company or any of its properties or assets, except for such conflicts, breaches, violations and defaults as are not reasonably likely, individually or in the aggregate, to have (a) a material adverse effect on the business or prospects of the Company; or (b) any adverse effect on the consummation of the transactions contemplated by the Underwriting Agreement. Except for the registration of the Stock under the Securities Act, and such consents, approvals, authorizations, registrations, or qualifications as may be required under the Exchange Act and applicable state or foreign securities laws in connection with the purchase and distribution of the Stock by the underwriters thereof, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the issuance and sale of the shares of Stock being delivered on the date hereof by the Company,
the compliance by the Company with all of the provisions of the Underwriting Agreement or the consummation of the transactions contemplated thereby.
11. To our knowledge, except as described under the caption "Shares Eligible for Future Sale -- Registration Rights" in the Preliminary Prospectus there are no contracts, agreements or understandings in effect on the date hereof between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act. To our knowledge, upon the consummation of the initial public offering, no person or entity will have a right of first refusal or participation with respect to the sale of shares of the Stock by the Company.
12. The Stock issued and sold by the Company will be duly authorized for listing on the Nasdaq National Market upon official notice of issuance of the shares by the Company to the Nasdaq Stock Market.
In connection with the preparation of the Registration Statement and the Prospectus, we have participated in conferences with officers and representatives of the Company and the independent accountants of the Company, at which conferences we have made inquiries of such persons and others and discussed the contents of the Registration Statement and the Prospectus. While the limitations inherent in the independent verification of factual matters and the character of determinations involved in the registration process are such that we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus (except as specifically stated elsewhere in this opinion), nothing has come to our attention which has caused us to believe that the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading (except that we express no view or opinion with respect to the financial statements and schedules or other financial and statistical data included in the Registration Statement), and nothing has come to our attention which has caused us to believe that the Prospectus, as of its date and as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (except that we express no view or opinion with respect to the financial statements and schedules or other financial and statistical data included in the Prospectus).
In rendering the foregoing opinion we may rely as to questions of law not involving the laws of the United States, the State of New York and the State of Delaware upon opinions of local counsel satisfactory in form and scope to counsel for the Underwriters. We are not, however, rendering any opinion with respect to those matters which are the subject of the legal opinion being rendered by the Company's patent counsel. Copies of any
opinions so relied upon shall be delivered to the Representatives and to counsel for the Underwriters and the foregoing opinion shall also state that counsel knows of no reason the Underwriters are not entitled to rely upon the opinions of such local counsel. In addition, we may state that as to various questions of fact material to our opinion, we have relied upon the representations made in or pursuant to the Underwriting Agreement and upon certificates of officers of the Company.
ANNEX B
Matters to be Covered in the Opinion of
Patent Counsel for the Company
1. We are unaware of any facts that would preclude the Company from having clear title to the Company's patents and patent applications referred to or described in the Prospectus, except as described in the Prospectus. To the best of our knowledge, we and the Company have complied with the required duty of candor and good faith in dealing with the Patent and Trademark Office, including the duty to disclose to the Office all information believed to be material to the patentability of each issued U.S. patent or pending application. We have no knowledge of any facts that would form the basis for a belief that the Company lacks or will be unable to obtain any rights or licenses to use all patents and know-how necessary to conduct the business now conducted or proposed to be conducted by the Company as described in the Prospectus, except as described in the Prospectus. We have no knowledge of any facts that would form a basis for a belief that any of the patents or applications owned or licensed by the Company are unenforceable or invalid, or would be unenforceable or invalid if issued as patents, except as described in the Prospectus. We have no knowledge of any patent applications of third parties, that, if issued, would limit or prohibit the business now conducted or proposed to be conducted by the Company as described in the Prospectus, except as described therein. We know of no pending or threatened action, suit, proceeding or claim by others that the Company is infringing any patent that could result in any material adverse effect on the Company, except as described in the Prospectus;
2. There are no legal or governmental proceedings pending relating to patent rights, other than review by the Patent and Trademark Office of pending applications for patents, including appeal and reissue proceedings, and, to the best of our knowledge, no such proceedings are threatened or contemplated by governmental authorities or others; and
3. To the best of our knowledge, there are no contracts or other documents material to the Company's patents or proprietary information other than those described in the Prospectus.
Although we have not verified the accuracy or completeness of the statements contained in the Prospectus relating to intellectual property, nothing has come to our attention that causes us to believe that, at the time the Registration Statement became effective, or at the Closing Date, the Prospectus, under the captions "Risk Factors -- Uncertainty of Protection of Patents and Proprietary Rights" and "Business -- Patents, Proprietary Technology and Trade Secret," contained any untrue statement of a material fact, or omitted to state any material fact necessary to make the statements therein not misleading.
In rendering this advice, we have relied as to matters of fact, to the extent we have deemed proper, upon certificates and representations of the Company's officers and management.
CERTIFICATE OF INCORPORATION
OF
CADUS THERAPEUTICS CORP.
FIRST. The name of the corporation is Cadus Therapeutics Corp.
SECOND. The address of the corporation's registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares which the corporation shall have authority to issue is 2,000,000 shares of Common Stock, $0.001 par value per share.
FIFTH. The name and mailing address of the incorporator is Joseph M. Harary, Esq., c/o Howard, Darby & Levin, 1330 Avenue of the Americas, New York, New York 10019.
SIXTH. The board of directors of the corporation is expressly authorized to adopt, amend or repeal by-laws of the corporation.
SEVENTH. Elections of directors need not be by written ballot, except and to the extent provided in the by-laws of the corporation.
EIGHTH. Any directors or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares at the time entitled to vote at an election of directors, whether or not the board of directors is classified as provided in subsection (d) of section 141 of Title 8 of the Delaware Code.
NINTH. Whenever a compromise or arrangement is proposed between the corporation and its creditors or any class of them and/or between the corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the corporation under the provisions of section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the corporation, as the case may be, to the summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the corporation, as the case may be, and also on the corporation.
TENTH. To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of
the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
ELEVENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power.
THE UNDERSIGNED INCORPORATOR hereby acknowledges that the foregoing Certificate of Incorporation is his act and deed and that the facts stated therein are true on this 23rd day of January, 1992.
/s/ JOSEPH M. HARARY -------------------------- Joseph M. Harary |
Certificate of Amendment of Certificate of Incorporation
Cadus Therapeutics Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
First: That the Board of Directors of Cadus Therapeutics Corporation, by the unanimous written consent of its members, filed with the minutes of the Board, duly adopted a resolution on June 14, 1992, amending the Certificate of Incorporation of said corporation as follows:
Resolved, that the Certificate of Incorporation be amended by changing the First article thereof, so that, as amended said article shall be and read as follows:
FIRST. The name of the Corporation is Cadus Pharmaceutical Corporation.
Second: That the Board of Directors of Cadus Therapeutic Corporation, by the unanimous written consent of its members, filed with the minutes of the Board, duly adopted a resolution as of June 14, 1992 amending the certificate of Incorporation of said corporation as follows:
Resolved,that the Company amend its Certificate of Incorporation such that the article FOURTH of the Certificate of Incorporation will read as follows:
FOURTH. The total number of shares of common stock which the Corporation shall have authority to issue is 10 million (10,000,000) shares with a par value of $.001 per share.
Third: That said amendments were duly adopted by the Board of Directors in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
In witness whereof, said Cadus Pharmaceutical Corporation has caused this Certificate to be signed by Samuel D. Waksal, its Chairman of the Board of Directors, and attested by John B. Landes, its Secretary, this 14th day of June, 1992.
By: Attested by: /s/ SAMUEL D. WAKSAL /s/ JOHN B. LANDES - ---------------------------------- ------------------ Samuel D. Waksal John B. Landes Chairman of the Board of Directors Secretary |
CADUS PHARMACEUTICAL CORPORATION
CERTIFICATE DESIGNATING SERIES OF CONVERTIBLE PREFERRED
STOCK, SERIES A, AND FIXING THE RELATIVE RIGHTS AND
PREFERENCES THEREOF
Cadus Pharmaceutical Corporation, a corporation organized and existing under the laws of the State of Delaware (hereafter referred to as the "Corporation"), in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation, as amended, of the Corporation, the Board of Directors of the Corporation, at a meeting duly convened and held on July 28, 1993 at which a quorum was present and acting throughout, adopted a resolution providing for the issuance of a series of the Corporation's Preferred Stock, $.001 per value, which series is designated "Convertible Preferred Stock, Series A", which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of Directors of the Corporation by the Certificate of Incorporation, as amended, the Board of Directors does hereby provide for the issuance of a series of the Preferred Stock, $.001 par value (hereafter called the "Preferred Stock"), of the Corporation, and to the extent that the voting powers and the designations, preferences and relative, participating, optional or other special rights thereof and the qualifications, limitations or restrictions of such rights have not been set forth in the Certificate of Incorporation, as amended, of the Corporation, does hereby fix the same as follows:
Convertible Preferred Stock, Series A
1. Designation. A total of 17,600,000 shares of the Corporation's Preferred Stock shall be designated the "Convertible Preferred Stock, Series A". Any shares of Convertible Preferred Stock, Series A which are not issued on or before August 31, 1996 shall be retired and returned to the status of authorized, unissued and undesignated shares of the Preferred Stock.
2. Dividends. The holders of the outstanding shares of Series A Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends payable if, as and when declared by the Board of Directors of the Corporation. In the event that the Board of Directors of the Corporation shall declare a dividend payable upon the then outstanding shares of Common Stock (other than a stock dividend on the Common Stock distributed solely in the form of additional shares of Common Stock), the holders of the Convertible Preferred Stock, Series A shall be entitled to dividends in an amount per share of Convertible Preferred Stock, Series A as would be declared payable on the largest number of whole shares of Common Stock into which each share of Convertible Preferred Stock, Series A held by each holder thereof could be converted pursuant to the provisions of Section 5 hereof, such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend.
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or in the event of its insolvency, before any distribution or payment is made to any holders of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Convertible Preferred Stock, Series A and subject to the liquidation rights and preferences of any class or series of Preferred Stock or any other class of capital stock designated in the future to be senior to, or on a parity with, the Convertible Preferred Stock, Series A with respect to liquidation preferences, the holders of each share of Convertible Preferred Stock, Series A shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes whether such assets are capital, surplus or earnings ("Available Assets"), an amount equal to $.457 per share of Convertible Preferred Stock, Series A. Such amount shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the capital structure of the Convertible Preferred Stock, Series A.
If, upon liquidation, dissolution or winding up of the Corporation, the Available Assets shall be insufficient to pay the holders of Convertible Preferred Stock, Series A the full amount to which they otherwise would be entitled, the holders of Convertible Preferred Stock, Series A shall share ratably in any distribution of Available Assets in proportion to the respective liquidation preference amounts which would otherwise be payable upon liquidation with respect to the outstanding shares of the
Convertible Preferred Stock, Series A if all liquidation preference dollar amounts with respect to such shares were paid in full.
(b) Participating Rights. After the distribution described in Section 3(a) shall have been paid in full, the remaining Available Assets of the Corporation shall be distributed to the holders of Convertible Preferred Stock, Series A and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all shares of Convertible Preferred Stock, Series A into shares of Common Stock at the Conversion Rate in effect at that time pursuant to Section 5).
(c) Distributions Other than Cash. Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors of the Corporation.
4. Voting Power.
(a) General. Except as otherwise expressly provided in this Section 4, or as otherwise required by law, each holder of Convertible Preferred Stock, Series A shall be entitled to vote on all matters and shall be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such holder's shares of Convertible Preferred Stock, Series A could be converted, pursuant to the provisions of Section 5 hereof, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited. Except as otherwise required by law, the holders of shares of Convertible Preferred Stock, Series A and Common Stock shall vote together as a single class on all matters submitted to the stockholders of the Corporation.
(b) Rights with Respect to Certain Matters. So long as the number of outstanding shares of Convertible Preferred Stock, Series A is at least equal to 25 percent of the number of shares of Convertible Preferred Stock, Series A originally issued, the Corporation shall not take any of the following actions without the approval by the affirmative vote of the holders of at least 85 percent of the then outstanding shares of Convertible Preferred Stock, Series A, voting as a separate class, each share of Convertible Preferred Stock, Series A to be entitled to one vote in each instance:
(1) amend the Certificate of Incorporation if such amendment would change any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Convertible Preferred Stock, Series A so as to materially adversely
affect the rights of the holders of the Convertible Preferred Stock, Series A; or
(2) authorize or create shares of any class of stock ranking senior to or on a parity with the Common Stock with respect to liquidation preferences or dividend or redemption rights; or
(3) increase the authorized number of shares of Convertible Preferred Stock, Series A;
(4) (A) sell, convey or otherwise dispose of all or substantially all of the assets of the Corporation or (B) merge into or consolidate with any other corporation (other than a wholly-owned subsidiary of the Corporation) if more than 50 percent of the voting power of the Corporation is transferred to persons who were not stockholders of the Corporation immediately prior to such merger or consolidation;
(5) Liquidate, dissolve or otherwise wind up the affairs of the Corporation; or
(6) Any amendment of the By-laws of the Corporation which would alter the vote required for action by the Board of Directors of the Corporation or the term of office of the Chairman of the Board.
5. Conversion Rights. The holders of the Convertible Preferred Stock, Series A shall have the following rights with respect to the conversion of such shares into shares of Common Stock:
(a) General. Subject to and in compliance with the provisions
of this Section 5, any shares of the Convertible Preferred Stock, Series A may,
at the option of any holder, be converted at any time and from time to time into
fully-paid and non-assessable shares of Common Stock. The number of shares of
Common Stock to which a holder of Convertible Preferred Stock, Series A shall be
entitled to receive upon conversion at any particular time shall be the product
obtained by multiplying the Conversion Rate (determined as provided in Section
5(b)) by the number of shares of Convertible Preferred Stock, Series A being
converted at such time.
(b) Conversion Rate. The conversion rate in effect at any
time for the Convertible Preferred Stock, Series A shall be the quotient
obtained by dividing $.457 by the Conversion Value, calculated as provided in
Section 5(c) (the "Conversion Rate").
(c) Conversion Value. The Conversion Value in effect from time to time, except as adjusted in accordance with Section
5(d) hereof, shall be $.457 with respect to the Convertible Preferred Stock, Series A (the "Conversion Value").
(d) Adjustments to Conversion Value
(i)(A) Upon Dilutive Issuances of Common Stock or Convertible Securities. If the Corporation shall, while there are any shares of Convertible Preferred Stock, Series A outstanding, issue or sell shares of its Common Stock or Common Stock Equivalents without consideration or at a price per share less than the Conversion Value in effect immediately prior to such issuance or sale, then in each such case such Conversion Value for the Convertible Preferred Stock, Series A upon each such issuance or sale, except as hereinafter provided, shall be reduced so as to be equal to an amount determined by multiplying the Conversion Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (as hereafter defined) (calculated on a fully-diluted basis assuming the conversion of all presently exercisable options, warrants, purchase rights or convertible securities), plus (b) the number of shares of Common Stock or Common Stock Equivalents which the net aggregate consideration, if any, received by the Corporation for the total number of such additional shares of Common Stock or Common Stock Equivalents so issued would purchase at the Conversion Value in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully-diluted basis assuming the exercise or conversion of all presently exercisable options, warrants, purchase right or convertible securities), plus (b) the number of such additional shares of Common Stock or Common Stock Equivalents so issued.
The provisions of this Section 5(d)(i)(A) may be waived with respect to all outstanding shares of Convertible Preferred Stock, Series A in any instance by the affirmative vote of holders of a majority of the outstanding Convertible Preferred Stock, Series A.
(i)(B) Upon Dilutive Issuances of Warrants, Options and Purchase Rights to Common Stock or Convertible Securities.
(1) For the purposes of this Section 5(d)(i), the issuance of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase rights with respect to such convertible or exchangeable securities (collectively, "Common Stock Equivalents"), shall be deemed an issuance of Common Stock with respect to adjustments in the Conversion Value of the Convertible Preferred Stock, Series A if the Net Consideration Per Share (as hereinafter determined) which may be received by the Corporation for such Common Stock shall be less than the Conversion Value in effect at the time of such issuance. Any obligation, agreement or undertaking to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance of Common Stock Equivalents at the time such obligation, agreement or undertaking is made or arises. No adjustment of the Conversion Value shall be made under this Section 5(d)(i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the issuance of any such Common Stock Equivalents as above provided.
(2) Adjustments for Cancellation or Expiration of Common Stock Equivalents. Should the Net Consideration Per Share of any such Common Stock Equivalents be decreased from time to time, then, upon the effectiveness of each such change, the Conversion Value will be that which would have been obtained (1) had the adjustments made upon the issuance of such Common Stock Equivalents been made upon the basis of the actual Net Consideration Per Share of such securities, and (2) had the adjustments made to the Conversion Value since the date of issuance of such Common Stock Equivalents been made to such Conversion Value as adjusted pursuant to clause (1) above. Any adjustment of the Conversion Value pursuant to this paragraph which relates to any Common Stock Equivalent shall be eliminated if, as, and when such Common Stock Equivalent expires or is canceled without being exercised, or is repurchased by the Company at a price per share at or less than the original purchase price, so that the Conversion Value for the Convertible Preferred Stock, Series A effective immediately upon such cancellation or expiration shall be equal to the Conversion Value that
would have been in effect had the expired or canceled Common Stock Equivalent not been issued.
(3) Net Consideration Per Share. For purposes of this Section
5(d)(i)(B), the "Net Consideration Per Share" which may be received by
the Corporation shall be determined as follows:
(a) The "Net Consideration Per Share" shall mean the amount equal to the total amount of consideration, if any, received by the Corporation for the issuance of such Common Stock Equivalents, plus the minimum amount of consideration, if any, payable to the Corporation upon exercise, or conversion or exchange thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted.
(b) The "Net Consideration Per Share" which may be received by the Corporation shall be determined in each instance as of the date of issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate adjustments which may be applicable with respect to such Common Stock Equivalents.
(i)(C) Stock Dividends for Holders of Capital Stock Other than Common Stock. In the event that the Corporation shall make or issue, or shall fix a record date for the determination of holders of any capital stock of the Corporation, other than holders of Common Stock, entitled to receive a dividend or other distribution payable in Common Stock or securities of the Corporation convertible into or otherwise exchangeable for shares of Common Stock of the Corporation, then such Common Stock or other securities issued in payment of such dividend shall be deemed to have been issued for a consideration of $.01, except for (i) dividends payable in shares of Common Stock payable pro rata to holders of Convertible Preferred Stock, Series A and to holders of any other class of stock and (ii) with respect to the Convertible Preferred Stock, Series A, dividends payable in shares of Convertible Preferred Stock, Series A; provided, however, that holders of any shares of Convertible Preferred Stock, Series A shall be entitled to receive in place of such Convertible Preferred Stock, Series A the shares of Common Stock into which the shares of Convertible Preferred Stock, Series A being distributed as a dividend are then convertible.
(i)(D) Consideration Other than Cash. For purposes of this
Section 5(d)(i), if a part or all of the consideration received by the
Corporation in connection with the
issuance of shares of the Common Stock or the issuance of any of the securities described in this Section 5(d)(i) consists of property other than cash, such consideration shall be deemed to have a fair market value as is reasonably determined in good faith by the Board of Directors of the Corporation. In the event of any dispute between the holders of the Convertible Preferred Stock, Series A and the Corporation regarding the determination of fair market value, at the written request of the holders of a majority of the outstanding shares of Convertible Preferred Stock, Series A, the Corporation shall engage a consulting firm or investment banking firm, selected by the Board of Directors and approved by the holders of a majority of the outstanding shares of Preferred Stock, to prepare an independent appraisal of the fair market value of such property to be distributed. The expenses of any appraisal by such consulting or investment banking firm shall be borne by the Corporation.
(i)(E) Exceptions to Anti-dilution Adjustments; Reserved Employee Shares. This Section 5(d)(i) shall not apply under any of the circumstances which would constitute an Extraordinary Common Stock Event (as defined below). Further, this Section 5(d)(i) shall not apply with respect to the issuance or sale of up to 2,000,000 shares of Common Stock, including by way of the grant of options exercisable for up to such number of shares of Common Stock (which options shall not be counted separately from the Common Stock subject thereto), issued or issuable after the original issue date of the Convertible Preferred Stock, Series A to directors, officers, employees and consultants of the Corporation or any subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, stock purchase plan or agreement, stock restriction agreement, employee stock ownership plan, consulting agreement, or such other options, issuances, arrangements, agreements or plans approved by Board of Directors; provided, however, that the number set forth above may be increased from time to time by the affirmative vote of the holders of 85 percent of the outstanding shares of Convertible Preferred Stock, Series A entitled to vote (voting together as a separate class). The foregoing numbers shall be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock of the Corporation.
(d)(ii) Upon Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common Stock Event (as hereinafter defined), the Conversion Value (and all other conversion values set forth in Section 5(d)(i) above) shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted by multiplying the Conversion Value by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the product so obtained shall thereafter be the Conversion Value, and the Conversion Value, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (i) the issue of additional shares of Common Stock as a dividend or other distribution on outstanding shares of Common Stock, (ii) a subdivision of outstanding shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination or reverse stock split of outstanding shares of Common Stock into a smaller number of shares of Common Stock.
(e) Automatic Conversion Upon Public Offering.
(i) Mandatory Conversion of Preferred Stock. In connection with the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock) then all outstanding shares of Convertible Preferred Stock, Series A shall be converted automatically into the number of shares of Common Stock into which such shares of Convertible Preferred Stock, Series A are then convertible pursuant to this Section 5 as of the closing and consummation of such underwritten public offering without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent.
(ii) Surrender of Certificates Upon Mandatory Conversion.
Upon the occurrence of the conversion event specified in the preceding paragraph
(i), the holders of the Convertible Preferred Stock, Series A shall, upon notice
from the Corporation, surrender the certificates representing such shares at the
office of the Corporation or its transfer agent for the Common Stock. Thereupon,
there shall be issued and delivered to each such holder a certificate or
certificates for the number of shares of Common Stock into which the shares of
Convertible Preferred Stock, Series A so surrendered were convertible on the
date on which the conversion occurred. The Corporation shall not be obligated to
issue such certificates and the holder shall not be entitled to
exercise any of the rights of a holder of the shares of Common Stock issued upon conversion of the shares of Convertible Preferred Stock, Series A unless certificates evidencing such shares of Convertible Preferred Stock, Series A being converted are either delivered to the Corporation or any such transfer agent, or the holder notifies the Corporation that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith.
(f) Dividends. In the event the Corporation shall make or issue, or shall fix a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution (other than a distribution in liquidation or other distribution otherwise provided for herein) with respect to the Common Stock payable in (i) securities of the Corporation other than shares of Common Stock, or (ii) other assets (excluding cash dividends or distributions), then and in each such event provision shall be made so that the holders of the Convertible Preferred Stock, Series A shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the number of securities or such other assets of the Corporation which each holder would have received had such holder's Convertible Preferred Stock, Series A been converted into Common Stock on the date of such event and had such holder thereafter, during the period from the date of such event to and including the Conversion Date (as that term is hereinafter defined in Section 5(j)), retained such securities or such other assets receivable by such holder during such period, giving application to all other adjustments called for during such period under this Section 5 with respect to the rights of the holders of the Convertible Preferred Stock, Series A.
(g) Capital Reorganization or Reclassification. If the Common Stock issuable upon the conversion of the Convertible Preferred Stock, Series A shall be changed into the same or different number of shares of any class or classes of capital stock, whether by capital reorganization, recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for elsewhere in this Section 5, or the sale of all or substantially all of the Corporation's capital stock or assets to any other person), then and in each such event the holder of each share of Convertible Preferred Stock, Series A shall have the right thereafter to convert such share into the kind and amount of shares of capital stock and other securities and property receivable upon such reorganization, recapitalization, reclassification or other change by the holders of the number of shares of Common Stock into which such shares of Convertible Preferred Stock, Series A might have been converted immediately prior to such reorganization,
recapitalization, reclassification or change, all subject to further adjustment as provided herein.
(h) Capital Reorganization, Merger or Sale of Assets. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, recapitalization, reclassification or exchange of shares provided for elsewhere in this Section 5) or a merger, or consolidation of the Corporation with or into another corporation, or the sale of all or substantially all of the Corporation's capital stock or assets to any other person, or any other form of business combination or reorganization in which control of the Corporation is transferred and to which Section 7 does not apply (each, a "Reorganization"), then as a part of such Reorganization, provision shall be made so that the holders of the Convertible Preferred Stock, Series A shall thereafter be entitled to receive upon conversion of the Convertible Preferred Stock, Series A the same kind and amount of stock or other securities or property (including cash) of the Corporation, or of the successor corporation resulting from such Reorganization to which such holder would have been entitled if such holder had converted its shares of Convertible Preferred Stock, Series A immediately prior to the effective time of such Reorganization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 to the end that the provisions of this Section 5 (including adjustment of the Conversion Value then in effect and the number of shares of Common Stock or other securities issuable upon conversion of such shares of Convertible Preferred Stock, Series A) shall be applicable after that event in as nearly equivalent a manner as may be practicable.
(i) Certificate as to Adjustments; Notice by Corporation. In each case of an adjustment or readjustment of the Conversion Rate, the Corporation at its expense will furnish each record holder of Convertible Preferred Stock, Series A, at such holder's registered address as shall appear on the stock records of the Corporation, a certificate prepared by the Treasurer or Chief Financial Officer of the Corporation, showing such adjustment or readjustment, and stating in detail the facts upon which such adjustment or readjustment is based.
(j) Exercise of Conversion Privilege. To exercise its conversion privilege, a holder of Convertible Preferred Stock, Series A shall surrender the certificate or certificates representing the shares being converted to the Corporation at its principal office, and shall give written notice to the Corporation at that office that such holder elects to convert such shares. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock issuable upon such conversion shall be issued. The
certificate or certificates for shares of Convertible Preferred Stock, Series A surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation, together with the certificate or certificates representing the shares of Convertible Preferred Stock, Series A being converted, shall be the "Conversion Date". As promptly as practicable after the Conversion Date, the Corporation shall issue and deliver to the holder of the shares of Convertible Preferred Stock, Series A being converted, or on its written order, such certificate or certificates as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of Convertible Preferred Stock, Series A in accordance with the provisions of this Section 5, and cash, as provided in Section 5(k), in respect of any fraction of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Convertible Preferred Stock, Series A shall cease and the person(s) in whose name(s) any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby.
(k) Cash in Lieu of Fractional Shares. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of shares of Convertible Preferred Stock, Series A. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Convertible Preferred Stock, Series A, the Corporation shall pay to the holder of the shares of Convertible Preferred Stock, Series A which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the fair market value per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be based upon the aggregate number of shares of Convertible Preferred Stock, Series A being converted at any one time by any holder thereof, not upon each share of Convertible Preferred Stock, Series A being converted.
(l) Partial Conversion. In the event some but not all of the shares of Convertible Preferred Stock, Series A represented by a certificate(s) surrendered by a holder are converted, the Corporation shall execute and deliver to or on the order of the holder, at the expense of the Corporation, a new certificate representing the number of shares of Convertible Preferred Stock, Series A which were not converted.
(m) Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Convertible Preferred Stock, Series A, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Convertible Preferred Stock, Series A (including any shares of Convertible Preferred Stock, Series A represented by any warrants, options, subscription or purchase rights for Convertible Preferred Stock, Series A), and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Convertible Preferred Stock, Series A (including any shares of Convertible Preferred Stock, Series A represented by any warrants, options, subscriptions or purchase rights for such Convertible Preferred Stock, Series A), the Corporation shall take such action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.
(n) No Reissuance of Convertible Preferred Stock, Series A. No share or shares of Convertible Preferred Stock, Series A acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued as shares of Convertible Preferred Stock, Series A, and all such shares shall be retired and returned to the status of authorized, unissued and undesignated shares of Preferred Stock.
6. No Redemption Rights; Repurchases.
(a) The Corporation shall not have the right to mandatorily redeem all of the outstanding shares of Convertible Preferred Stock, Series A. Nothing herein shall prohibit the Corporation from purchasing or acquiring Shares of Convertible Preferred Stock, Series A.
(b) The Corporation shall not purchase or acquire any shares of Convertible Preferred Stock, Series A except pursuant to an offer made upon the same terms pro rata to all holders of outstanding shares of Convertible Preferred Stock, Series A.
7. Merger, Consolidation, Etc.
(a) If at any time there is (1) a merger or consolidation of the Corporation with or into another corporation or other entity or person, or any other corporate reorganization in which the Corporation shall not be the continuing or surviving entity of such merger, consolidation or reorganization, or any transaction or series of related transactions by the Corporation, in each case in which in excess of 50 percent of the Corporation's voting power is transferred, or (2) a sale of all or substantially
all of the Corporation's assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Convertible Preferred Stock, Series A shall be entitled to receive in exchange for their shares of Convertible Preferred Stock, Series A, prior to any distribution to holders of Common Stock, a number of shares of stock or other securities or an amount of cash or property to be issued to the Corporation or its stockholders by reason of such reorganization, merger, consolidation or sale in an amount per share of Convertible Preferred Stock, Series A having a value equal to $.457 per share subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, reclassification or other similar event involving a change in the capital structure of the Convertible Preferred Stock, Series A). The holders of Common Stock and Convertible Preferred Stock, Series A, shall thereafter be entitled to receive, pro rata, the remainder of the number of shares of stock or other securities or cash or property to be issued to the Corporation or its stockholders by reason of such reorganization, merger, consolidation or sale (treating each share of Convertible Preferred Stock, Series A as if it had been converted into the number of shares of Common Stock into which it is at the time convertible pursuant to Section 5).
(b) Any securities to be delivered to the holders of Convertible Preferred Stock, Series A, and Common Stock pursuant to Section 7(a) above shall be valued as follows:
(i) Securities not subject to investment letter or other similar restrictions on free marketability:
(A) if traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three days prior to the closing of the transaction;
(B) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing of the transaction; and
(C) If there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.
(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market value determined as above in (i)(A), (B) or (C) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.
(c) In the event the requirements of subsection 7(a) are not complied with, the Corporation shall forthwith either:
(i) cause the closing of the transaction to be postponed until such time as the requirements of this Section 7 have been complied with, or
(ii) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Convertible Preferred Stock, Series A shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 7(d) hereof.
(d) The Corporation shall give each holder of record of Convertible Preferred Stock, Series A written notice of such impending transaction not later than 20 days prior to the stockholders' meeting called to approve such transaction, or 20 days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 7, and the Corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place earlier than 20 days after the Corporation has given the first notice provided for herein or earlier than ten days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of 75 percent of the shares of Convertible Preferred Stock, Series A then outstanding.
(e) The provisions of this Section 7 are in addition to and not in lieu of the provisions of Section 4 hereof.
IN WITNESS WHEREOF, Cadus Pharmaceutical Corporation has caused this certificate to be signed by Jeremy Levin, its President, and attested by John B. Landes, its Secretary, on the 29th day of June, 1992.
CADUS PHARMACEUTICAL
CORPORATION
Attest: By:/s/JEREMY LEVIN
-----------------------
/s/JOHN B. LANDES
- -------------------------
John B. Landes
Secretary
|
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
CADUS PHARMACEUTICAL CORPORATION
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Cadus Pharmaceutical Corporation, a corporation organized and existing under and by virtue of the General Corporation law of the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation is hereby amended by deleting existing Article FOURTH thereof and substituting in lieu of Article FOURTH the following:
"FOURTH. The total number of shares of all classes which the Corporation shall have authority to issue is 53,000,000, consisting of 30,000,000 shares of Common Stock, par value $.001 per share (the "Common Stock"), and 23,000,000 shares of Preferred Stock, par value $.001 per share (the "Preferred Stock").
A. Undesignated Preferred Stock
Subject only to the limitations hereinbefore and hereinafter contained and to the requirements of the laws of the State of Delaware, authority is hereby vested in the Board of Directors of the Corporation from time to time to issue the Preferred Stock in one or more series and by resolution or resolutions as to each series:
(a) To fix the distinctive serial designation of the shares of such series,
(b) to fix the rate per annum at which the holders of the shares of such series shall be entitled to receive dividends or the amount of dividends which the holders of the shares of such series shall be entitled to receive, if any, the dates on which said dividends shall be payable, and if the directors determine that the dividends with respect to said series shall be cumulative, the date or dates from which such dividends shall be cumulative,
(c) to determine whether the shares of such series shall have voting power, and, if so, the extent and definition of such voting power,
(d) to fix the price or prices at which the shares of such series may be redeemed, and to determine whether the shares of such series may be redeemed in whole or in part or only as a whole,
(e) to fix the amounts payable on the shares of such series in the event of liquidation, dissolution or winding up of the Corporation,
(f) to determine whether or not the shares of any such series shall be made convertible into or exchangeable for shares of any other class or classes of stock of the Corporation or of any other series of Preferred Stock and the conversion price, or prices, or the rate, or rates, of exchange at which such conversion or exchange may be made,
(g) to determine the amount of the sinking fund, purchase fund, or any analogous fund, if any, to be provided with respect to each such series, and
(h) to fix preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, applicable to each such series.
B. Common Stock
1. Subject to the prior rights of the holders of Preferred Stock from time to time outstanding, the Common Stock shall be entitled to receive such dividends as the Board of Directors may from time to time declare thereon out of the funds available therefor and to receive any balance remaining in case of dissolution, liquidation or winding up of the Corporation.
2. The holders of the Common Stock, except when there shall be Preferred Stock outstanding possessing voting rights applicable in the premises, shall have the exclusive voting power for the election of Directors and for all other corporate purposes."
SECOND: That said amendment has been duly adopted by written consent of the stockholders of the Corporation in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Cadus Pharmaceutical Corporation has caused this Certificate of Amendment to be signed by Jeremy Levin, its President and Chief Executive Officer, and John B. Landes, its Secretary, on this 28th day of July, 1993.
CADUS PHARMACEUTICAL
CORPORATION
By: /s/JEREMY LEVIN
----------------------------
Jeremy Levin
President and
Chief Executive Officer
Attest:
By: /s/JOHN B. LANDES
------------------------
John B. Landes
Secretary
|
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CADUS PHARMACEUTICAL CORPORATION
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Cadus Pharmaceutical Corporation (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation is hereby amended by deleting the existing Article FOURTH thereof and the Certificate of Designation filed pursuant thereto and substituting in lieu of Article FOURTH and such Certificate of Designation the following:
"FOURTH. The total number of shares of all classes which the Corporation shall have authority to issue is 49,701,080, consisting of 19,701,080 shares of Preferred Stock (the "Preferred Stock"), $.001 par value per share, and 30,000,000 shares of Common Stock (the "Common Stock"), $.001 par value per share. The Preferred Stock shall have two series: Series A Convertible Preferred Stock ("Series A Preferred Stock"), consisting of 14,879,651 shares, and Series B Convertible Preferred Stock ("Series B Preferred Stock"), consisting of 4,821,429 shares. As used herein the term Preferred Stock means the Series A Preferred Stock and the Series B Preferred Stock, share-for-share alike and without distinction as to class or series, except as otherwise set forth herein or as the context otherwise requires.
A description of the different classes of the Corporation's capital stock and a statement of the designations and relative rights, preferences and limitations hereof are as follows:
A. PREFERRED STOCK
1. RELATIVE RIGHTS.
The preferences, limitations, voting rights and relative rights of the Preferred Stock shall be as set forth below.
2. DIVIDENDS.
In the event that the Board of Directors of the Corporation shall declare a dividend payable upon the then outstanding shares of Common Stock (other than a stock dividend on the Common Stock distributed solely in the form of additional
shares of Common Stock), the holders of the Preferred Stock shall be entitled to dividends in an amount per share of Preferred Stock as would be declared payable on the largest number of whole shares of Common Stock into which each share of Preferred Stock held by the holder thereof could be converted pursuant to the provisions of Section 5 hereof, such number determined as of the record date for the determination of holders of Common Stock entitled to receive such dividend.
3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or in the event of its insolvency, before any distribution or payment is made to any holders of Common Stock or any other class or series of capital stock of the Corporation designated to be junior to the Preferred Stock, and subject to the liquidation rights and preferences of any class or series of capital stock designated in the future to be senior to, or on a parity with, the Preferred Stock with respect to liquidation preferences, the holders of each share of Preferred Stock shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes whether such assets are capital, surplus or earnings ("Available Assets"), an amount equal to $0.457 for each share of Series A Preferred Stock and $3.50 for each share of Series B Preferred Stock. Such amounts shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the capital structure of the Series A Preferred Stock or the Series B Preferred Stock, as the case may be.
If, upon liquidation, dissolution or winding up of the Corporation, the Available Assets shall be insufficient to pay the holders of Preferred Stock the full amount to which they otherwise would be entitled, the holders of Preferred Stock shall share ratably in any distribution of Available Assets in proportion to the respective liquidation preference amounts which would otherwise be payable upon liquidation with respect to the outstanding shares of the Preferred Stock, if all liquidation preference dollar amounts with respect to such shares were paid in full.
After the payment or distribution to the holders of Preferred Stock of the full preferential amounts to which they are entitled, the holders of Common Stock shall be entitled to receive ratably all of the remaining assets of the corporation to be distributed.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be
the fair market value of such property as determined in good faith by the Board of Directors of the Corporation.
4. VOTING POWER.
(a) GENERAL. Except as otherwise expressly provided in this
Section 4 or as otherwise required by law, each holder of Preferred Stock shall
be entitled to vote on all matters and shall be entitled to that number of votes
equal to the largest number of whole shares of Common Stock into which such
holder's shares of Preferred Stock could be converted, pursuant to the
provisions of Section 5 hereof, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise required by law, the holders of
shares of Preferred Stock and Common Stock shall vote together as a single class
on all matters submitted to the stockholders of the Corporation.
(b) RIGHTS WITH RESPECT TO CERTAIN MATTERS. So long as (i) the
number of outstanding shares of Series A Preferred Stock is at least equal to 25
percent of the number of shares of Series A Preferred Stock originally issued or
(ii) the number of outstanding shares or Series B Preferred Stock is at least
equal to 25 percent of the number of shares of Series B Preferred Stock
originally issued, the Corporation shall not take any of the following actions
without the approval by the affirmative vote of the holders of at least 66-2/3
percent of the then outstanding shares of Preferred Stock, voting as a separate
class, each share of Preferred Stock to be entitled, in each instance, to that
number of votes equal to the largest number of whole shares of Common Stock into
which such share of Preferred Stock could be converted pursuant to the
provisions of Section 5 hereof, at the record date for the determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
stockholders is solicited:
(1) amend the Certificate of Incorporation if such amendment would change any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Preferred Stock so as to materially adversely affect the rights of the holders of the Preferred Stock; or
(2) authorize or create shares of any class of stock ranking senior to or on a parity with the Preferred Stock with respect to general voting or liquidation preferences or dividend or redemption rights; or
(3) redeem or purchase any outstanding shares of Common Stock (except upon the termination of employment of an employee or pursuant to agreements existing on the date hereof).
(c) RIGHTS OF PREFERRED STOCK WITH RESPECT TO CERTAIN AMENDMENTS TO BY-LAWS. So long as the number of outstanding shares of Series A Preferred Stock is at least equal to 25 percent of the number of shares of Series A Preferred Stock originally issued, the Corporation shall not amend its By-Laws or this Certificate of Incorporation in any manner if the effect of the amendment is to eliminate or change, in whole or in part, the vote required with respect to the items enumerated in Section 2.6 of its By-Laws as adopted by the Board of Directors of the Corporation on June 28, 1994, without the approval by the affirmative vote of the holders of at least 85 percent of the then outstanding shares of Preferred Stock, voting as a separate class, each share of Preferred Stock to be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such share of Preferred Stock could be converted pursuant to the provisions of Section 5 hereof, at the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited.
(d) RIGHTS OF SERIES A PREFERRED STOCK WITH RESPECT TO CERTAIN MATTERS. So long as the number of outstanding shares of Series A Preferred Stock is at least equal to 25 percent of the number of shares of Series A Preferred Stock originally issued, the Corporation shall not (i) redeem or purchase any outstanding shares of Series B Preferred Stock, (ii) increase the authorized number of shares of Series A Preferred Stock, or (iii) amend the Certificate of Incorporation if such amendment would change any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Series A Preferred Stock so as to materially adversely affect only the rights of the holders of the Series A Preferred Stock, without the approval by the affirmative vote of the holders of at least 85 percent of the then outstanding shares of Series A Preferred Stock, voting as a separate class, each share of Series A Preferred Stock to be entitled to one vote.
(e) RIGHTS OF SERIES B PREFERRED STOCK WITH RESPECT TO CERTAIN MATTERS. So long as the number of outstanding shares of Series B Preferred Stock is at least equal to 25 percent of the number of shares of Series B Preferred Stock originally issued, the Corporation shall not (i) redeem or purchase any outstanding shares of Series A Preferred Stock, (ii) increase the authorized number of shares of Series B Preferred Stock or issue additional shares of Series B Preferred Stock, or (iii) amend the Certificate of Incorporation if such amendment would change any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Series B Preferred Stock so as to materially adversely affect only the rights of the holders of the Series B Preferred Stock, without the approval by the affirmative vote of the holders of at least 66-2/3 percent of the then outstanding shares of Series B Preferred Stock, voting as a
separate class, each share of Series B Preferred Stock to be entitled to one vote.
5. CONVERSION RIGHTS. The holders of the Preferred Stock shall have the following rights with respect to the conversion of such shares into shares of Common Stock:
(a) GENERAL. Subject to and in compliance with the provisions of this Section 5, any shares of the Preferred Stock may, at the option of any holder, be converted at any time and from time to time into fully-paid and non-assessable shares of Common Stock. The number of shares of Common Stock to which a holder of Series A Preferred Stock or Series B Preferred Stock shall be entitled to receive upon conversion at any particular time shall be the product obtained by multiplying the Series A Conversion Rate or the Series B Conversion Rate (determined as provided in Section 5(b)) by the number of shares of Series A Preferred Stock or Series B Preferred Stock, as the case may be, being converted at such time.
(b) CONVERSION RATE. The conversion rate in effect at any time
(i) for the Series A Preferred Stock (the "Series A Conversion Rate") shall be
the quotient obtained by dividing $0.457 by the Series A Conversion Value
calculated as provided in Section 5(c) and (ii) for the Series B Preferred Stock
(the "Series B Conversion Rate") shall be the quotient obtained by dividing
$2.80 by the Series B Conversion Value calculated as provided in Section 5(c).
(c) CONVERSION VALUE. The Series A Conversion Value in effect from time to time, except as adjusted in accordance with Section 5(d) hereof, shall be $0.457. The Series B Conversion Value in effect from time to time, except as adjusted in accordance with Section 5(d) hereof, shall be $2.80.
(d) ADJUSTMENTS TO CONVERSION VALUE
(i)(A) UPON DILUTIVE ISSUANCES OF COMMON STOCK OR CONVERTIBLE SECURITIES. If the Corporation shall, while there are any shares of Preferred Stock outstanding, issue or sell shares of its Common Stock or Common Stock Equivalents without consideration or at a price per share less than the Series A Conversion Value and/or the Series B Conversion Value, in effect immediately prior to such issuance or sale, then in each such case such Series A Conversion Value or Series B Conversion Value, as the case may be, upon each such issuance or sale, except as hereinafter provided, shall be reduced so as to be equal to an amount determined by multiplying the Series A Conversion Value or the Series B Conversion Value, as the case may be, by a fraction:
(1) the numerator of which shall be (a) the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (as hereafter defined) (calculated on a fully-diluted basis assuming the conversion of all presently exercisable options, warrants, purchase rights or convertible securities), plus (b) the number of shares of Common Stock or Common Stock Equivalents which the net aggregate consideration, if any, received by the Corporation for the total number of such additional shares of Common Stock or Common Stock Equivalents so issued would purchase at the Series A Conversion Value or the Series B Conversion Value, as the case may be, in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares of Common Stock or Common Stock Equivalents (calculated on a fully-diluted basis assuming the exercise or conversion of all presently exercisable options, warrants, purchase rights or convertible securities), plus (b) the number of such additional shares of Common Stock or Common Stock Equivalents so issued.
The provisions of this Section 5(d)(i)(A) may be waived with respect to all outstanding shares of (i) Series A Preferred Stock in any instance by the affirmative vote of holders of a majority of the outstanding shares of Series A Preferred Stock and (ii) Series B Preferred Stock in any instance by the affirmative vote of holders of a majority of the outstanding shares of Series B Preferred Stock.
(i)(B) UPON DILUTIVE ISSUANCES OF WARRANTS, OPTIONS AND PURCHASE RIGHTS TO COMMON STOCK OR CONVERTIBLE SECURITIES.
(1) For the purposes of this Section 5(d)(i), the issuance of any warrants, options, subscription or purchase rights with respect to shares of Common Stock and the issuance of any securities convertible into or exchangeable for shares of Common Stock, or the issuance of any warrants, options, subscription or purchase rights with respect to such convertible or exchangeable securities (collectively, "Common Stock Equivalents"), shall be deemed an issuance of Common Stock with respect to adjustments in the Series A Conversion Value or the Series B Conversion Value if the Net Consideration Per Share (as hereinafter determined) which may be received by the Corporation for such Common Stock shall be less than the Series A Conversion Value or the Series B Conversion Value, as the case may be, in effect at the time of such issuance. Any obligation, agreement or
undertaking to issue Common Stock Equivalents at any time in the future shall be deemed to be an issuance of Common Stock Equivalents at the time such obligation, agreement or undertaking is made or arises. No adjustment of the Series A Conversion Value or the Series B Conversion Value shall be made under this Section 5(d)(i) upon the issuance of any shares of Common Stock which are issued pursuant to the exercise, conversion or exchange of any Common Stock Equivalents if any adjustment shall previously have been made upon the issuance of any such Common Stock Equivalents as above provided.
(2) ADJUSTMENTS FOR CANCELLATION OR EXPIRATION OF
COMMON STOCK EQUIVALENTS. Should the Net Consideration Per
Share of any such Common Stock Equivalents be decreased from
time to time, then, upon the effectiveness of each such
change, the Series A Conversion Value or the Series B
Conversion Value, as the case may be, will be that which would
have been obtained (1) had the adjustments made upon the
issuance of such Common Stock Equivalents been made upon the
basis of the actual Net Consideration Per Share of such
securities, and (2) had the adjustments made to the Series A
Conversion Value or the Series B Conversion Value, as the case
may be, since the date of issuance of such Common Stock
Equivalents been made to such Series A Conversion Value or the
Series B Conversion Value as adjusted pursuant to clause (1)
above. Any adjustment of the Series A Conversion Value or the
Series B Conversion Value pursuant to this paragraph which
relates to any Common Stock Equivalent shall be eliminated if,
as, and when such Common Stock Equivalent expires or is
canceled without being exercised, or is repurchased by the
Company at a price per share at or less than the original
purchase price, so that the Series A Conversion Value or the
Series B Conversion Value effective immediately upon such
cancellation or expiration shall be equal to the Series A
Conversion Value or the Series B Conversion Value, as the case
may be, that would have been in effect had the expired or
canceled Common Stock Equivalent not been issued.
(3) NET CONSIDERATION PER SHARE. For purposes of this
Section 5(d)(i)(B), the "Net Consideration Per Share" which
may be received by the Corporation shall be determined as
follows:
(a) The "Net Consideration Per Share" shall mean the amount equal to the total amount of consideration, if any, received by the Corporation for the issuance of such Common Stock Equivalents, plus the minimum amount of consideration, if any, payable to the
Corporation upon exercise, or conversion or exchange thereof, divided by the aggregate number of shares of Common Stock that would be issued if all such Common Stock Equivalents were exercised, exchanged or converted.
(b) The "Net Consideration Per Share" which may be received by the Corporation shall be determined in each instance as of the date of issuance of Common Stock Equivalents without giving effect to any possible future upward price adjustments or rate adjustments which may be applicable with respect to such Common Stock Equivalents.
(i)(C) STOCK DIVIDENDS FOR HOLDERS OF CAPITAL STOCK OTHER THAN COMMON STOCK. In the event that the Corporation shall make or issue, or shall fix a record date for the determination of holders of any capital stock of the Corporation, OTHER THAN holders of Common Stock, entitled to receive a dividend or other distribution payable in Common Stock or securities of the Corporation convertible into or otherwise exchangeable for shares of Common Stock of the Corporation, then such Common Stock or other securities issued in payment of such dividend shall be deemed to have been issued for a consideration of $.01 per share, except for dividends payable in shares of Common Stock payable pro rata to holders of Preferred Stock (in accordance with the largest number of whole shares of Common Stock into which their shares of Preferred Stock could be converted pursuant to the provisions of Section 5 hereof) and to holders of any other class of stock.
(i)(D) CONSIDERATION OTHER THAN CASH. For purposes of this
Section 5(d)(i), if a part or all of the consideration received by the
Corporation in connection with the issuance of shares of the Common Stock or the
issuance of any of the securities described in this Section 5(d)(i) consists of
property other than cash, such consideration shall be deemed to have a fair
market value as is reasonably determined in good faith by the Board of Directors
of the Corporation. In the event of any dispute between the holders of the
Series A Preferred Stock and/or the Series B Preferred Stock, on the one hand,
and the Corporation, on the other, regarding the determination of fair market
value, at the written request of the holders of a majority of the outstanding
shares of Series A Preferred Stock or Series B Preferred Stock, as the case may
be, the Corporation shall engage a consulting firm or investment banking firm,
selected by the Board of Directors and approved by the holders of a majority of
the outstanding shares of Series A Preferred Stock or Series B Preferred Stock,
as the case may be, to prepare an independent appraisal of the fair market value
of such property to be distributed. The expenses of any appraisal by such
consulting or investment banking firm shall be borne by the Corporation.
(i)(E) EXCEPTIONS TO ANTI-DILUTION ADJUSTMENTS; RESERVED
EMPLOYEE SHARES. This Section 5(d)(i) shall not apply
under any of the circumstances which would constitute an Extraordinary Common Stock Event (as defined below). This Section 5(d)(i) also shall not apply with respect to the issuance or sale of up to 3,500,000 shares of Common Stock, including by way of the grant of options exercisable for up to such number of shares of Common Stock (which options shall not be counted separately from the Common Stock subject thereto), issued or issuable after the original issue date of the Series A Preferred Stock to directors, officers, employees and consultants of the Corporation or any subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, stock purchase plan or agreement, stock restriction agreement, employee stock ownership plan, consulting agreement, or such other options, issuances, arrangements, agreements or plans approved by Board of Directors; PROVIDED, HOWEVER, that the number set forth above may be increased from time to time by the affirmative vote of the holders of 66-2/3 percent of the outstanding shares of Preferred Stock entitled to vote, voting together as a separate class, each share of Preferred Stock to be entitled to that number of votes equal to the largest number of whole shares of Common Stock into which such share of Preferred Stock could be converted pursuant to the provisions of Section 5 hereof, at the record date for the determination of stockholders entitled to vote on such matter or, if no record date is established, at the date such vote is taken or any written consent of stockholders is solicited. The foregoing numbers shall be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock of the Corporation. Further, the conversion of Preferred Stock pursuant to this Section 5 and the issuance of options or warrants for the purchase of Common Stock in connection with bona fide business transactions which involve the acquisition of technology by the Corporation, which are approved by the Board of Directors and which are entered into by the Corporation with unaffiliated persons shall not be deemed an issuance of additional shares of Common Stock and shall not have any effect on the calculations contemplated by this Section 5.
(d)(ii) UPON EXTRAORDINARY COMMON STOCK EVENT. Upon the happening of an Extraordinary Common Stock Event (as hereinafter defined), the Series A Conversion Value and the Series B Conversion Value (and all other conversion values set forth in Section 5(d)(i) above) shall, simultaneously with the happening of such Extraordinary Common Stock Event, be adjusted by multiplying each of the Series A Conversion Value and the Series B Conversion Value by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such Extraordinary Common Stock Event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such Extraordinary Common Stock Event, and the products so obtained shall thereafter be the Series A Conversion Value and the Series B Conversion Value, as the case may be, and the Series A Conversion
Value and the Series B Conversion Value, as so adjusted, shall be readjusted in the same manner upon the happening of any successive Extraordinary Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (i) the issue of additional shares of Common Stock as a dividend or other distribution on outstanding shares of Common Stock, (ii) a subdivision of outstanding shares of Common Stock into a greater number of shares of Common Stock, or (iii) a combination or reverse stock split of outstanding shares of Common Stock into a smaller number of shares of Common Stock.
(e) AUTOMATIC CONVERSION UPON PUBLIC OFFERING.
(i) MANDATORY CONVERSION OF PREFERRED STOCK. In connection with the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock) (a "Qualified Public Offering") then all outstanding shares of Preferred Stock shall be converted automatically into the number of shares of Common Stock into which such shares of Preferred Stock are then convertible pursuant to this Section 5 immediately after the closing and consummation of such underwritten public offering without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent.
(ii) SURRENDER OF CERTIFICATES UPON MANDATORY CONVERSION. Upon
the occurrence of the conversion event specified in the preceding Section
5(e)(i), the holders of the Preferred Stock shall, upon notice from the
Corporation, surrender the certificates representing such shares at the office
of the Corporation or its transfer agent for the Common Stock. Thereupon, there
shall be issued and delivered to each such holder a certificate or certificates
for the number of shares of Common Stock into which the shares of Preferred
Stock so surrendered were convertible on the date on which the conversion
occurred. The Corporation shall not be obligated to issue such certificates and
the holder shall not be entitled to exercise any of the rights of a holder of
the shares of Common Stock issued upon conversion of the shares of Preferred
Stock unless certificates evidencing such shares of Preferred Stock being
converted are either delivered to the Corporation or any such transfer agent, or
the holder notifies
the Corporation that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection therewith.
(f) DIVIDENDS. In the event the Corporation shall make or issue, or shall fix a record date for the determination of holders of Common Stock entitled to receive a dividend or other distribution (other than a distribution in liquidation or other distribution otherwise provided for herein) with respect to the Common Stock payable in (i) securities of the Corporation OTHER THAN shares of Common Stock, or (ii) other assets (excluding cash dividends or distributions), then and in each such event provision shall be made so that the holders of the Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the number of securities or such other assets of the Corporation which each holder would have received had such holder's Preferred Stock been converted into Common Stock on the date of such event and had such holder thereafter, during the period from the date of such event to and including the Conversion Date (as that term is hereinafter defined in Section 5(j)), retained such securities or such other assets receivable by such holder during such period, giving application to all other adjustments called for during such period under this Section 5 with respect to the rights of the holders of the Preferred Stock.
(g) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock issuable upon the conversion of the Preferred Stock shall be changed into the same or different number of shares of any class or classes of capital stock, whether by capital reorganization, recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for elsewhere in this Section 5, or the sale of all or substantially all of the Corporation's capital stock or assets to any other person), then and in each such event the holder of each share of Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of capital stock and other securities and property receivable upon such reorganization, recapitalization, reclassification or other change by the holders of the number of shares of Common Stock into which such shares of Preferred Stock might have been converted immediately prior to such reorganization, recapitalization, reclassification or change, all subject to further adjustment as provided herein.
(h) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, recapitalization, reclassification or exchange of shares provided for elsewhere in this Section 5) or a merger, or consolidation of the Corporation with or into another corporation,
or the sale of all or substantially all of the Corporation's capital stock or assets to any other person, or any other form of business combination or reorganization in which control of the Corporation is transferred (each, a "Reorganization"), then as a part of such Reorganization, provision shall be made so that the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock the same kind and amount of stock or other securities or property (including cash) of the Corporation, or of the successor corporation resulting from such Reorganization to which such holder would have been entitled if such holder had converted its shares of Preferred Stock immediately prior to the effective time of such Reorganization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 to the end that the provisions of this Section 5 (including adjustments of the Series A Conversion Value and the Series B Conversion Value then in effect and the number of shares of Common Stock or other securities issuable upon conversion of such shares of Preferred Stock) shall be applicable after that event in as nearly equivalent a manner as may be practicable.
(i) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY CORPORATION. In each case of an adjustment or readjustment of the Series A Conversion Rate or the Series B Conversion Rate, the Corporation at its expense will furnish each record holder of Series A Preferred Stock or Series B Preferred Stock, as the case may be, at such holder's registered address as shall appear on the stock records of the Corporation, a certificate prepared by the Treasurer or Chief Financial Officer of the Corporation, showing such adjustment or readjustment, and stating in detail the facts upon which such adjustment or readjustment is based.
(j) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion privilege, a holder of Preferred Stock shall surrender the certificate or certificates representing the shares being converted to the Corporation at its principal office, and shall give written notice to the Corporation at that office that such holder elects to convert such shares. Such notice shall also state the name or names (with address or addresses) in which the certificate or certificates for shares of Common Stock issuable upon such conversion shall be issued. The certificate or certificates for shares of Preferred Stock surrendered for conversion shall be accompanied by proper assignment thereof to the Corporation or in blank. The date when such written notice is received by the Corporation, together with the certificate or certificates representing the shares of Preferred Stock being converted, shall be the "Conversion Date". As promptly as practicable after the Conversion Date, the Corporation shall issue and deliver to the holder of the shares of Preferred Stock being converted, or on its written order, such certificate or certificates as it may request for the number of whole shares of Common Stock issuable upon the conversion of such shares of
Preferred Stock in accordance with the provisions of this Section 5, and cash, as provided in Section 5(k), in respect of any fraction of a share of Common Stock issuable upon such conversion. Such conversion shall be deemed to have been effected immediately prior to the close of business on the Conversion Date, and at such time the rights of the holder as holder of the converted shares of Preferred Stock shall cease and the person(s) in whose name(s) any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby.
(k) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common Stock or scrip representing fractional shares shall be issued upon the conversion of shares of Preferred Stock. Instead of any fractional shares of Common Stock which would otherwise be issuable upon conversion of Preferred Stock, the Corporation shall pay to the holder of the shares of Preferred Stock which were converted a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the fair market value per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not any fractional shares are issuable shall be based upon the aggregate number of shares of Preferred Stock being converted at any one time by any holder thereof, not upon each share of Preferred Stock being converted.
(l) PARTIAL CONVERSION. In the event some but not all of the shares of Preferred Stock represented by a certificate(s) surrendered by a holder are converted, the Corporation shall execute and deliver to or on the order of the holder, at the expense of the Corporation, a new certificate representing the number of shares of Preferred Stock which were not converted.
(m) RESERVATION OF COMMON STOCK. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Preferred Stock (including any shares of Preferred Stock represented by any warrants, options, subscription or purchase rights for Preferred Stock), and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock (including any shares of Preferred Stock represented by any warrants, options, subscriptions or purchase rights for such Preferred Stock), the Corporation shall take such action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.
(n) NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued as shares of Preferred Stock, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
6. NO REDEMPTION RIGHTS; REPURCHASES.
(a) The Corporation shall not have the right to mandatorily redeem all of the outstanding shares of Preferred Stock. Nothing herein shall prohibit the Corporation from purchasing or acquiring shares of Preferred Stock.
(b) The Corporation shall not purchase or acquire any shares of Series A Preferred Stock except pursuant to an offer made upon the same terms pro rata to all holders of outstanding shares of Series A Preferred Stock.
(c) The Corporation shall not purchase or acquire any shares of Series B Preferred Stock, except pursuant to an offer made upon the same terms pro rata to all holders of outstanding shares of Series B Preferred Stock.
B. COMMON STOCK
1. DIVIDENDS
Subject to the rights of the holders of Preferred Stock as set forth in Section 2 of Part A of this Article FOURTH, the holders of Common Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in such amounts as the Board of Directors may determine in its sole discretion. The Board of Directors shall not declare any cash dividends upon the Common Stock until after a Qualified Public Offering.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
The rights of the holders of Common Stock upon liquidation, dissolution or winding up of the Company are as set forth in Section 3 of Part A of this Article FOURTH.
3. VOTING RIGHTS.
Except as may otherwise expressly provided herein or as otherwise required by law, the holders of Preferred Stock and Common Stock shall be entitled to vote together as a single class on all matters. Each holder of Common Stock shall have one vote for each share of Common Stock held by him.
SECOND: That this amendment has been duly adopted by written consent of the stockholders of the Corporation in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. Prompt written notice of the adoption of this amendment has been given to those stockholders who have not consented in writing thereto, as provided in Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That this amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Jeremy M. Levin, its President, and attested by James Rielly, its Secretary, on July 25, 1994.
CADUS PHARMACEUTICAL CORPORATION
Attest: By: /s/JEREMY M. LEVIN
----------------------------
Jeremy M. Levin, President
/s/JAMES S. RIELLY
- -------------------------
James Rielly, Secretary
|
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CADUS PHARMACEUTICAL CORPORATION
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Cadus Pharmaceutical Corporation (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation is hereby amended by deleting Article FOURTH, Section A.4(c) thereof.
SECOND: That this amendment has been duly adopted by written consent of the stockholders of the Corporation in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. Prompt written notice of the adoption of this amendment has been given to those stockholders who have not consented in writing thereto, as provided in Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That this amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Jeremy M. Levin, its President, and attested by James Rielly, its Secretary, on July 28, 1995.
CADUS PHARMACEUTICAL CORPORATION
By: /s/JEREMY LEVIN
-----------------------------
Attest: Jeremy M. Levin, President
/s/JAMES S. RIELLY
- -----------------------
James Rielly, Secretary
|
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CADUS PHARMACEUTICAL CORPORATION
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Cadus Pharmaceutical Corporation (the "Corporation"), a Corporation is organized and existing under the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation is hereby
amended by deleting the first two sentences of the existing Article FOURTH
thereof and substituting in lieu thereof the following two sentences:
"FOURTH. The total number of shares of all classes which the
Corporation shall have authority to issue is 57,201,080, consisting of
22,201,080 shares of Preferred Stock (the "Preferred Stock"), $.001 par value
per share, and 35,000,000 shares of Common Stock (the "Common Stock"),
$.001 par value per share. The Preferred Stock shall have two series:
Series A Convertible Preferred Stock ("Series A Preferred Stock"), consisting
of 14,879,651 shares, and Series B Convertible Preferred Stock ("Series B
Preferred Stock"), consisting of 7,321,429 shares."
SECOND: That this amendment has been duly adopted by written consent of the
stockholders of the Corporation in accordance with the applicable provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
Prompt written notice of the adoption of this amendment has been given to
those stockholders who have not consented in writing thereto, as provided in
Section 228 of the General Corporation Law of the State of Delaware.
THIRD: That this amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Jeremy M. Levin, its President, and attested by
James Rielly, its Secretary, on October 30, 1995.
CADUS PHARMACEUTICAL CORPORATION
By: /s/JEREMY LEVIN
-----------------------------
Attest: Jeremy M. Levin, President
/s/JAMES S. RIELLY
- -----------------------
James Rielly, Secretary
|
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CADUS PHARMACEUTICAL CORPORATION
(PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
Cadus Pharmaceutical Corporation (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Certificate of Incorporation of the Corporation is hereby amended by adding immediately after the first paragraph of the existing Article FOURTH thereof the following:
"On __________, 1996, the following shall occur:
Each three shares of Common Stock, $.001 par value per share theretofore outstanding shall, without any action on the part of the holder thereof, automatically be reclassified as and changed and converted into one (1) share of Common Stock, $.01 par value per share, subject to adjustment as provided in the following sentence. Each holder of shares of Common Stock, $.001 par value per share reclassified, changed and converted pursuant to the preceding sentence shall be entitled to receive, in exchange for all certificates of such holder representing the stock so reclassified, changed and converted, a certificate or certificates representing such number of shares of Common Stock, $.01 par value per share, as shall be determined pursuant to the preceding sentence, rounded to the next higher whole number (determined by reclassifying all of such shares of such holder simultaneously); provided, however, that the failure of any such holder to so exchange such holder's certificates shall in no way affect the occurrence of the reclassification pursuant to this Article FOURTH."
SECOND: That the Certificate of Incorporation of the Corporation is hereby amended by adding the following to the end of Section 5(e)(i) of Article FOURTH thereof:
"No fractional shares of Common Stock shall be issued upon the conversion of shares of Preferred Stock pursuant to this Section 5(e)(i). In lieu of any fractional share of Common Stock to which a holder of Preferred Stock would otherwise be entitled upon conversion of all his Preferred Stock pursuant to this Section 5(e)(i), such holder shall be entitled to receive one whole share of Common Stock. The determination as to whether or not a fractional share is issuable to a holder shall be based upon the total number of shares of his Preferred Stock being converted pursuant to this Section 5(e)(i), not upon each share of his Preferred Stock being converted."
THIRD: That the Certificate of Incorporation of the Corporation is hereby amended by amending Section 5(k) of Article FOURTH thereof to read in its entirety as follows:
"(k) Cash in Lieu of Fractional Shares. No fractional shares of Common Stock shall be issued upon the conversion of shares of Preferred Stock pursuant to Section 5(j). In lieu of any fractional share of Common Stock to which a holder of Preferred Stock would otherwise be entitled upon conversion of shares of his Preferred Stock pursuant to Section 5(j), the Corporation shall pay to such holder a cash adjustment in respect of such fractional share in an amount equal to the same fraction of the fair market value per share of the Common Stock (as determined in a reasonable manner prescribed by the Board of Directors) at the close of business on the Conversion Date. The determination as to whether or not a fractional share is issuable to a holder shall be based upon the total number of shares of Preferred Stock being converted at any one time by such holder, not upon each share of his Preferred Stock being converted."
FOURTH: That the Certificate of Incorporation of the Corporation is hereby amended by adding the following as Article TWELFTH thereto:
"TWELFTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. The Corporation shall advance expenses for the defense of any director, officer, employee or agent prior to a final disposition of a claim provided such party executes an undertaking to repay advances from the Corporation if it is ultimately determined that such party is not entitled to indemnification. Any repeal or modification of this Article shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification."
FIFTH: That this amendment has been duly adopted by written consent of the stockholders of the Corporation in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. Prompt written notice of the adoption of this amendment has been given to
those stockholders who have not consented in writing thereto, as provided in
Section 228 of the General Corporation Law of the State of Delaware.
SIXTH: That this amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Jeremy M. Levin, its President, and attested by James Rielly, its Secretary, on ______, 1996.
CADUS PHARMACEUTICAL CORPORATION
By:_____________________________
Jeremy M. Levin, President
Attest:
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CADUS PHARMACEUTICAL CORPORATION
(formerly Cadus Therapeutics Corp.)
CADUS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is CADUS PHARMACEUTICAL CORPORATION.
2. The Corporation's original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 23, 1992, under the name Cadus Therapeutics Corp.
3. This Restated Certificate of Incorporation (the "Restated Certificate") which was duly adopted in accordance with Sections 242 and 245, with prompt written notice thereof having been given to the stockholders of the Corporation pursuant to Section 228(d), of the General Corporation Law of the State of Delaware, amends and restates the provisions of the present certificate of incorporation, as amended, of the Corporation.
4. Immediately upon filing this Restated Certificate, the text of the present certificate of incorporation, as amended, is hereby amended and restated to read in full as set forth herein:
FIRST: The name of the Corporation is CADUS PHARMACEUTICAL CORPORATION (the "Corporation").
SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 35,000,000, all of which shall be Common Stock having a par value of $.01 per share.
FIFTH: The Board of Directors of the Corporation is
expressly authorized and empowered to adopt, amend or repeal the by-laws of the Corporation, without any action on the part of the stockholders of the Corporation, but the stockholders of the Corporation may make additional by-laws and may amend or repeal any by-law whether adopted by them or otherwise.
SIXTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
SEVENTH: The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by subsection 102(b)(7) of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented.
EIGHTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. The Corporation shall advance expenses for the defense of any director, officer, employee or agent prior to a final disposition of a claim provided such party executes an
undertaking to repay advances from the Corporation if it is ultimately determined that such party is not entitled to indemnification. Any repeal or modification of this Article shall not adversely affect any right or protection existing hereunder immediately prior to such repeal or modification.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by Jeremy M. Levin, its President, and attested by James S. Rielly, its Secretary, on July __, 1996.
CADUS PHARMACEUTICAL CORPORATION
By:_____________________________
Jeremy M. Levin, President
Attest:
BY-LAWS
OF
CADUS PHARMACEUTICALS CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation.
Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 1.5. QUORUM. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes or the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these by-laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shal1 act as secretary of the meeting, but in absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7. VOTING; PROXIES. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. If the
certificate of incorporation provides for more or less than one vote for any share on any matter, every reference in these by-laws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock.
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation.
Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED, that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.
Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise provided in the certificate of incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this by-law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders.
Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Each director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place within or
without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting.
Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting.
Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board of Directors a majority of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors of the entire Board shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.
Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors.
ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, removing or indemnifying directors or amending these by-laws; and, unless the resolution, these by-laws or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws.
ARTICLE IV
OFFICERS
Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the certificate of incorporation or these by-laws otherwise provide.
Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting.
Section 4.3. POWERS AND DUTIES. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these by-laws or in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board.
Section 4.4. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.
Section 4.5. VICE CHAIRMAN OF THE BOARD. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.
Section 4.6. PRESIDENT. In the absence of the Chairman of the Board and Vice Chairman of the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law.
Section 4.7. VICE PRESIDENTS. The Vice President or Vice Presidents, at the request or in the absence of the President or during the President's inability to act, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law.
Section 4.8. SECRETARY. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from
time to time, be assigned to him or her by the Board or the President or as may be provided by law.
Section 4.9. TREASURER. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law.
Section 4.10. OTHER OFFICERS. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.
Section 4.11. FIDELITY BONDS. if required by the Board of Directors, any officer shall give the Corporation a bond in a sum and with one or more sureties satisfactory to the Board, for the faithful performance of the duties of his or her office, and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock in the Corporation
owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
Each certificate representing shares shall state upon the face thereof that the Corporation is formed under the laws of the State of Delaware, the name of the person or persons to whom such shares have been issued and the number and class of such shares, and the designation of the class or series, if any, which such certificate represents.
If the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock; provided, that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 5.3. TRANSFERS OF STOCK. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney, lawfully constituted in writing, and upon surrender of the certificate therefor, together with such evidence of the payment of transfer taxes and
compliance with other provisions of law as the Corporation or its transfer agent may require.
Section 5.4. REGISTERED STOCKHOLDERS. The Corporation may treat the holder of record of any share or shares of stock as the holder thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware.
ARTICLE VI
MISCELLANEOUS
Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall be determined by the Board of Directors.
Section 6.2. SEAL. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws.
Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses incurred by any such
person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this by-law, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation.
Section 6.5. INTERESTED DIRECTORS; QUORUM. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or
interested directors my be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
Section 6.6. FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.
Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them.
ARTICLE VII
OFFICES
Section 7.1. REGISTERED OFFICE. The registered office of the Corporation in the State of Delaware shall be at 1209 Orange Street, City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company.
Section 7.2. OTHER OFFICES. The Corporation may also have an office or offices at other places within or without the State of Delaware.
July 30, 1993
Section 2.6 of the Corporation's By-laws shall be amended to read as follows:
Section 2.6. Quorum, Vote Required. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, at any meeting of the Board of Directors a majority of the entire Board of Directors shall constitute a quorum for the transaction of business. If less than a quorum be present at a meeting, the directors present may adjourn the meeting and the meeting may be held as adjourned without further notice. If a quorum be present at a meeting and the meeting is adjourned to reconvene at a later time and/or date, no notice need be given other than announcement at the meeting. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, when a quorum is present at any meeting of the Board of Directors, the affirmative vote of a majority of the directors present shall decide any question brought before such meeting, and the action of such number of directors shall be deemed to be the action of the Board. Except as otherwise provided by law or the Certificate of Incorporation, until the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock) the following matters shall be determined by the affirmative vote of a number of directors equal to the number of directors constituting the whole Board, less one director.
(a) Any loan of money or property by the Corporation any person other than a wholly-owned subsidiary of Corporation;
(b) Issuance by the Corporation of any securities other than
(1) connection with the exercise of options granted pursuant to the Cadus Pharmaceutical Corporation 1993 Stock Option Plan;
(2) pursuant to the Preferred Stock Purchase Agreement, dated as of July 30, 1993, relating to the issuance and sale of shares of Convertible Preferred Stock, Series A;
(3) pursuant to the exercise of the rights of holders of Convertible Preferred Stock, Series A as provided in the Certificate of Incorporation, as amended;
(4) in connection with the grant of options to the prospective employees referred to in clause (c) of this Section 2.6;
(c) Any written employment agreement to be entered into by the Corporation with any employee or prospective employee other than pursuant to two offers of employment made on behalf of the Corporation by its President and Chief Executive Officer, which offers were outstanding as of July 27, 1993;
(d) Any borrowing of money or the issuance of debt securities by the Corporation in an amount in excess of S100,000 principal amount in a single transaction or in excess of $200,000 principal amount of loans or debt securities issued in any period of twelve consecutive months;
(e) Approval and adoption of the Corporation's annual budget;
(f) Capital expenditures by the Corporation in excess of the amount thereof set forth in a budget approved as provided in the preceding clause (e);
(g) Adoption of employee benefit plans, but not adoption of employee policies;
(h) The declaration of any dividend or other distribution on shares of capital stock of the Corporation of any class;
(i) The filing by the Corporation of a voluntary petition under the federal Bankruptcy Code;
(j) The acquisition in whatever form by the Corporation of any other corporation or business;
(k) Any sale of assets of the Corporation outside the ordinary course of business;
(l) Any merger or consolidation of the Corporation with or into another corporation or other entity or person, or any other corporate reorganization in which the Corporation shall not be the continuing or surviving entity of such merger, consolidation or reorganization, or the sale of all or substantially all of the Corporation's properties and assets to any other person, or any transaction or series of related transactions by the Corporation in which in excess of 50 percent of the Corporation's voting power is transferred;
(m) Compensation to any employee of the Corporation earning a salary in excess of $l00,000 per annum;
(n) Any change in the nature of the business conducted by the Corporation from the business conducted and proposed to be conducted as of July 27, 1993;
(o) Any significant new project to be undertaken by the Corporation which is not related to the business of the Corporation as conducted from time to time;
(p) Any government grant for scientific activity pursuant to which the Corporation cedes any of its rights in its technology to any other person;
(q) Any amendment of the Certificate of Incorporation or By-laws of the Corporation on or after July 30, 1993;
(r) Election or appointment of any officer of the Corporation or the election by the Board of Directors of any new director;
(s) Any licensing of scientific technology by the Corporation as licensor or licensee outside the ordinary course of business;
(t) Any reduction in the number of directors constituting the whole Board;
(u) Any determination required to be made by the Board of Directors as to the value of any consideration received by or to be paid to the Corporation or its stockholders;
(v) Any purchase by the Corporation of any outstanding shares of the Corporation's capital stock other than a
purchase of Common Stock pursuant to Section 1 of any of the several Restricted Stock Agreements, dated as of May 24, 1993, between the Corporation and certain founders;
(w) Any compensation, fee, loan, payment or other financial benefit made or given directly or indirectly to ImClone Systems Incorporated, a Delaware corporation ("ImClone"), or any person who is or at any time in the past was an officer, employee, consultant or director of ImClone or any person affiliated with ImClone or any member of the immediate family (as defined in Regulation S-K under the Securities Act of 1933, as amended) of any such officer, employee, consultant, director or affiliate, other than pursuant to a written agreement of the Company with any of ImClone, Dr. Thomas Deuel or Dr. Thomas Shenk, which agreement was in effect as of July 30, 1993; or
(x) The designation of any committee of the Board of Directors;
(y) Leases outside of the ordinary course of business.
For purposes hereof, the phrase "whole Board" shall mean at any time the number of directors who would be in office if there were no vacancies in the Board of Directors.
In addition to the other requirements of this Section 2.6, including the reference to the public offering in the first paragraph of this Section 2.6, any action of the Board of Directors which deals with the matters described in paragraph (w) of this Section 2.6 shall require the affirmative unanimous vote of the directors representing the purchasers of Preferred Stock, which are described in Sections l.l(a) and l.l(b) of the Voting Agreement, dated as of July 30, 1993, by and among the Corporation and the other parties named therein, as the same may be amended from time to time in accordance with its terms, notwithstanding that the Voting Agreement may have terminated.
Section 4.2 of the By-laws shall be amended to read as follows:
Section 4.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless otherwise provided in these By-laws or in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. From and after July 30, 1993, the Chairman of the Board shall hold office until the next succeeding February 1 or August 1 of each year, whichever first occurs, and the term of office of the Chairman of the Board shall continue beyond such February 1 or August 1, as the case may be, to the next February 1 or August 1,
as the case may be, in each case only if such continuation is approved by the affirmative vote of a number of directors equal to the number of directors constituting the whole Board, less one director. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting.
Section 2.6 of the Corporation's By-laws shall be amended to read as follows:
Section 2.6. Quorum, Vote Required. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, at any meeting of the Board of Directors a majority of the entire Board of Directors shall constitute a quorum for the transaction of business. If less than a quorum be present at a meeting, the directors present may adjourn the meeting and the meeting may be held as adjourned without further notice. If a quorum be present at a meeting and the meeting is adjourned to reconvene at a later time and/or date, no notice need be given other than announcement at the meeting. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, when a quorum is present at any meeting of the Board of Directors, the affirmative vote of a majority of the directors present shall decide any question brought before such meeting, and the action of such number of directors shall be deemed to be the action of the Board. Except as otherwise provided by law or the Certificate of Incorporation, until the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock) the following matters shall be determined by the affirmative vote of a number of directors equal to the number of directors constituting the whole Board less one director:
(a) Any borrowing of money or the issuance of debt securities by the Corporation other than in the ordinary course of business;
(b) The acquisition in whatever form by the Corporation of any other corporation or business;
(c) Any sale of assets of the Corporation outside the ordinary course of business;
(d) Any merger or consolidation of the Corporation with or into another corporation or other entity or person, or any other corporate reorganization in which the Corporation shall not be the continuing or surviving entity of such merger, consolidation or reorganization, or the sale of all or substantially all of the
Corporation's properties and assets to any other person, or any transaction or series of related transactions by the Corporation in which in excess of 50 percent of the Corporation's voting power is transferred;
(e) Any amendment to Article Fourth Section A.4(c) or A.4(d) of the Certificate of Incorporation of the Corporation;
(f) Any amendment of this Section 2.6 of the By-laws of the Corporation after July 26, 1994;
(g) An increase in the number of directors constituting the Board of Directors of the Corporation beyond nine;
(h) Any compensation, fee, loan, payment or other financial benefit made or given directly or indirectly to ImClone Systems Incorporated, a Delaware corporation ("ImClone"), or any person who is or at any time in the past was an officer, employee, consultant or director of ImClone or any person affiliated with ImClone or any member of the immediate family (as defined in Regulation S-K under the Securities Act of 1933, as amended) of any such officer, employee, consultant, director or affiliate, other than pursuant to a written agreement of the Company with any of ImClone, Dr. Thomas Deuel or Dr. Thomas Shenk, which agreement was in effect as of July 30, 1993;
(i) The designation of any committee of the Board of Directors;
(j) An initial public offering of the Corporation's Common Stock in which the price per share of such Common Stock is less than $3.50 per share (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock); or
(k) The grant by the Corporation of any options to purchase securities of the Corporation other than pursuant to the Cadus Pharmaceutical Corporation 1993 Stock Option Plan or the grant of options to employees of or consultants to the Corporation made in compliance with the "Guidelines for Stock Option Grants" adopted by the Board of Directors of the Corporation on June 28, 1994, as the same may be amended from time to time by the affirmative vote of a number of directors equal to the number of directors constituting the whole Board less one director.
For purposes hereof, the phrase "whole Board" shall mean at any time the number of directors then in office, except that a director who is required to recuse himself from the vote on a matter shall not be deemed a director then in office for purposes of such vote.
In addition to the other requirements of this Section 2.6, including the reference to the public offering in the first paragraph of this Section 2.6, any action of the Board of Directors which deals with the matters described in paragraph (h) of this Section 2.6 shall require the affirmative unanimous vote of the directors representing the purchasers of Preferred Stock, which are described in Sections l.l(a) and l.l(b) of the Voting Agreement, dated as of July 30, 1993, by and among the Corporation and the other parties named therein, as the same may be amended from time to time in accordance with its terms, notwithstanding that the Voting Agreement may have terminated.
Adopted as of July 28, 1995
Section 2.6 of the Corporation's By-laws shall be amended to read as follows:
Section 2.6. Quorum, Vote Required. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, at any meeting of the Board of Directors a majority of the entire Board of Directors shall constitute a quorum for the transaction of business. If less than a quorum be present at a meeting, the directors present may adjourn the meeting and the meeting may be held as adjourned without further notice. If a quorum be present at a meeting and the meeting is adjourned to reconvene at a later time and/or date, no notice need be given other than announcement at the meeting. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, when a quorum is present at any meeting of the Board of Directors, the affirmative vote of a majority of the directors present shall decide any question brought before such meeting, and the action of such number of directors shall be deemed to be the action of the Board.
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of _________, 1996 by and between CADUS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), and _______________ Indemnitee").
RECITALS
WHEREAS, Indemnitee performs a valuable service to the Corporation in his or her capacity as an officer and/or Director of the Corporation;
WHEREAS, the Corporation, pursuant to a proposed Article XII proposed to be added to its certificate of incorporation, as amended, and Section 6.4 of its bylaws, as amended (collectively, the "Organizational Documents"), has adopted and will adopt provisions for the indemnification of the directors, officers, employees and other agents of the Corporation, including persons serving at the request of the Corporation in such capacities with other corporations or enterprises, as authorized by the Delaware General Corporation Law, as amended (the "Code");
WHEREAS, the Organizational Documents and the Code, by their non-exclusive nature, permit contracts between the Corporation and its directors, officers, employees and other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Indemnitee to continue to serve as an officer and/or Director of the Corporation, the Corporation has determined and agreed to enter into this Agreement with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's continued service as an officer and/or Director after the date hereof, the parties hereto agree as follows:
1. SERVICES TO THE CORPORATION. Indemnitee will serve, at the will of the Corporation or under separate contract, if any such contract exists, as an officer and/or Director of the Corporation, or as a director, officer or other fiduciary of an affiliate of the Corporation (including any employee benefit plan of the Corporation) faithfully and to the best of his ability so long as he is duly elected and qualified in accordance with the Organizational Documents of the Corporation or such affiliate; provided, however, that Indemnitee may at any time and for any reason resign from such position or any other position (subject to any contractual obligation that Indemnitee may have assumed apart from this Agreement) and that the Corporation or any affiliate shall have no obligation under this Agreement to continue Indemnitee in such position or any other position.
2. INDEMNITY OF INDEMNITEE. The Corporation hereby
agrees to hold harmless and indemnify Indemnitee to the fullest extent authorized or permitted by the Organizational Documents and the Code, as the same may be amended from time to time (but, only to the extent that any such amendment permits the Corporation to provide broader indemnification rights than the Organizational Documents or the Code permitted prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the indemnification otherwise provided for herein, and subject only to the Organizational Documents, the Code, any other applicable law and the exclusions set forth in Section 4 hereof, the Corporation hereby further agrees to hold harmless and indemnify Indemnitee:
(a) against any and all expenses (including attorneys' fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Indemnitee becomes legally obligated to pay because of any claim or claims made against or by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative (including an action by or in the right of the Corporation), to which Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Indemnitee is, was or at any time becomes a director, officer, employee or other agent of Corporation, or is or was serving or at any time serves at the written request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Indemnitee by the Corporation under the Code and the Organizational Documents.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Corporation, pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or
(b) for which payment has actually been made to Indemnitee under a valid and collectible insurance policy or under a valid and enforceable indemnity clause, bylaw or agreement, except in respect of any excess beyond payment under such insurance, clause, bylaw or agreement; or
(c) in connection with any proceeding (or part
thereof) brought or made by Indemnitee against the Corporation, unless (i) such indemnification is expressly required to be made by law, or (ii) the proceeding is initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the Corporation contained herein shall continue during the period Indemnitee is a director, officer, employee or other agent of the Corporation (or is or was serving at the written request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed action, suit or proceeding, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Indemnitee was serving in the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Indemnitee shall be entitled under this Agreement to indemnification by the Corporation for a portion of the expenses (including attorneys' fees), witness fees, damages, judgments, fines and amounts paid in settlement and any other amounts that Indemnitee becomes legally obligated to pay in connection with any action, suit or proceeding referred to in Section 4 hereof even if not entitled hereunder to indemnification for the total amount thereof, and the Corporation shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days after receipt by Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee will, if a claim in respect thereof is to be made against the Corporation under this Agreement, notify the Corporation of the commencement thereof; but the omission so to notify the Corporation will not relieve it from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Indemnitee notifies the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its own expense;
(b) Except as otherwise provided below, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the Corporation to Indemnitee of its election to assume the defense thereof, the Corporation will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof except for reasonable costs of investigation or otherwise as provided below. Indemnitee shall
have the right to employ separate counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of Indemnitee
unless (i) the employment of counsel by Indemnitee has been authorized by the
Corporation, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Indemnitee in the conduct of
the defense of such action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Indemnitee's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Indemnitee shall have made the conclusion provided for in clause
(ii) above;
(c) The Corporation shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent, which shall not be unreasonably withheld. The Corporation shall be permitted to settle any action except that it shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent, which may be given or withheld in Indemnitee's sole discretion;
(d) If any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding voting securities or if there is a Change in Control (defined below) of the Company, then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity, expense payments and/or advances under this Agreement or any other agreement or the Organizational Documents now or hereafter in effect, the Company shall seek and follow legal advice only from Independent Legal Counsel (defined below) selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company shall pay the reasonable fees of such Independent Legal Counsel and fully indemnify such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto;
(e) For purposes of this Section, a "Change in Control" shall be deemed to have occurred if (i) during any period of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iii) the stockholders or the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company's assets; and
(f) For purposes of this section, "Independent Legal Counsel" shall be defined as an attorney or firm of attorneys, selected in accordance with this Section, who have not otherwise performed services for the Company or Indemnitee within the last five years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other directors, officers, employees or other agents under similar indemnity agreements).
8. EXPENSES. The Corporation shall advance, prior to the final disposition of any proceeding, promptly following request therefor, all expenses incurred by Indemnitee in connection with such proceeding upon receipt of an undertaking by or on behalf of Indemnitee to repay said amounts if it shall be determined ultimately that Indemnitee is not entitled to be indemnified under the provisions of this Agreement, the Organizational Documents, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Indemnitee in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under Section 3 hereof (other than an action brought to enforce a claim for expenses pursuant to Section 8 hereof, provided that the required undertaking has been tendered to the Corporation) that Indemnitee is not entitled to
indemnification because of the limitations set forth in Section 4 hereof. Neither the failure of the Corporation (including its Board of Directors or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Corporation (including its Board of Directors or its stockholders) that such indemnification is improper shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by this Agreement shall not be exclusive of any other right which Indemnitee may have or hereafter acquire under any statute, provision of the Organizational Documents, agreement, vote of stockholders or directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Indemnitee by this Agreement shall continue after Indemnitee has ceased to be a director, officer, employee or other agent of the Corporation or to serve at the request of the Corporation as a director, officer, employee or other agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the benefit of Indemnitee's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. Furthermore, if this Agreement shall be invalidated in its entirety on any ground, then the Corporation shall nevertheless
indemnify Indemnitee to the fullest extent provided by the Organizational Documents, the Code or any other applicable law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon delivery if delivered by hand to the party to whom such communication was directed or (ii) upon the third business day after the date on which such communication was mailed if mailed by certified or registered mail with postage prepaid addressed as follows or to such other address as a party may hereafter designate by notice given pursuant hereto:
(a) If to Indemnitee, at the address indicated on the signature page hereof.
(b) If to the Corporation, to:
Cadus Pharmaceutical Corporation 777 Old Saw Mill River Road Tarrytown, New York 10591-6705
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: ______________________________
Name:
Title:
INDEMNITEE
CADUS PHARMACEUTICAL CORPORATION
1993 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Stock Option Plan (the "Plan") is to enable Cadus Pharmaceutical Corporation and its affiliates, as defined in Article X below (collectively the "Company"), to attract, retain and reward the best qualified executives, consultants and employees by granting Options, as defined in Article X below, to acquire common stock of the Company, in order to foster in such personnel an increased personal interest in the future growth and prosperity of the Company and to further identify the interests of such personnel with those of the stockholders of the Company. Options granted under the Plan may be Incentive Stock Options ("Incentive Stock Options") satisfying the requirements of Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code"), or options which do not satisfy such requirements ("Non-Qualified Options").
ARTICLE II
ADMINISTRATION
2.1 STOCK OPTION COMMITTEE. The Plan shall be administered by the Stock Option Committee (the "Committee"), which shall be comprised of two or more persons appointed by the Board of Directors (the "Board") from among the members of the Board. Members of the Committee shall not be eligible to receive awards under the plan while they are members of the Committee or for three months thereafter. Members of the Committee shall, unless otherwise determined by the Board, be "disinterested persons" as such term is defined in Rule 16b-3(c) under the Securities Exchange Act of 1934, as amended (the "Act"), as such rule or any successor rule is now or hereafter may be in effect. In this and all other respects the Plan is intended to comply with Rule 16b-3 of the Act, and any provision of the Plan contrary to Rule 16b-3 shall be deemed null and void to the extent permissible by law and deemed appropriate by the Committee.
2.2 DURATION OF COMMITTEE MEMBERSHIP. The members of the Committee may be appointed or removed at any time and for any cause by vote of the Board of Directors.
2.3 ACTIONS OF COMMITTEE. All decisions of the Committee shall be made by majority vote, by written ballot signed by the member of the Committee casting the vote.
2.4 DETERMINATIONS OF GRANTS. The Committee has the power to determine to whom Options will be awarded, the date(s) of such
award(s), the number of shares subject to each option, the schedule by which such Option first becomes exercisable with respect to the shares subject thereto, the exercise price, terms of payment, and other terms of each Option.
2.5 INTERPRETATION. The interpretation and construction by the Committee of the provisions of the Plan or of the options shall be final unless otherwise determined by the Board. No member of the Board or of the Committee shall be liable for an action taken or determination made in good faith. The Company shall upon request furnish any information or documentation which the Committee deems necessary to perform its duties and functions under the Plan.
2.6 AMENDMENTS OR DISCONTINUATION. The Board may make such amendments, changes, and additions to the Plan, or may discontinue or terminate the Plan, as it may deem advisable; provided, however, that no action shall reduce the value or impair the rights of any Options theretofore granted under the Plan; and provided, further, however, that the affirmative vote of the owners of a majority of the outstanding shares of Common Stock shall be necessary to effect any amendment to the Plan which would increase the number of shares of Common Stock subject to Options granted under the Plan or effect any other modification requiring stockholder approval in order for the Plan to satisfy the requirements of Section 422(b) of the Code or Rule 16b-3 under the Act.
2.7 TERM OF PLAN. All grants shall be made, if at all, within ten years from the effective date of the Plan.
2.8 EFFECTIVE DATE. The Plan shall become effective upon its adoption by the Board of Directors of the Company, subject to receipt of approval by the stockholders of the Company within 12 months after adoption by the Board of Directors. Subsequent to approval of the Plan by the Board of Directors, the Committee may grant options which shall be subject to approval of the Plan by the stockholders of the Company.
ARTICLE III
SHARES SUBJECT TO PLAN
3.1 DESCRIPTION OF SHARES. The stock to which the Plan applies is shares of the Company's common stock, $.001 par value ("Common Stock"), either authorized but unissued or shares issued and reacquired by the Company. The number of shares as to which Options may be granted pursuant to the Plan shall not exceed 2,000,000, subject to Section 3.2 hereof, except as adjusted in accordance with Article IX hereunder.
3.2 RESTORATION OF UNPURCHASED SHARES. If any Outstanding
Option (as defined below) expires or is terminated for any reason, the unexercised shares subject to that Option will again be available for the grant of Options under the Plan.
3.3 RESERVATION OF SUFFICIENT SHARES. During the term of the Plan, the Company shall at all times reserve and keep available a number of shares sufficient to satisfy the requirements of the Plan.
ARTICLE IV
ELIGIBILITY; TYPES OF OPTIONS
4.1 ELIGIBILITY. Options shall be granted only to persons ("Participants") who at the time of granting are key executives, consultants or employees of the Company. Incentive Stock Options shall be granted only to persons who are at the time of grant employees of the Company.
4.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options, as defined in section 422 of the Code, may be granted under the Plan to key employees of the Company. Such Options are intended to be eligible for favorable federal income tax treatment. The aggregate Fair Market Value (as defined below), of the Common Stock for which Incentive Stock Options vest in any calendar year (under all plans, including the Plan, providing for the grant of options which satisfy the requirements of the Code for incentive stock options of the Company) shall not exceed $100,000.
4.3 NON-QUALIFIED OPTIONS. Non-Qualified Options may be granted to executives, consultants or employees of the Company under the Plan. Such Options carry tax consequences as provided in the Code.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
5.1 STANDARD FORMS OF OPTIONS. All Options shall be evidenced by written stock option agreements ("Stock Option Agreements"), which need not be identical, between the Company and the Participant in such form as the Committee shall from time to time approve, subject to the terms of the Plan. Each Stock Option Agreement shall state the type of Option to be granted, the total number of shares of Common Stock with respect to which the Option is granted, the terms and conditions of the Option, and the exercise price thereof.
5.2 EXERCISE PRICE. The price at which the Common Stock subject to each option (the "Exercise Price") may be purchased shall be determined by the Committee. The Exercise Price per share of Common Stock for Incentive Stock Options granted under the Plan shall be at least equal to 100% of Fair Market Value, as defined in Article X below, of a share of Common Stock. The
Exercise Price of Incentive Stock Options granted to a Participant who is a 10% Owner, as defined in Article X below, shall be at least 110% of FMV. The Exercise Price of Non-Qualified Options granted under the Plan shall be at least 85% of FMV. The Exercise Price of an Option may be adjusted in accordance with Article IX of the Plan.
5.3 EXERCISE PERIOD. The Committee may set a schedule of vesting, prescribing the date or dates on which the Option becomes exercisable, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the attainment of stated goals.
5.4 RIGHTS AS A STOCKHOLDER. No Participant shall have any rights as a stockholder with respect to shares of Common Stock subject to an Option until properly signed certificates for such shares have issued from the Company or its transfer agent and the ownership of such shares shall have been registered in the books maintained for such purposes. No adjustment shall be made for dividends or other rights for which the record date is prior to the date of such issue.
5.5 NO OBLIGATION TO EXERCISE. No Participant is obligated to exercise an Option.
5.6 OTHER BENEFITS. Participation in the Plan shall not preclude a Participant from eligibility for any other benefit plan which the Company has adopted or may adopt.
5.7 OTHER PROVISIONS. Stock Option Agreements entered into pursuant to the Plan may contain such other provisions (not inconsistent with the Plan) as the Committee or the Board may deem necessary or desirable, including, but not limited to, covenants on the part of the Participant not to compete, and remedies available to the Company in the event of the breach of any such covenant.
ARTICLE VI
METHOD OF EXERCISE
6.1 EXERCISABILITY. An Option may be exercised only as to shares with respect to which the Option has become vested at the time of exercise. To the extent so exercisable, an Option may be exercised in whole or in part, but no exercise for the purchase of fractional shares is allowable under the Plan.
6.2 WRITTEN NOTICE. Options shall be exercised by written notice to the Company, addressed to the Company at its principal place of business. Such notice shall state the Participant's election to exercise the Option and the number of shares of Common Stock in respect of which it is being exercised, and shall be signed by the Participant.
6.3 METHOD OF PAYMENT. Notice of exercise must be accompanied by payment of the full Exercise Price of the number of shares the Participant has elected to purchase, except that the Committee may, at its sole discretion, arrange a deferred payment schedule at the time of exercise. Payment shall be in cash, by check or in stock of the Company that has been owned by the participant for at least six months, or notes of the Company or, as agreed to by the Board of Directors, other consideration.
6.4 TAX WITHHOLDING. In the event that any federal, state or local income taxes, employment taxes, Federal Insurance Contributions Act ("FICA") withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Option holder in connection with the exercise of an Option, the Option holder shall advance in cash to the Company the amount of such withholding(s). The Committee may, however, at its sole discretion, arrange an alternate method of payment of such withholding(s), except that, with respect to Participants subject to Section 16 of the Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 under the Act.
ARTICLE VII
TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT. The right to exercise any unexercised portion of any Option granted under the Plan shall terminate on the date of termination of all consulting and/or employee relationship(s) between the Company and the Participant, for any reason except as otherwise provided in Sections 7.2 or 7.5 below. A Participant's employment shall not be deemed terminated by reason of a transfer to another employer which is an Affiliate of the Company. The Committee, in its sole discretion, shall have the authority in connection with the grant of any particular Option or in connection with the termination of the consultancy and/or employment relationship of the holder of any particular Option to accelerate a vesting schedule and/or extend the time for exercise of all or any part of an Option in case of such a termination of relationship.
7.2 TERMINATION WITH CAUSE. A Participant whose employment or consulting relationship with the Company is terminated for cause shall lose the right to exercise any unexercised portion of any Option granted under the Plan as of the date of termination. For purposes of this paragraph, "cause" shall be deemed to include dishonesty with respect to the employer, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information or other conduct substantially prejudicial to the business of the Company, except as otherwise prescribed by the Committee in connection with the grant of any particular Option. The Committee's determination of cause shall be final, binding and
absolute for all purposes.
7.3 TRANSFERABILITY. Options granted to a Participant under the Plan shall not be transferable otherwise than by will, by the laws of descent and distribution, or (if authorized in the applicable Stock Option Agreement) pursuant to a qualified domestic relations order ("QDRO") as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. During the Participant's lifetime, Options shall be exercised only by such Participant, such Participant's guardian or legal representative, or (if authorized in the applicable Stock Option Agreement) such Participant's transferee pursuant to a QDRO.
7.4 DEATH OR DISABILITY OF PARTICIPANT. In the event a Participant dies or is disabled while in the employ of the Company, any Options theretofore granted to such Participant shall be exercisable only within the 12 months immediately succeeding such death or disability and then only (a) in the case of death, by the person or persons to whom the Participant's rights under the Option shall pass by will or the laws of descent and distribution, and, in the case of disability, by such Participant or his legal representative, and (b) if and to the extent that the Participant was entitled to exercise the Option at the date of the Participant's death.
7.5 RETIREMENT. Voluntary retirement after fifteen years continuous service as an officer of the Company shall not be considered a termination for purposes of this Plan. In the event of such a retirement, a former officer may exercise any Option(s) held at the time of retirement, if and to the extent such former officer would have been entitled to do so had such former officer remained employed by the Company until the Option expiration date(s); provided, however, that an exercise of any such Option(s) that is (are) an Incentive Stock Option beyond the period provided in the Code may disqualify such exercise from the tax treatment afforded Incentive Stock Options under the Code.
7.6 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan or in a Stock Option Agreement shall confer upon any Participant any right to continue in the employ or as a consultant of the Company, or interfere in any way with the right of the Company to terminate such Participant's employment or consultant relationship for any reason whatsoever, with or without cause, at any time.
ARTICLE VIII
REGISTRATION
8.1 REVENUE STAMPS. The Company shall be responsible and shall pay for any transfer, revenue, or documentary stamps with respect to shares issued upon the exercise of Options granted
under the Plan.
8.2 LEGAL REQUIREMENTS. The Company shall not be required to issue certificates for shares upon the exercise of any Option unless and until, in the opinion of the Company's legal counsel, such issuance would not result in a violation of any state or federal securities or other law.
8.3 PRIVATE OFFERING. The Options to be granted under the Plan are available only to a limited number of present and future key executives, consultants and employees of the Company who have knowledge of the Company's financial condition, management, and affairs. Such Options are not intended to provide additional capital for the Company but are to encourage stock ownership by the Company's key personnel. By the act of accepting an Option, in the absence of an effective registration statement under the Securities Act of 1933, as amended (the "1933 Act"), Participants shall agree that upon exercise of such Option, they will acquire the shares of Common Stock that are the subject thereof for investment and not with any intention at such time to resell or redistribute the same, and they shall confirm such agreement at the time of exercise, but the neglect or failure to confirm the same in writing shall not be a limitation of such agreement.
8.3 REGISTRATION OF PLAN. The Board of Directors may choose to register shares issuable pursuant to the Plan under the 1933 Act. Until such registration is made and declared effective, certificates for shares, when issued, shall have the following legend, or statements of other restrictions, endorsed thereon, and may not be immediately transferable:
The shares of Common Stock evidenced by this certificate have been issued to the registered owner in reliance upon written representations that these shares have been purchased for investment. These shares may not be sold, transferred, or assigned unless, in the opinion of the Company and its legal counsel, such sale, transfer, or assignment will not be in violation of the Securities Act of 1933, as amended, applicable rules and regulations of the Securities and Exchange Commission and any applicable state securities laws.
The Company may also place a stop-transfer restriction in its share register, or instruct its transfer agent to do so, with respect to such shares.
8.4 NOTICE OF DISQUALIFYING DISPOSITION. If a Participant sells or otherwise disposes of any share of Common Stock transferred to him pursuant to the exercise of an Option granted hereunder within two years from the date of the granting of the Option or within one year of the transfer of such shares to him (i.e., a "disqualifying disposition"), the Participant, within ten
days thereafter, shall furnish to the Committee at the principal offices of the Company, written notice of such sale or other disposition and the Company shall not be required to permit the transfer of such shares until, among other things, the requirements of Section 6.4 of this Plan have been satisfied with respect to such shares.
ARTICLE IX
ADJUSTMENTS FOR CAPITALIZATION
9.1 CHANGE IN FINANCIAL STRUCTURE. If the Company shall at any time
change the number of issued shares of Common Stock without new consideration to
the Company (through merger, consolidation, reorganization, recapitalization,
stock dividend, split-up, combination of shares, exchange of shares, issuance of
rights to subscribe, or change in capital structure), appropriate adjustments
shall be made by the Committee as to the maximum number of shares subject to the
Plan and the number of shares and price per share subject to Outstanding Options
as shall be equitable to prevent dilution or enlargement of option rights;
provided, however, that any such adjustment shall comply with the rules of
Section 424(a) of the Code.
9.2 ACCELERATED VESTING. In the event of a change of control of the Company, the Board of Directors may choose to (1) accelerate the vesting of all Outstanding Options and prescribe that all Options under the Plan shall terminate if unexercised within thirty days after such change of control; or (2) require that the person or persons in control of the Company immediately following such change of control shall assume and maintain the Plan as the Plan existed before the event or events leading to such change in control. In no event shall a change of control cause a Participant to lose the rights granted under an Option without having been given an opportunity to exercise such Option. A change of control for purposes of the Plan shall mean any event or series of related events with respect to which persons who were the stockholders of the Company immediately prior to such event or events do not, immediately thereafter, own more than 50% of the shares of the Company entitled to vote, or a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company, as determined by the Company.
ARTICLE X
CERTAIN DEFINITIONS
10.1 AFFILIATE. "Affiliate" shall mean a corporation which, for purposes of Section 422 of the Code, is a parent or subsidiary of the Company, direct or indirect.
10.2 OPTION. "Option" means a right or option granted under
the Plan.
10.3 OUTSTANDING. An Option shall be considered "Outstanding" which has been granted by the Company and acknowledged as received by the Participant, unless and until such Option has been exercised, canceled, terminated or replaced by an equivalent Option.
10.4 FAIR MARKET VALUE. "Fair Market Value" or "FMV" shall mean the fair market value of one share of Common Stock on the date an Option is granted, as determined by the Board of Directors or, if at the time of grant of an Option the Common Stock is publicly traded, then it shall mean the closing price of the Common Stock, as reported in the principal market in which the Common Stock trades, on the date of grant.
10.5 10% OWNER. "10% Owner" shall mean any Participant who, at the time the Option is granted, owns more than 10% of the total combined voting power of all classes of stock of the Company.
CADUS PHARMACEUTICAL CORPORATION
1996 INCENTIVE PLAN
CADUS PHARMACEUTICAL CORPORATION
1996 INCENTIVE PLAN
Article Page
- ------- -----
I. Establishment and Purpose........................................ 1
1.1 Establishment and Effective Date............................ 1
1.2 Purpose..................................................... 1
II. Awards........................................................... 1
2.1 Form of Awards.............................................. 2
2.2 Maximum Shares Available.................................... 2
2.3 Return of Prior Awards...................................... 2
III. Administration................................................... 2
3.1 Committee................................................... 2
3.2 Powers of the Committee..................................... 3
3.3 Delegation.................................................. 3
3.4 Interpretations............................................. 3
3.5 Liability; Indemnification.................................. 4
IV. Eligibility...................................................... 4
V. Stock Options.................................................... 4
5.1 Grant of Options............................................ 4
5.2 Designation as Non-Qualified
Stock Option or Incentive Stock Option..................... 5
5.3 Option Price................................................ 5
5.4 Limitation on Amount of
Incentive Stock Options ................................... 6
5.5 Limitation on Time of Grant................................. 6
5.6 Exercise and Payment........................................ 6
5.7 Term........................................................ 7
5.8 Rights as a Stockholder..................................... 7
5.9 General Restrictions........................................ 7
5.10 Cancellation of Stock Appreciation Rights................... 7
VI. Stock Appreciation Rights........................................ 7
6.1 Grants of Stock Appreciation Rights......................... 7
6.2 Limitations on Exercise..................................... 8
6.3 Surrender or Exchange of Tandem Stock
Appreciation Rights........................................ 8
6.4 Exercise of Nontandem Stock Appreciation Rights............. 8
6.5 Settlement of Stock Appreciation Rights..................... 9
6.6 Cash Settlement............................................. 9
VII. NonTransferability of Options and
Stock Appreciation Rights....................................... 9
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VIII Effect of Termination of Employment,
Disability, Retirement, or Death............................... 10
8.1 General Rule............................................... 10
8.2 Disability or Retirement .................................. 11
8.3 Death...................................................... 11
8.4 Termination of Unvested Options ........................... 12
IX. Restricted Shares............................................... 12
9.1 Grant or Sale of Restricted Shares ........................ 12
9.2 Restrictions .............................................. 12
9.3 Restricted Stock Certificates ............................. 13
9.4 Rights of Holders of Restricted Shares..................... 13
9.5 Forfeiture; Repurchase..................................... 13
9.6 Delivery of Restricted Shares ............................. 13
X. Unrestricted Shares............................................. 14
10.1 Grant of Sale of Unrestricted Shares ...................... 14
10.2 Delivery of Unrestricted Shares ........................... 14
XI. Tax Offset Payments ............................................ 14
XII. Adjustment Upon Changes in Capitalization ...................... 15
XIII Amendment and Termination ...................................... 15
XIV. Written Agreement .............................................. 15
XV. Miscellaneous Provisions ....................................... 16
15.1 Tax Withholding .......................................... 16
15.2 Compliance with Section 16(b) ............................ 16
15.3 Successors ............................................... 16
15.4 General Creditor Status .................................. 17
15.5 Non Right to Employment .................................. 17
15.6 Other Plans .............................................. 17
15.7 Notices .................................................. 17
15.8 Severability ............................................. 17
15.9 Governing Law ............................................ 17
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CADUS PHARMACEUTICAL CORPORATION
1996 INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT AND EFFECTIVE DATE. Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby establishes a stock incentive plan to be known as the "Cadus Pharmaceutical Corporation 1996 Incentive Plan" (the "Plan"). The Plan shall become effective as of March __, 1996, subject to the approval of the stockholders of the Corporation. In the event that such stockholder approval is not obtained, any awards made hereunder shall be cancelled and all rights of employees and consultants with respect to such awards shall thereupon cease. Upon approval of the Plan by the Board of Directors of the Corporation (the "Board"), awards may be made by the Board's Compensation Committee (the "Committee"), as provided herein.
1.2 PURPOSE. The purpose of the Plan is to encourage and enable key employees and consultants (subject to such requirements as may be prescribed by the Committee) of the Corporation and its subsidiaries to acquire a proprietary interest in the Corporation through the ownership of the Corporation's common stock, par value $0.001 per share ("Common Stock"), and other rights with respect to the Common Stock. Such ownership will provide such employees and consultants with a more direct stake in the future welfare of the Corporation and encourage them to remain with the Corporation and its subsidiaries. It is also expected that the Plan will encourage qualified persons to seek and accept employment with the Corporation and its subsidiaries.
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted in any one or all of the following forms: (i) incentive stock options ("Incentive Stock Options") meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); (ii) non-qualified stock options ("Non-qualified Stock Options") (unless otherwise indicated, references in the Plan to "Options" shall include both Incentive Stock Options and Nonqualified Stock Options); (iii) stock appreciation rights ("Stock Appreciation Rights"), as described in Article 6 hereof, which may be awarded either in tandem with Options ("Tandem Stock
Appreciation Rights") or on a stand-alone basis ("Nontandem Stock Appreciation Rights"); (iv) shares of Common Stock which are subject to vesting requirements as provided in Article 9 hereof ("Restricted Shares"); (v) shares of Common Stock that are not subject to any vesting requirements ("Unrestricted Shares"); and (vi) tax offset payments ("Tax Offset Payments"), as described in Article 11 hereof.
2.2 MAXIMUM SHARES AVAILABLE. The maximum aggregate number of shares of Common Stock available for award under the Plan is 1,000,000, subject to adjustment pursuant to Article 12 hereof. Shares of Common Stock issued pursuant to the Plan may be either authorized but unissued shares or issued shares reacquired by the Corporation. In the event that prior to the end of the period during which Options may be granted under the Plan, any Option or any Nontandem Stock Appreciation Rights under the Plan expires unexercised or is terminated, surrendered or cancelled (other than in connection with the exercise of Stock Appreciation Rights) without being exercised in whole or in part for any reason, or any Restricted Shares are forfeited, or if such awards are settled in cash in lieu of shares of Common Stock, then such shares shall be available for subsequent awards under the Plan upon such terms and conditions as the Committee may determine.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent award, the Committee shall have the right, in its sole discretion, to require employees to return to the Corporation awards previously granted under the Plan. Subject to the provisions of the Plan, such new award shall be upon such terms and conditions as are specified by the Committee at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 COMMITTEE. Awards shall be determined, and the Plan shall be administered, by the Committee as appointed from time to time by the Board, which Committee shall consist of not less than two (2) members of the Board; provided, however, that from and after the consummation of the initial public offering of the Common Stock and so long as the Plan shall be required to comply with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in order to permit transactions pursuant to the Plan by employees of the Corporation to be exempt from the provisions of Section 16(b) of the 1934 Act, each member of the Committee, at the effective date of his appointment to the Committee, shall be a "disinterested person," as that term is defined in subparagraph (c)(2)(i) of Rule 16b-3, as in effect from time to time, under the 1934 Act.
3.2 POWERS OF THE COMMITTEE. Subject to the express provisions of the Plan, the Committee shall have the power and authority (i) to grant Options and to determine the purchase price of the Common Stock covered by each Option, the term of each Option, the number of shares of Common Stock to be covered by each Option, the time or times at which each Option shall become exercisable and the duration of the exercise period applicable to each Option; (ii) to designated Options as Incentive Stock Options or Non-qualified Stock Options and to determine which Options, if any, shall be accompanied by Tandem Stock Appreciation Rights, (iii) to grant Tandem Stock Appreciation Rights and Nontandem Stock Appreciation Rights and to determine the terms and conditions of such rights; (iv) to grant or cause to be sold Restricted Shares and to determine the purchase price, if any, of such shares and the vesting period and other conditions and restrictions applicable to such shares; (v) to grant or cause to be sold Unrestricted Shares and to determine the purchase price, if any, of such shares; (vi) to determine the amount of, and to make, Tax Offset Payments; (vii) to determine the employees and the consultants to whom, and the time or times at which, Options, Stock Appreciation Rights, Restricted Shares, Unrestricted Shares and Tax Offset Payments shall be granted or made and (viii) to take all other actions contemplated to be taken by the Committee under the Plan, including, but not limited to, authorizing the amendment of any written agreement relating to any award made hereunder. Without limiting the foregoing, in the event of a merger, consolidation, combination, exchange of shares, separation, spin-off, reorganization, liquidation or other similar transaction, the Committee may, in its sole discretion, accelerate the lapse of any vesting periods and waiting periods and extend the exercise periods applicable to any award made under the Plan.
3.3 DELEGATION. The Committee may delegate to one or more of its members or to any other person or persons such ministerial duties as it may deem advisable; provided, however, that the Committee may not delegate any of its responsibilities hereunder if such delegation would cause the Plan to fail to comply with the "disinterested administration" rules under Section 16 of the Act. The Committee may also employ attorneys, consultants, accountants or other professional advisors and shall be entitled to rely upon the advice opinions or valuations of any such advisors.
3.4 INTERPRETATIONS. The Committee shall have sole discretionary authority to interpret the terms of the Plan, to adopt and revise rules, regulations and policies to administer the Plan and to make any other factual determinations which it believes to be necessary or advisable for the administration of the Plan. All actions taken and interpretations and determinations made by the Committee in good faith shall be final
and binding upon the Corporation, all employees and consultants who have received awards under the Plan and all other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Committee, nor any person to whom ministerial duties have been delegated, shall be personally liable for any action, interpretation or determination made with respect to the Plan or awards made thereunder, and each member of the Committee shall be fully indemnified and protected by the Corporation with respect to any liability he or she may incur with respect to any such action, interpretation or determination, to the extent permitted by applicable law and to the extent provided in the Corporation's certificate of incorporation and bylaws, as amended from time to time, or under any agreement between any such member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all employees and consultants of the Corporation or any of its subsidiaries (subject to such requirements as may be prescribed by the Committee). Awards may be made to a director of the Corporation who is not also a member of the Committee provided that the director is also an employee. In determining the employees and consultants to whom awards shall be granted and the number of shares to be covered by each award, the Committee shall take into account the nature of the services rendered by such employees and consultants, their present and potential contributions to the success of the Corporation and its subsidiaries and such other factors as the Committee in its sole discretion shall deem relevant.
Notwithstanding the foregoing, only employees of the Corporation and any present or future corporation which is or may be a "subsidiary corporation" of the Corporation (as such term is defined in Section 424(f) of the Code) shall be eligible to receive Incentive Stock Options.
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under the Plan for the purchase of shares of Common Stock. Options shall be granted in such form and upon such terms and conditions, including the satisfaction of corporate or individual performance objectives and other vesting standards, as the Committee shall from time to time determine.
5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION OR INCENTIVE STOCK OPTION. In connection with any grant of Options, the Committee shall designate in the written agreement required pursuant to Article 14 hereof whether the Options granted shall be Incentive Stock Options or Non-Qualified Stock Options, or in the case both are granted, the number of shares of each.
5.3 OPTION PRICE. The purchase price per share under each Incentive Stock Option shall be not less than the Market Price (as hereinafter defined) of the Common Stock on the date the Incentive Stock Option is granted. The purchase price per share under each Non-Qualified Stock Option shall be determined by the Committee. In no case, however, shall the purchase price per share of either an Incentive Stock Option or Non-Qualified Stock Option be less than the par value of the Common Stock ($0.001). In the case of an Incentive Stock Option granted to an employee owning (actually or constructively under Section 424(d) of the Code), more than 10% of the total combined voting power of all classes of stock of the Corporation or of a subsidiary (a "10% Stockholder"), the option price shall not be less than 110% of the Market Price of the Common Stock on the date of grant.
The "Market Price" of the Common Stock on any day shall be determined as follows: (i) if the Common Stock is listed on a national securities exchange or quoted through the NASDAQ National Market System, the Market Price on any day shall be, in the sole discretion of the Committee, either (x) the average of the high and low reported Consolidated Trading sales prices, or if no such sale is made on such day, the average of the closing bid and asked prices reported on the Consolidated Trading listing for such day or (y) the closing price reported on the Consolidated Trading listing for such day; (ii) if the Common Stock is quoted on the NASDAQ interdealer quotation system, the Market Price on any day shall be the average of the representative bid and asked prices at the close of business for such day; (iii) if the Common Stock is not listed on a national stock exchange or quoted on NASDAQ, the Market Price on any day shall be the average of the high bid and low asked prices reported by the National Quotation Bureau, Inc. for such day; or (iv) if the Common Stock is not listed on a national stock exchange, quoted on NASDAQ or reported on by the National Quotation Bureau, Inc., the Market Price on any day shall mean the fair market value of one share of Common Stock on such day as determined by the Board of Directors. In no event shall the Market Price of a share of Common Stock subject to an Incentive Stock Option be less than the fair market value as determined for purposes of Section 422(b)(4) of the Code.
The Option price so determined shall also be applicable in connection with the exercise of any Tandem Stock Appreciation Rights granted with respect to such Option.
5.4 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTIONS. In the case of Incentive Stock Options, the aggregate Market Price (determined at the time the Incentive Stock Option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an optionee during any calendar year (under all plans of the Corporation and any subsidiary) shall not exceed $100,000.
5.5 LIMITATION ON TIME OF GRANT. No grant of an Incentive Stock Option shall be made under the Plan more than ten (10) years after the date the Plan is approved by the stockholders of the Corporation.
5.6 EXERCISE AND PAYMENT. Options may be exercised in whole or in part. Common Stock purchased upon the exercise of Options shall be paid for at the time of purchase. Such payment shall be made in cash or, in the sole discretion of the Committee, through delivery of shares of Common Stock, installment payments under the optionee's promissory note or combination of cash, Common Stock and/or installment payments, in accordance with procedures to be established by the Committee. Any shares so delivered shall be valued at their Market Price on the date of exercise. Upon receipt of a notice of exercise and payment in accordance with procedures to be established by the Committee, the Corporation or its agent shall deliver to the persons exercising the Option (or his or her designee) a certificate for such shares.
The Committee in its sole discretion may, on an individual basis or pursuant to a general program established by the Committee in connection with the Plan, lend money to an optionee to exercise all or a portion of an Option granted hereunder. If the exercise price is paid in whole or part with an optionee's promissory note, such note shall (i) provide for full recourse to the maker, (ii) be collateralized by the pledge of the shares of Common Stock that the optionee purchases upon exercise of such Option, (iii) bear interest at a rate no less than the applicable Federal rate (within the meaning of Section 1274 of the Code), and (iv) contain such other terms as the Committee in its sole discretion shall require. In the event that payment for exercised Options is made through the delivery of shares of Common Stock, the Committee, in accordance with procedures established by the Committee, may grant Non-qualified Stock Options ("Restoration Options") to the person exercising the Option for the purchase of a number of shares equal to the number of shares of Common Stock delivered to the Corporation in connection with the payment of the exercise price of the Option and the payment of or surrender of shares for any withholding taxes due upon such exercise. The purchase price per share under each Restoration Option shall be the Market Price of the Common Stock on the date the Restoration Option is granted.
5.7 TERM. The term of each Option granted hereunder shall be determined by
the Committee; PROVIDED, HOWEVER, that, notwithstanding any other provision of
the Plan, in no event shall an Incentive Stock Option be exercisable after ten
(10) years from the date it is granted, or in the case of an Incentive Stock
Option granted to a 10% Stockholder, five (5) years from the date it is granted.
5.8 RIGHTS AS A STOCKHOLDER. A recipient of Options shall have no rights as a stockholder with respect to any shares issuable or transferable upon exercise thereof until the date a stock certificate representing such shares is issued to such recipient. Except as otherwise expressly provided in the Plan or by the Committee, no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date such stock certificate is issued.
5.9 GENERAL RESTRICTIONS. Each Option granted under the Plan shall be subject to the requirement that, if at any time the Board shall determine, in its sole discretion, that the listing, registration or qualification of the shares issuable or transferable upon exercise thereof upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Option or the issue, transfer, or purchase of shares thereunder, such Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Board.
The Board or the Committee may, in connection with the granting of any Option, require the individual to whom the Option is to be granted to enter into an agreement with the Corporation stating that as a condition precedent to each exercise of the Option, in whole or in part, such individual shall if then required by the Corporation represent to the Corporation in writing that such exercise is for investment only and not with a view to distribution, and also setting forth such other terms and conditions as the Board or the Committee may prescribe.
5.10 CANCELLATION OF STOCK APPRECIATION RIGHTS. Upon exercise of all or a portion of an Option, the related Tandem Stock Appreciation Rights shall be cancelled with respect to an equal number of shares of Common Stock.
ARTICLE 6
STOCK APPRECIATION RIGHTS
6.1 GRANTS OF STOCK APPRECIATION RIGHTS. Tandem Stock Appreciation Rights may be awarded by the Committee in connection
with any Option granted under the Plan, either at the time the Option is granted or thereafter at any time prior to the exercise, termination or expiration of the Option. Nontandem Stock Appreciation Rights may also be granted by the Committee at any time. At the time of grant of Nontandem Stock Appreciation Rights, the Committee shall specify the number of shares of Common Stock covered by such right and the base price of shares of Common Stock to be used in connection with the calculation described in Section 6.4 below. The base price of any Nontandem Stock Appreciation Rights shall be not less than 100% of the Market Price of a share of Common Stock on the date of grant. Stock Appreciation Rights shall be subject to such terms and conditions not inconsistent with the other provisions of the Plan as the Committee shall determine.
6.2 LIMITATIONS ON EXERCISE. Tandem Stock Appreciation Rights shall be exercisable only when and to the extent that, the related Option is exercisable and shall be exercisable only for such period as the Committee may determine (which period must, in the case of a Tandem Stock Appreciation Right related to an Incentive Stock Option, expire not later than the expiration date of the related Option). A Tandem Stock Appreciation Right related to an Incentive Stock Option may only be exercised when the Market Price of the Corporation's Common Stock exceeds the exercise price per share of the related Option. Upon the exercise of all or a portion of Tandem Stock Appreciation Rights, the related Option shall be cancelled with respect to an equal number of shares of Common Stock. Shares of Common Stock subject to Options, or portions thereof, surrendered upon exercise of Tandem Stock Appreciation Rights shall not be available for subsequent awards under the Plan. Nontandem Stock Appreciation Rights shall be exercisable during such period as the Committee shall determine.
6.3 SURRENDER OR EXCHANGE OF TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights shall entitle the recipient to surrender to the Corporation
unexercised the related Option, or any portion thereof, and to receive from the
Corporation in exchange therefor that number of shares of Common Stock having an
aggregate Market Price equal to (A) the excess of (i) the Market Price of one
(1) share of Common Stock as of the date the Tandem Stock Appreciation Rights
are exercised over (ii) the option price per share specified in such Option,
multiplied by (B) the number of shares of Common Stock subject to the Option, or
portion thereof, which is surrendered. Cash shall be delivered in lieu of any
fractional shares.
6.4 EXERCISE OF NONTANDEM STOCK APPRECIATION RIGHTS. The exercise of Nontandem Stock Appreciation Rights shall entitle the recipient to receive from the Corporation that number of shares of Common Stock having an aggregate Market Price equal to (A) the excess of (i) the Market Price of one (1) share of Common Stock as of the date on which the Nontandem Stock Appreciation Rights
are exercised over (ii) the base price of the shares covered by the Nontandem Stock Appreciation Rights, multiplied by (B) the number of shares of Common Stock covered by the Nontandem Stock Appreciation Rights, or the portion thereof being exercised. Cash shall be delivered in lieu of any fractional shares.
6.5 SETTLEMENT OF STOCK APPRECIATION RIGHTS. As soon as is reasonably practicable after the exercise of any Stock Appreciation Rights, the Corporation shall (i) issue, in the name of the recipient, stock certificates representing the total number of full shares of Common Stock to which the recipient is entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to the Market Price, as of the date of exercise, of any resulting fractional shares, and (ii) if the Committee causes the Corporation to elect to settle all or part of its obligations arising out of the exercise of the Stock Appreciation Rights in cash pursuant to Section 6.6 hereof, deliver to the recipient an amount in cash equal to the Market Price, as of the date of exercise, of the shares of Common Stock it would otherwise be obligated to deliver.
6.6 CASH SETTLEMENT. The Committee, in its sole discretion, may cause the Corporation to settle all or any part of its obligation arising out of the exercise of Stock Appreciation Rights by the payment of cash in lieu of all or part of the shares of Common Stock it would otherwise be obligated to deliver in an amount equal to the Market Price of such shares on the date of exercise.
ARTICLE 7
NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
No Option or Stock Appreciation Rights may be transferred, assigned, pledged or hypothecated (whether by operation of law or otherwise), except as provided by will or the applicable laws of descent and distribution, and no Option or Stock Appreciation Rights shall be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of an Option or Stock Appreciation Rights not specifically permitted herein shall be null and void and without effect. An Option or Stock Appreciation Rights may be exercised by the recipient only during his or her lifetime, or following his or her death pursuant to Section 8.3 hereof.
Notwithstanding anything to the contrary in the preceding paragraph, the Committee may, in its sole discretion, cause the written agreement relating to any Non-qualified Stock Options or Stock Appreciation Rights granted hereunder to provide that the recipient of such Non-qualified Stock Options or Stock Appreciation Rights may transfer any of such Non-qualified Stock
Options or Stock Appreciation Rights other than by will or the laws of descent
and distribution in any manner authorized under applicable law; PROVIDED,
HOWEVER, that in no event may the Committee permit any transfers which would
cause the Plan to fail to satisfy the applicable requirements of Rule 16b-3
under the 1934 Act or which would cause any recipient of awards hereunder to
fail to be entitled to the benefits Rule 16b-3 or other exemptive rules under
Section 16 of the 1934 Act or be subject to liability thereunder.
ARTICLE 8
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
8.1 GENERAL RULE. Except as expressly provided in the written agreement relating to any Option or Stock Appreciation Rights or as otherwise expressly determined by the Committee in its sole discretion, in the event that a recipient of Options or Stock Appreciation Rights ceases to be an employee or consultant of the Corporation and its subsidiaries (a "Terminated Person") for any reason other than Disability or Retirement (as hereinafter defined) or death, any Options or Stock Appreciations Rights which were held by such Person on the date on which he or she ceased to be an employee or consultant (the "Termination Date") and which were otherwise exercisable on such Date shall expire unless exercised within the period of 30 days following the Termination Date, but in no event after the expiration of the exercise period of such Options or Stock Appreciation Rights.
Except as expressly provided in the written agreement relating to the Options or Stock Appreciation Rights or as otherwise expressly determined by the Committee in its sole discretion, the Committee may, in its sole discretion, cause any Option or Stock Appreciation Rights to be forfeited upon an employee's termination of employment or the termination of a consultant's consulting arrangement if the employee or consultant was terminated for one (or more) of the following reasons: (i) the employee's or consultant's commission of any fraud, misappropriation or misconduct which causes demonstrable injury to the Corporation or a subsidiary, or (ii) an act of dishonesty by the employee or consultant resulting or intended to result, directly or indirectly, in gain or personal enrichment at the expense of the Corporation or a subsidiary; PROVIDED, HOWEVER, that "cause," in the case of an employee or consultant who has an employment or consulting agreement with the Corporation or a subsidiary thereof, shall have the meaning, if any, set forth in such employment or consulting agreement. It shall be within the sole discretion of the Committee to determine whether an employee's or consultant's termination was for one of the
foregoing reasons, and the decision of the Committee shall be final and conclusive.
8.2 DISABILITY OR RETIREMENT. Except as expressly provided otherwise in the
written agreement relating to any Option or Stock Appreciation Rights granted
under the Plan or as otherwise determined by the Committee in its sole
discretion, in the event of a termination of employment or consulting
arrangement of a Terminated Person due to the Disability or Retirement of such
Person, any Options or Stock Appreciation Rights which were held by such Person
on the Termination Date and which were otherwise exercisable on such Date shall
expire unless exercised within the period of 180 days following such Date, but
in no event after the expiration date of the exercise period of such Options or
Stock Appreciation Rights; provided, however, that any Incentive Stock Option of
such Terminated Person shall no longer be treated as an Incentive Stock Option
unless exercised within three (3) months of the Termination Date (or within one
(1) year in the case of an employee who is "disabled" within the meaning of
Section 22(e)(3) of the Code).
"Disability" shall mean any termination of employment or consulting arrangement with the Corporation or a subsidiary because of a long-term or total disability, as determined by the Committee in its sole discretion. "Retirement" shall mean a termination of employment or consulting arrangement with the Corporation or a subsidiary with the written consent of the Committee in its sole discretion. The decision of the Committee shall be final and conclusive.
8.3 DEATH. Except as expressly provided in the written agreement relating to the Options or Stock Appreciation Rights or as otherwise expressly determined by the Committee in its sole discretion, in the event of the death of a recipient of Options or Stock Appreciation Rights while an employee or consultant of the Corporation or any subsidiary, any Options or Stock Appreciation Rights which were held by such Person at the date of death and which were otherwise exercisable on such date shall be exercisable by the beneficiary designated by the employee or consultant for such purpose (the "Designated Beneficiary") or if no Designated Beneficiary shall be appointed or if the Designated Beneficiary shall predecease the employee, by the employee's personal representatives, heirs or legatees for a period of one (1) year from the date of death, but in no event later than the expiration date of the exercise period of such Options of Stock Appreciation Rights, at which time such Options or Stock Appreciation Rights shall expire.
In the event of the death of a Terminated Person following a termination of employment due to Disability or Retirement, any Options or Stock Appreciation Rights which were
held by such Person on the Termination Date and which were exercisable on such Date shall be exercisable by such recipient's Designated Beneficiary, or if no Designated Beneficiary shall be appointed or if the Designated Beneficiary shall predecease such recipient, by such recipient's personal representatives, heirs or legatees for a period of one (1) year from the date of death but in no event later than the expiration date of the exercise period of such Options or Stock Appreciation Rights, at which time such Options or Stock Appreciation Rights shall expire; provided, however, that any Incentive Stock Option of such Terminated Person shall no longer be treated as an Incentive Stock Option unless exercised within three (3) months of the date of such Termination Date (or within one (1) year in the case of an employee whose termination of employment occurs by reason of "disability" within the meaning of Section 22(e)(3) of the Code) or death.
8.4 TERMINATION OF UNVESTED OPTIONS. All Options and Stock Appreciation Rights which were not exercisable by a Terminated Person as of the Termination Date of such Terminated Person shall terminate as of such Date, except as expressly provided in the written agreement relating to the Options or Stock Appreciation Rights or as otherwise expressly determined by the Committee in its sole discretion. Options and Stock Appreciation Rights shall not be affected by any change of employment so long as the recipient continues to be employed by either the Corporation or a subsidiary.
ARTICLE 9
RESTRICTED SHARES
9.1 GRANT OR SALE OF RESTRICTED SHARES. The Committee may from time to time cause the Corporation to grant or to sell Restricted Shares under the Plan to employees and consultants, subject to such restrictions, conditions and other terms as the Committee may determine. The purchase price, if any, for Restricted Shares shall be determined by the Committee in its sole discretion.
9.2 RESTRICTIONS. At the time a grant of Restricted Shares is made, the Committee shall establish a period over which such Restricted Shares will vest (the "Restricted Period"). Each grant of Restricted Shares may be subject to a different Restricted Period. The Committee may, in its sole discretion, at the time a grant is made prescribe restrictions in addition to or other than the expiration of the Restricted Period, including the satisfaction of corporate or individual performance objectives, which shall be applicable to all or any portion of the Restricted Shares. The Committee may also, in its sole discretion, at any time shorten or terminate the Restricted Period or waive any other restrictions applicable to all or a portion of such Restricted Shares. None of the
Restricted Shares may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the Committee with respect to such Restricted Shares.
9.3 RESTRICTED STOCK CERTIFICATES. The Corporation shall issue, in the name of each employee or consultant to whom Restricted Shares have been granted or sold, stock certificates representing the total number of Restricted Shares granted or sold to the employee or consultant, as soon as reasonably practicable after the grant or sale. The Corporation, at the direction of the Committee, shall hold such certificates, properly endorsed for transfer, for the employee's or consultant's benefit until such time as the Restricted Shares are forfeited to or repurchased by the Corporation or the restrictions lapse.
9.4 RIGHTS OF HOLDERS OF RESTRICTED SHARES. Holders of Restricted Shares shall have the right to vote such shares and the right to receive any cash dividends with respect to such shares. All distributions, if any, received by an employee or consultant with respect to Restricted Shares as a result of any stock split, stock distribution, a combination of shares, or other similar transaction shall be subject to the restrictions of this Article 9.
9.5 FORFEITURE; REPURCHASE. Except as expressly provided in the written agreement relating to the Restricted Shares or as otherwise expressly determined by the Committee in its sole discretion, any Restricted Shares held by an employee or consultant pursuant to the Plan shall be forfeited or subject to repurchase by the Corporation at a price equal to the original price paid therefor by the employee or consultant upon the termination of his or her employment or consulting arrangement with the Corporation or its subsidiaries, as the case may be, prior to the expiration or termination of the Restricted Period and the satisfaction of any other conditions applicable to such Restricted Shares. Upon any such forfeiture or repurchase, the Restricted Shares shall be retained in the treasury of the Corporation and available for subsequent awards under the Plan, unless the Committee directs that such Restricted Shares be cancelled.
9.6 DELIVERY OF RESTRICTED SHARES. Upon the expiration or termination of the Restricted Period applicable to any Restricted Shares and the satisfaction of any other conditions prescribed by the Committee that are applicable to such Restricted Shares, the restrictions applicable to the Restricted Shares shall lapse and a stock certificate for the number of Restricted Shares with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions, to the employee, consultant, beneficiary or estate, as the case may be.
ARTICLE 10
UNRESTRICTED SHARES
10.1 GRANT OR SALE OF UNRESTRICTED SHARES. The Committee may cause the Corporation to grant or to sell Unrestricted Shares to employees and consultants at such time or times, in such amounts and for such reasons as the Committee, in its sole discretion, shall determine. The purchase price, if any, for Unrestricted Shares shall be determined by the Committee in its sole discretion.
10.2 DELIVERY OF UNRESTRICTED SHARES. The Corporation shall issue, in the name of each employee or consultant to whom Unrestricted Shares have been granted or sold, stock certificates representing the total number of Unrestricted Shares granted or sold to the employee or consultant, and shall deliver such certificates to the employee or consultant as soon as reasonably practicable after the date of grant or sale or on such later date as the Committee shall determine at the time of grant or sale.
ARTICLE 11
TAX OFFSET PAYMENTS
The Committee shall have the authority at the time of any award under the Plan or anytime thereafter to make Tax Offset Payments to assist employees in paying income taxes incurred as a result of their participation in the Plan. The Tax Offset Payments shall be determined by applying a percentage established by the Committee to all or a portion (as the Committee shall determine) of the taxable income recognizable by an employee upon (i) the exercise of Non-Qualified Stock Options or Stock Appreciation Rights, (ii) the disposition of shares received upon exercise of Incentive Stock Options, (iii) the lapse of restrictions on Restricted Shares or (iv) the award or sale of Unrestricted Shares. The percentage shall be established, from time to time, by the Committee at that rate which the Committee, in its sole discretion, determines to be appropriate and in the best interests of the Corporation to assist employees in paying income taxes incurred as a result of the events described in the preceding sentence. Tax Offset Payments shall be subject to the restrictions on transferability applicable to Options and Stock Appreciation Rights under Article 7.
ARTICLE 12
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Committee may: (i) at any time, make or provide for such adjustments to the Plan or to the number and class of shares
available thereunder or (ii) at the time of grant of any Options, Stock Appreciation Rights or Restricted Shares, provide for such adjustments to such Options, Stock Appreciation Rights or Restricted Shares, in each case as the Committee shall deem appropriate to prevent dilution or enlargement of rights, including, without limitation, adjustments in the event of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, spin-offs, reorganizations, liquidations and the like.
ARTICLE 13
AMENDMENT AND TERMINATION
The Board may suspend, terminate, modify or amend the Plan, provided that any amendment that would (i) materially increase the aggregate number of shares which may be issued under the Plan, (ii) materially increase the benefits accruing to employees under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan, shall be subject to the approval of the Corporation's stockholders, except that any such increase or modification that may result from adjustments authorized by Article 12 hereof shall not require such stockholder approval. If the Plan is terminated, the terms of the Plan shall, notwithstanding such termination, continue to apply to awards granted prior to such termination. No suspension, termination, modification or amendment of the Plan may, without the consent of the employee or consultant to whom an award shall theretofore have been granted, adversely affect the rights of such employee or consultant under such award.
ARTICLE 14
WRITTEN AGREEMENT
Each award of Options, Stock Appreciation Rights, Restricted Shares, Unrestricted Shares and Tax Offset Payments shall be evidenced by a written agreement containing such restrictions, terms and conditions, if any, as the Committee may require. In the event of any conflict between a written agreement and the Plan, the terms of the Plan shall govern.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1 TAX WITHHOLDING. The Corporation shall have the right to require employees or their beneficiaries or legal representatives to remit to the Corporation an amount sufficient to satisfy Federal, state and local withholding tax requirements, or to deduct from all payments under the Plan, including Tax Offset Payments, amounts sufficient to satisfy all withholding
tax requirements. Whenever payments under the Plan are to be made to an employee in cash, such payments shall be net of any amounts sufficient to satisfy all Federal, state and local withholding tax requirements. The Committee may, in its sole discretion, permit an employee to satisfy his or her tax withholding obligations either by (i) surrendering shares owned by the employee or (ii) having the Corporation withhold from shares otherwise deliverable to the employee. Shares surrendered or withheld shall be valued at their Market Price as of the date on which income is required to be recognized for income tax purposes.
15.2 COMPLIANCE WITH SECTION 16(B). In the case of employees who are or may be subject to Section 16 of the 1934 Act, it is the intent of the Corporation that the Plan and any award granted hereunder satisfy and be interpreted in a manner that satisfies the applicable requirements of Rule 16b-3 so that such persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 of the 1934 Act and will not be subjected to liability thereunder. If any provision of the Plan or any award would otherwise conflict with the intent expressed herein, that provision, to the extent possible, shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provision shall be deemed void as applicable to employees who are or may be subject to Section 16 of the 1934 Act.
15.3 SUCCESSORS. The obligations of the Corporation under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Corporation, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Corporation. In the event of any of the foregoing, the Committee may, in its discretion prior to the consummation of the transaction and subject to Article 13 hereof, cancel, offer to purchase, exchange, adjust or modify any outstanding awards, at such time and in such manner as the Committee deems appropriate and in accordance with applicable law.
15.4 GENERAL CREDITOR STATUS. Employees and consultants shall have no right, title, or interest whatsoever in or to any investments which the Corporation may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Corporation and any employee, consultant, beneficiary or legal representative of such employee or consultant. To the extent that any person acquires a right to receive payments from the Corporation under the Plan, such right shall be no greater than the right of an unsecured general
creditor of the Corporation. All payments to be made hereunder shall be paid from the general funds of the Corporation and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
15.5 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any written agreement entered into pursuant to Article 14 hereof, nor the grant of any award, shall confer upon any employee any right to continue in the employ of the Corporation or a subsidiary or to be entitled to any remuneration or benefits not set forth in the Plan or such written agreement or interfere with or limit the right of the Corporation or a subsidiary to modify the terms of or terminate such employee's employment at any time. The preceding sentence shall be equally applicable with respect to consultants of the Corporation or a subsidiary.
15.6 OTHER PLANS. Effective upon the adoption of the Plan by the stockholders, no further awards shall be made under the Cadus Pharmaceutical Corporation 1993 Stock Option Plan, adopted on January 13, 1993 (the "Prior Plan"). Thereafter, all awards made under the Prior Plan prior to the adoption of the Plan by the stockholders shall continue in accordance with the terms of the Prior Plan.
15.7 NOTICES. Notices required or permitted to be given under the Plan shall be sufficiently given if in writing and personally delivered to the employee or consultant or sent by regular mail addressed (a) to the employee or consultant at the employee's or consultant's address as set forth in the books and records of the Corporation or its subsidiaries, or (b) to the Corporation or the Committee at the principal office of the Corporation clearly marked "Attention: Compensation Committee."
15.8 SEVERABILITY. In the event that any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
15.9 GOVERNING LAW. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware.
[graphic]
DISCOVERY AND NON-DISCLOSURE AGREEMENT
CADUS
PHARMACEUTICAL
CORPORATION
For value received, and for other good and valuable consideration, including my employment or other association with CADUS PHARMACEUTICAL CORPORATION (the "Company"), the offer of employment or other association made to me by the Company (whether or not I accept it) and the compensation to be paid to me, I hereby covenant and agree with the Company (which term shall include any affiliate, subsidiary or successor to the Company) as follows:
1. DISCLOSURE OF DISCOVERIES
I hereby agree that I shall promptly communicate in writing to the Company, or to such individual as the Company may, from time to time, designate, a full and complete disclosure of any and all research and other information, inventions, processes, designs, materials, products, developments, discoveries and improvements ("Discoveries") made, developed, invented, conceived and/or reduced to practice by me alone or jointly with others, whether or not patentable or copyrightable (i) while in the employ of, or other association with, the Company, whether during or outside of the usual hours of work, and (ii) during a one (1) year period following the termination of my employment or other association with the Company, and which are reasonably related to the business of the Company during the term of my employment or other association with the Company. All such Discoveries shall be and remain the sole and exclusive property of the Company.
2. ASSIGNMENT OF DISCOVERIES
I hereby agree to, and hereby do, assign and transfer to the Company, or to its nominee or designee, without any separate remuneration or compensation to me other than the compensation received or assigned to me from time to time in the course of my aforesaid employment or other association with the Company, all my rights, title and interest throughout the world in and to such Discoveries, together with the right to file, and/or own wholly and without restriction, applications for United States and foreign patents on all Discoveries, and to do, execute and deliver any and all acts and instruments that may be necessary and proper to vest in the Company all such Discoveries, patents, copyrights and trademarks; and that I will render to the Company, or to its nominee or designee, all such assistance as it may require in the prosecution of all such patent, copyright and trademark applications, and applications for the reissue of such patents, copyrights and trademarks. I agree that I shall also execute, upon request, documents which secure to the Company the interests here conveyed.
I further agree that I shall assist, upon request, in locating writings and other physical evidence of the making of my Discoveries, and provide unrecorded information relating to such Discoveries, and give testimony in any proceeding in which any of my Discoveries, or any application or patent, copyright or trademark directed thereto, may be involved.
3. COPYRIGHT; PUBLISHING
I hereby agree that I shall promptly disclose to the Company any and all publishable and/or copyrightable material which I produce, compose, or write, individually or in collaboration with others, which arises out of work delegated to me by the Company, and I further agree that such materials shall be considered works made for hire.
At the expense of the Company, and to the extent that such material may not be considered works made for hire, I shall assign to the Company all my interest in such copyrightable material, and will sign all papers and do all other acts necessary to assist the Company in obtaining copyrights on such material in any and all countries.
4. TRADE SECRETS; CONFIDENTIAL INFORMATION
I hereby agree that I will not disclose to any unauthorized third party or use for my own benefit any trade secrets (as hereinafter defined) or other confidential information pertaining to the Company, its proprietary technology and its business. A trade secret is information, not generally known to the trade, which gives the Company an advantage over its competitors. Trade secrets include, without limitation, research being planned and developed, research methods and processes, sources of supply, materials used in research, information concerning the filing or pendency of patent applications, identity of licensors and licensees of technology, and marketing plans. Such obligation of confidentiality shall be waived as to information which (i) is in the public domain, (ii) comes into the public domain through no fault of my own, (iii) was known to me prior to its disclosure under this Agreement, or (iv) is disclosed to me by a third party having lawful right to make such disclosure.
5. COMPANY INFORMATION
I hereby agree that I will not, without first obtaining the written approval of the Company, or of such individual as the Company may, from time to time, designate, divulge or disclose to anyone outside of the Company, whether by private communication or by public address, publication or otherwise, any information (including, but not limited to materials) not already lawfully available to the public concerning the Company's business and/or products, including, but not limited to, all information about (a) the Company's production, profitability, business and legal plans,
finances, internal affairs, competitive position, customers and vendors; (b) its formulae, processes, methods, reports, machines, or inventions; and (c) any such information relating to the business of any corporation, firm or person for whom the Company is conducting, or shall conduct, research services, or is providing, or shall provide, other services, whether supplied, developed and/or conceived by me or by others in the employ or other association with the Company.
6. NON-SOLICITATION OF EMPLOYEES
During the period of my employment or other association with the Company and for one (1) year thereafter, I will not directly or indirectly: (i) employ, hire, or cause to be employed or hired, any person who is then employed by the Company or was so employed within six (6) months prior thereto; or (ii) cause, invite, solicit, entice or induce any such person to terminate his employment with the Company.
7. NON-COMPETITION
During the period of my employment or other association with the Company, I shall not, without the prior written consent of the Company, directly or indirectly, for myself, or as an agent on behalf of, or in conjunction with, any person, firm, organization or business enterprise, (i) engage in a business competitive with the business of the Company, (ii) engage in research, development or marketing of pharmaceutical products or biological reagents or materials (other than on behalf of the Company), (iii) engage or participate in or become employed by or render advisory or other services to any person, firm, organization or business enterprise engaged in a business competitive with the business of the Company or in research, development or marketing of pharmaceutical products or biological reagents or materials (other than the Company), or (iv) invest or otherwise become interested in, as principal, partner, officer, director or stockholder of, any such person, firm, organization or business enterprise (other than the Company). Nothing contained herein, however, shall restrict me from acquiring or holding stock in any publicly-held company so long as such ownership does not exceed 5% of the total outstanding stock of such company.
8. INJUNCTIVE AND OTHER EQUITABLE RELIEF
I acknowledge that, in the event of a breach or threatened breach by me of any of the provisions of this Agreement, the Company would sustain irreparable injury and damage. Therefore, in addition to any other remedies which the Company may have under this Agreement or otherwise, it shall be entitled to the remedies of injunction, specific performance and other equitable relief
for a breach or threatened breach by me of any of the provisions of this Agreement. This Paragraph 8 shall not, however, be construed as a waiver of any of the rights which the Company may have for damages or otherwise.
9. COMPANY PROPERTY; TERMINATION CERTIFICATION
Upon the termination of my employment or other association with the Company or my election not to accept the Company's offer of employment or other association, I hereby agree to turn over to the Company all models, prototypes, notes, memoranda, notebooks, drawings, specifications, records, customer lists, proposals, business plans, and other documents and/or materials, tools, equipment programs, databases or other property in my possession or under my control, relating to any work done for, or otherwise belonging to, the Company, it being acknowledged and agreed to by me that all such items are the sole property of the Company, and I hereby agree to sign the following "Termination Certificate" upon such termination of my employment or other association with the Company or upon my election not to accept the Company's offer of employment or other association:
"This is to certify that I do not have in my possession or custody, nor have I failed to return, any materials, models, prototypes, notes, memoranda, notebooks, drawings, specification, records, customer lists, proposals, business plans, or copies of any of these, and other documents, and/or materials, tools, equipment programs, databases or other property belonging to the Company."
10. DEFINITIONS
For the purpose of Paragraphs 4, 5, 7 and 9, "materials" include, without limitation, biological materials such as cells, lipids, polysaccharides, proteins and natural and synthetic nucleic acid molecules, such as plasmids and vectors.
11. GOVERNING LAW
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the choice of law principles thereof.
12. GENERAL PROVISIONS
(a) If at any time subsequent to the date hereof any provisions of this Agreement shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provisions shall be of no force and effect, but the illegality or unenforceability of such provisions shall have no effect upon and shall not impair the enforceability of any other provision of this
Agreement. Furthermore, if any provision of this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the fullest extent compatible with the existing applicable law.
(b) I further agree that this Agreement shall be binding upon me irrespective of the duration of my employment or other association with the Company, the reasons for the cessation of my employment or other association with the Company, or the amount of my compensation and/or salary.
(c) This Agreement is the entire agreement between the Company and me with respect to the subject matter hereof, and no modification or variation hereof shall be deemed valid unless in a writing signed by the Company.
(d) This Agreement shall be binding upon my heirs, executors, successors, administrators, and legal representatives, and shall insure to the benefit of the successors and assigns of the Company.
(e) I represent and warrant to the Company that I am not under any obligations to any person, firm or corporation, and have no other interest which is inconsistent or in conflict with this Agreement, or which would prevent, limit or impair in any way the performance by me of the covenants hereunder or my duties in my said employment or other association with the Company.
IN WITNESS WHEREOF, I have hereunto set my hand as of __________, 199__ at Tarrytown, New York.
WITNESS: ----------------------------
Signature
- ------------------------- ----------------------------
Print Name
----------------------------
Address
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METLIFE RETIRE PRO(sm) PROGRAM
CADUS PHARMACEUTICAL
CORPORATION
401(k) PLAN
INTRODUCTION
The Cadus Pharmaceutical Corporation 401(k) Plan can help you save in two important ways.
First, your 401(k) savings are not subject to current federal income taxes. This may enable you to save a greater amount than you could otherwise.
Second, earnings on your savings contributions, employer matching contributions, and profit sharing contributions are tax deferred. You pay no taxes until the funds are distributed to you from the plan. In the meantime, the funds compound tax-free. This means that your effective rate of return on contributions under the plan will be greater than with a taxable investment outside the plan earning at the same rate.
To encourage you to save for retirement and to take advantage of the tax benefits of this 401(k) Plan, Cadus Pharmaceutical Corporation may make a discretionary matching contribution which will vary every year.
In its discretion, Cadus Pharmaceutical Corporation may also make annual profit sharing contributions on behalf of eligible participants.
This summary will tell you about the Cadus Pharmaceutical Corporation
401(k) Plan. It is a summary of the plan in simple language and does not give
you all the details on all aspects of the plan. The actual terms of the plan are
contained in the plan document, the legal document which governs your rights and
benefits under the plan. The plan document and other legal documents relating to
the plan are available for inspection by participants and their beneficiaries
upon request to the plan administrator.
You should read this booklet carefully. We want you to understand the way the 40l(k) Plan works. If you have a specific question about how the plan applies to you, you should consult the plan administrator.
Cadus Pharmaceutical Corporation 401(k) Plan
CONTENTS
Page
----
Participation ............................................................. 1
Savings Contributions ..................................................... 1
Matching Contributions .................................................... 3
Profit Sharing Contributions .............................................. 3
Your Accounts ............................................................. 4
In-Service Withdrawals .................................................... 5
Loans ..................................................................... 6
Distributions ............................................................. 7
Additional Information .................................................... 10
Directory ................................................................. 13
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PARTICIPATION
Eligibility rules Participation in the savings part of the plan is
voluntary. All employees, who have met the eligibility
requirements, may participate.
You may join the plan and begin saving on any entry date
after you complete one year of service and you reach age
21.
The plan's entry dates are each January 1 and July 1.
The plan administrator will notify you prior to your
appropriate entry date. At that time, you must fill out
an enrollment form indicating if you wish to participate
in the savings part of the plan.
Service rules You earn a year of service for participation if you are
for participation credited with 1,000 or more hours of service in an
"employment year." An employment year is the 12-month
period starting on your date of hire or on an anniversary
of your date of hire. A year of service is not completed
before the end of your employment year regardless of when
during the 12-month period you complete 1,000 hours.
Hours of service include all hours for which you are
paid for working. Paid non-working hours (such as
vacation, illness or back pay awards), and non-paid time
on authorized leave of absence or leave for required
military service, also count as hours of service.
SAVINGS CONTRIBUTIONS
Amount You decide how much you want to save in the plan. You can
choose any whole percentage of your pay, up to the
maximum percentage specified on the deferral agreement.
Each pay period, the percentage you have chosen is taken
from your pay and deposited to your plan savings account.
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You can choose to make your savings contributions on a
before-tax basis (so-called "401(k)" savings) or on an
after-tax basis. You will defer paying income taxes on
the 401(k) savings you contribute to the plan. However,
there are IRS restrictions on withdrawing 401(k)
savings. You should carefully review the tax treatment
and withdrawal sections of this summary before deciding
which type of savings is right for you.
Your 401(k) savings contributions cannot exceed $8,994
(this limit applies in 1993 and is adjusted annually for
cost-of-living increases). There are also special IRS
rules that may limit 401(k) or after-tax savings
contributions by highly paid employees in certain
circumstances. We will notify you if these rules affect
you.
No current income tax As an incentive to help you build long-term savings under
on 401(k) savings the plan, there is a special income tax rule for 401(k)
savings contributions. Your 401(k) savings contributions
are free of federal income tax until distributed to you
from the plan. We do not withhold federal income tax on
your 401(k) savings contributions and we do not include
them in your taxable earnings reported to the IRS on your
W-2 Form.
Savings contributions are subject to withholding of
Social Security taxes and are included in your wages for
calculating your Social Security benefits.
State income tax treatment can vary. Most states do not
tax 401(k) savings contributions.
Changing your You can increase or decrease your savings contribution
savings amount election. Your new savings amount will go into effect on
the next payroll period after you give the required
advance notice to the plan administrator.
You may stop making savings deposits for any reason. Your
savings deposits will stop with the payroll period after
you give the required advance notice to the plan
administrator.
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If you stop your savings deposits, you may resume them
for any payroll period by giving the plan administrator
advance notice.
The required advance notice for changes in your savings
contributions is specified in the plan administrator's
procedures for operating the plan; please check with the
plan administrator for this information.
Rollovers from other If you receive a lump sum distribution from another
qualified plans employer's qualified retirement, pension or profit
sharing plan, you may deposit all or part of it in this
plan. By taking advantage of this opportunity, you can
defer paying taxes on the amount you roll over into the
plan and continue to accumulate tax-sheltered investment
earnings.
A rollover must be completed within 60 days after you
receive the payment from the other plan. Please consult
the plan administrator for more information on making a
rollover.
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MATCHING CONTRIBUTIONS
Matching contributions To encourage you to save for retirement under our plan, Cadus Pharmaceutical Corporation may match your 401(k) savings. The amount of Cadus Pharmaceutical Corporation's matching contribution will vary each year.
PROFIT SHARING CONTRIBUTIONS
Eligibility Each employee who meets the eligibility requirements for
the savings part of the plan is automatically a
participant in the profit sharing feature.
Amount For each plan year, Cadus Pharmaceutical Corporation will
contribute whatever amount it decides. Cadus
Pharmaceutical Corporation is not required to make a
contribution for any particular year and the amount
contributed may vary from year to year.
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Who shares You are entitled to a share of the profit sharing
contribution for a plan year as long as you are still a
participant on the last day of that plan year and you
complete at least 1,000 hours of service during that plan
year. Any profit sharing contributions that may be
credited to your account during a plan year are
conditioned on your satisfying these requirements during
the plan year.
However, you will share in any profit sharing
contribution for the year in which you terminate
employment due to retirement, disability or death, even
if you do not satisfy these requirements.
Amount of Your share of the profit sharing contribution for a plan
your share year will be based on the proportion that your
compensation for the plan year bears to the total
compensation of all participants sharing in the
contribution for that year.
Compensation means your total compensation from Cadus
Pharmaceutical Corporation received during the plan year.
If you became a participant during a plan year,
compensation before you became a participant does not
count when figuring your share.
The plan will not consider compensation above $200,000
(as indexed by the cost-of-living adjustment) when
calculating any participant's share of the profit sharing
contribution.
Minimum contribution Your account may receive a minimum contribution even
though you would not get this much under the method
described above. The minimum contribution (if any) may
vary from year to year.
YOUR ACCOUNTS
Participant accounts Contributions made to the plan on your behalf are
credited to participant accounts in your name.
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Investments The accounts of all participants in this plan are held in
a trust fund. You direct the investment of your plan
accounts among the funding choices available under the
trust fund from the MetLife RetirePro(sm) Program. Please
contact the plan administrator for information describing
your funding choices.
Earnings on your account are not subject to income tax
until withdrawn or paid to you. Your savings compound -
you earn interest on your interest - without any
reduction for taxes. This is another way the plan helps
you build savings.
IN-SERVICE WITHDRAWALS
Withdrawals for The purpose of this plan is to help you accumulate 1ong-
financial hardship term savings. However, in the event of a financial
hardship, you may withdraw up to the lesser of 95% of
your savings contributions or the amount necessary to
satisfy the financial hardship. Under the law, you may
not withdraw any earnings on your savings contributions.
The law defines a financial hardship as an immediate and
heavy financial need for which you do not have other
reasonably available resources to meet the need. Since
your plan allows for loans, you must first apply for use
of a loan before you can apply for a financial hardship
withdrawal. Usually medical costs, next semester or
quarter college tuition for you or your dependents, or
the initial purchase of your primary residence satisfy
these requirements provided you do not have other
reasonably available resources. Your contributions into
the plan will be suspended for a period of 12 months
following the hardship withdrawal. Other rules may apply,
so, if you wish to apply for a hardship withdrawal,
please see the plan administrator.
Withdrawals at will You may make a withdrawal for any reason from your
rollover account (if any); financial hardship is not
necessary.
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You may also make a withdrawal at will from the following
account(s):
- your after-tax employee contribution account
If you wish to make such a withdrawal, contact the plan
administrator.
Taxes on withdrawals A withdrawal is taxable as ordinary income. You do not
pay income taxes on the money put in the plan, so you
have to pay taxes on the money that you take out.
In addition to income tax, any withdrawal or distribution
before age 59-1/2 is subject to a 10% penalty tax,
unless:
- payment is made as a result of total disability or
death,
- payment is made to you in installments over your life
expectancy or the combined life expectancy of you and
your designated beneficiary,
- you retire after age 55, or
- the amount of the withdrawal does not exceed your
deductible medical expenses in the year of withdrawal.
Of course, any after-tax contributions are not subject to
income tax or any penalty tax when withdrawn from the
plan because these contributions were taxed when you
contributed them to the plan.
LOANS
Loans To be sure that the restrictions on withdrawals do not
prevent your using funds in your accounts if you need to,
the plan lets you borrow from your plan accounts.
You do not pay income taxes on the loan, even though you
are receiving the use of money that has not yet been
taxed. From this standpoint, a loan is better than a
withdrawal.
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The amount that you may borrow depends on your vested
account balances. If you obtain a loan, your account
balances will be used as security and you will have to
repay the loan with interest through withholding from
your paycheck each pay period or by personal check or
money order to the plan administrator.
The specific rules for loans, including minimum and
maximum amounts, length of the loan, interest rate and
procedures for applying for a loan, are available from
the plan administrator.
DISTRIBUTIONS
Distributions You will receive the vested amount in your participant
accounts when your employment terminates. Payment will be
made as soon as reasonably possible following your
termination of employment unless you make an election to
postpone payment to a later date.
Vesting You are always fully vested in your savings contributions
account and your rollover account (if any).
You will be fully vested in your employer matching
contributions account and your employer profit sharing
account according to the following schedule:
Number of Vested
Years of Service Percentage
---------------- ----------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
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If your employment with Cadus Pharmaceutical Corporation ends due to retirement after age 65, disability or death, you will be fully vested regardless of your years of service.
Vesting service You earn a year of service for vesting if you are
credited with 1,000 or more hours of service in a plan
year.
If your employment ends before you are fully vested, the
non-vested portion of your account will be forfeited.
However, if you return to employment with us before
having five consecutive one-year breaks, the amount that
was forfeited will be restored to your account.
A one-year break is a plan year when you complete 500 or
fewer hours of service. For this purpose only, hours of
service include (in addition to the hours already
mentioned) hours for time away from work for certain
childbirth or child care reasons; enough hours will be
credited to prevent you from having the first one-year
break that would otherwise occur.
Forfeitures that occur during a plan year will first
provide the matching contribution for that plan year. Any
forfeitures remaining after the matching contribution is
made will be added to the employer's profit sharing
contribution for that year and the total amount will be
allocated to participants entitled to receive a profit
sharing contribution for that year.
Forms of payment You may elect the form of payment in which your
account(s) are paid to you. Payment may be in one of the
following methods:
- one or more payments within one year.
- installment payments over a period you select, which
generally may not be longer than your life expectancy
or the combined life expectancies of you and your
designated beneficiary; other limits may apply in
certain cases.
- purchase an annuity contract providing payments over
your lifetime or the lifetimes of you and your
designated beneficiary.
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Taxes on A distribution to you is taxable as income. Since you did
distributions not pay taxes on money that goes into the plan, you must
pay taxes on the money when it is distributed to you.
In addition to regular income tax, a distribution before
age 59-1/2 may be subject to a 10% penalty tax. See the
section on IN-SERVICE WITHDRAWALS - Taxes on withdrawals
for a summary of when the 10% tax applies.
Of course, any after-tax contributions are not subject
to income tax or any penalty tax when distributed from
the plan because these contributions were taxed when you
contributed them to the plan.
You can defer the taxes on a distribution if you roll the
distribution over to an IRA or another employer's
qualified plan. A rollover must be completed within 60
days of the distribution.
Postponed payment If your vested account balance is greater than $3,500,
you can postpone the payment of your accounts until you
reach age 70-1/2.
Death If you die during your employment with us, you will
become fully vested in your account. Your beneficiary
will receive your full remaining account balance. If you
die after your employment with us ends, your beneficiary
will receive your remaining vested account balance.
Designating your You should designate, in writing, your beneficiary or
beneficiary beneficiaries on a form filed with the plan
administrator. If you are married, your spouse is
automatically your sole beneficiary unless your spouse
consents in writing to the designation of another
beneficiary. This is required by law.
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ADDITIONAL INFORMATION
Non-Assignment of Benefits
Your benefits under this plan may not be assigned, sold or used as collateral, nor in most cases may a creditor attach your account as a means of collecting a debt owed by you. This protects your participant account from the claims of most creditors you may have. However, a court may issue an order requiring that all or part of your account be paid to your spouse or a dependent as alimony or support. The plan would have to obey a proper order.
Claims Review Procedure
If you or your beneficiary do not receive a distribution when due, or you have another claim under the plan, you should file a written claim with the plan administrator. The plan administrator will then check the validity of the claim and take the necessary steps to resolve the problem.
If additional information is necessary to process your claim, you will be told what is needed.
If your claim is denied in whole or in part, you will be notified in writing within a reasonable period of time after receipt of your claim. The notice of denial will include the specific reasons for denial and references to the plan provisions on which the denial was based.
Within 60 days after receiving a denial, you or your authorized representative may appeal the decision by filing a written request for review with the plan administrator. In connection with your appeal, you may review pertinent plan documents and submit issues and comments in writing.
The plan administrator will give a written decision on your appeal after giving it full consideration.
Future of the Plan
We expect to continue the plan indefinitely. However, since future conditions cannot be foreseen, we reserve the right to amend or discontinue the plan. If the plan is ever terminated, you will be fully vested in all amounts credited to your account.
Your Rights Under Federal Law
Congress passed the Employee Retirement Income Security Act of 1974 (ERISA) to make sure that plans are managed in the interest of participants and their beneficiaries. As a participant in this plan, you are entitled to certain rights and protection under ERISA.
ERISA provides that you are entitled to:
- Receive this summary plan description, which explains the major provisions of plan.
- Examine, without charge, all plan documents, including copies of all documents filed with the U.S. Department of Labor, such as detailed annual reports. Consult the plan administrator if you wish to examine a document.
- Obtain copies of all plan documents and other plan information upon written request. We may make a reasonable charge for the copies, which we will tell you about before making your copies.
- Receive a summary of the plan's annual financial report.
- Receive periodic statements of the amount in your account.
In addition to creating rights for participants, ERISA imposes duties upon the people who are responsible for the operation of employee benefit plans. The people who have discretion over a plan's operations, called "fiduciaries" of the plan, have a duty to carry out their responsibilities prudently and in the interests of you and other plan participants and beneficiaries.
No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way for the purpose of preventing you from getting a benefit or for exercising your rights under ERISA.
If your claim for benefits is denied in whole or in part, you will receive a written explanation of the reason for the denial. You have the right to have your claim reviewed and reconsidered.
Under ERISA, there are steps you can take to enforce your rights. You may file suit in a federal court if there is a failure to provide any of the information described above or breach of responsibility by a plan fiduciary. The party being sued may have the right to counter sue. The court decides who pays the legal costs and may require the unsuccessful party to pay all legal costs.
If you have any questions regarding your rights, you should contact the plan administrator. You may also contact an area office of the U.S. Labor Management Services Administration, Department of Labor.
Plan Insurance
Your account under this plan is not insured by the Pension Benefit Guaranty Corporation (PBGC) if the plan should terminate. The PBGC insures only defined benefit types of plans. This plan is a defined contribution type of plan not covered by the PBGC.
DIRECTORY
Employer: Cadus Pharmaceutical Corporation
--------------------------------
180 Varick Street, 9th Floor
----------------------------
New York, NY 10014
------------------
Federal ID Number: 13-3660391
Plan Administrator: The employer is the plan administrator.
The person to contact is:
James S. Rielly
---------------
Cadus Pharmaceutical Corporation
--------------------------------
180 Varick Street, 9th Floor
----------------------------
New York, NY 10014
------------------
(212) 645-3738
--------------
Plan Trustee: James S. Rielly
- ------------- ---------------
Cadus Pharmaceutical Corporation
--------------------------------
180 Varick Street, 9th Floor
----------------------------
New York, NY 10014
------------------
Agent for service The agent for service of legal process is the plan
of legal process: administrator.
In addition, process may be served on the plan
trustee.
Plan Number: 001
---
Plan Year: Plan records are kept on a calendar year.
|
10/93
METLIFE SECURITY INSURANCE COMPANY OF LOUISIANA
METLIFE RETIREPRO(R) PROGRAM
Defined Contribution Basic Plan Document
November, 1994
(C)Copyright 1994, MetLife Security Insurance Company of Louisiana All rights reserved.
TABLE OF CONTENTS
Page
----
INDEX OF TERMS .................................................... vii-viii
ARTICLE 1 INTRODUCTION
- ----------------------
1.1 Establishment of Plan ............................................... 1
1.2 Plan Documents ...................................................... 1
1.3 Paired Plans ........................................................ 1
ARTICLE 2 DEFINITIONS
- ---------------------
2.1 Actual Deferral Percentage ........................................ 1
2.2 Adoption agreement ................................................ 1
2.3 Average Monthly Compensation ...................................... 1
2.4 Beneficiary ....................................................... 1
2.5 Code .............................................................. 1
2.6 Effective Date .................................................... 1
2.7 Elective Deferrals ................................................ 1
2.8 Employee .......................................................... 1
2.9 Employer .......................................................... 2
2.10 ERISA .......................................................... 2
2.1l Excess Aggregate Contributions .................................... 2
2.12 Excess Contributions .............................................. 2
2.13 Excess Elective Deferrals or Excess 401(k) Savings Contributions ... 2
2.14 Level Funding Amount .............................................. 2
2.15 Owner-employee .................................................... 2
2.16 Participant ....................................................... 2
2.17 Plan .............................................................. 2
2.18 Plan administrator ................................................ 2
2.19 Plan Compensation ................................................. 2
2.20 Plan year ......................................................... 3
2.21 Qualified Matching Contributions .................................. 3
2.22 Qualified Non-elective Contributions .............................. 3
2.23 Self-employed individual .......................................... 3
2.24 Shareholder-employee .............................................. 3
2.25 Sponsor ........................................................... 3
2.26 Target Benefit .................................................... 3
2.27 Trust ............................................................. 3
2.28 Trustee ........................................................... 3
2.29 Straight Life Annuity ............................................. 3
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ARTICLE 3 DEFINITIONS AND RULES RELATING TO SERVICE - --------------------------------------------------- PART A: HOURS OF SERVICE METHOD 3A.l Applicability of Part A............................................. 3 3A.2 Year of Service..................................................... 3 3A.3 Hour of Service..................................................... 3 3A.4 One-Year Break in Service........................................... 4 3A.5 Employment Years Defined............................................ 4 3A.6 Eligibility Computation Period...................................... 4 3A.7 Vesting Computation Period.......................................... 4 3A.8 Counting Years of Service for Participation......................... 4 3A.9 Years of Service for Vesting........................................ 4 3A.10 Service With Other Organizations.................................... 5 PART B: ELAPSED TIME METHOD 3B.1 Applicability of Part B............................................. 5 3B.2 Service............................................................. 5 3B.3 Definitions Relating to Service .................................... 5 3B.4 Certain Service Before Eligibility Disregarded...................... 5 3B.5 Service for Vesting................................................. 5 3B.6 Service With Other Organizations.................................... 6 ARTICLE 4 PARTICIPATION - ----------------------- 4.1 Eligible Employees.................................................. 6 4.2 Age and Service Requirements........................................ 6 4.3 Participation....................................................... 6 4.4 Termination of Participation........................................ 6 4.5 Re-entry of Former Participant...................................... 6 4.6 Transfers........................................................... 6 |
ARTICLE 5 EMPLOYEE 40l(k) SAVINGS CONTRIBUTIONS:
- ------------------------------------------------
AVERAGE DEFERRAL PERCENTAGE TEST
--------------------------------
5.1 Eligibility......................................................... 7
5.2 Limits on Amount.................................................... 7
5.3 Procedures.......................................................... 7
5.4 Collection of 401(k) Savings Contributions.......................... 7
5.5 Savings Contributions Account....................................... 7
5.6 401(k) Limits....................................................... 7
5.7 Deferral Percentage ............................................... 8
5.8 Higher and Lower Paid Groups Defined .............................. 9
5.9 Monitoring Participants' Deferral Percentages; Adjustments.......... 9
5.10 Treatment of Participant Who Reaches $7,000 Limit................... 10
ARTICLE 6 AFTER-TAX EMPLOYEE SAVINGS CONTRIBUTIONS; AVERAGE
- -----------------------------------------------------------
CONTRIBUTION PERCENTAGE TEST
----------------------------
6.1 Eligibility......................................................... 11
6.2 Limits on Amount.................................................... 11
6.3 Procedures; Plan Administrator Rules................................ 11
6.4 Collection of After-Tax Employee Contributions...................... 11
6.5 After-Tax Employee Contributions Account .......................... 11
6.6 401(m) Limits....................................................... 11
6.7 Contribution Percentage Defined..................................... 11
6.8 Special Rules....................................................... 12
6.9 Additional Limits for Plans Subject to Both 401(k) and 401(m) Limits.12
ARTICLE 7 ROLLOVERS AND DEDUCTIBLE EMPLOYEE CONTRIBUTIONS
- ------------------------------------------------------------
7.1 Rollover Contributions.............................................. 13
7.2 Qualified Voluntary Employee Contributions.......................... 13
7.3 Withdrawals......................................................... 13
ARTICLE 8 EMPLOYER CONTRIBUTIONS; AMOUNT AND ALLOCATION
- ---------------------------------------------------------
8.1 Amount of Employer Contribution..................................... 14
8.2 Profit-Sharing Plans................................................ 14
8.3 Money Purchase Pension Plans........................................ 14
8.4 Target Benefit Plans................................................ 15
8.5 Employer Matching Contributions..................................... 15
8.6 Persons Entitled to Share in Allocations............................ 16
8.7 Allocation Rules.................................................... 16
8.8 Determination of Level Funding Amount............................... 17
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ARTICLE 9 BENEFITS UPON RETIREMENT OR DISABILITY
- ------------------------------------------------
9.1 Retirement Dates.................................................... 18
9.2 Disability Retirement............................................... 19
9.3 Retirement Benefits................................................. 19
9.4 Method of Payment................................................... 19
9.5 Married Participants................................................ 19
9.6 Unmarried Participants.............................................. 20
9.6A. Direct Rollover Requirements........................................ 20
9.7 Distribution Requirements........................................... 21
9.8 Required Beginning Date............................................. 22
9.9 Transitional Rule................................................... 22
9.10 Date Benefit Payments Begin......................................... 22
9.11 Annuities Nontransferable ......................................... 22
ARTICLE 10 BENEFITS UPON DEATH
- ------------------------------
10.1 Benefits upon Death................................................. 22
10.2 Method of Payment................................................... 23
10.3 Qualified Preretirement Survivor Annuity............................ 23
10.4 Limitation on Installment or Annuity Payment of Death Benefits...... 24
10.5 Beneficiary......................................................... 25
10.6 Safe Harbor Rules................................................... 25
10.7 Transitional Rules.................................................. 25
ARTICLE 11 TERMINATION OF EMPLOYMENT AND VESTED INTEREST
- --------------------------------------------------------
11.1 Vested Interest in Accrued Benefit.................................. 26
11.2 Changes in Vesting Schedule......................................... 26
11.3 Payment of Vested Interest.......................................... 26
11.4 Forfeiture of Non-Vested Interest................................... 26
11.5 Protections Upon Resumption of Employment........................... 26
11.6 Calculating Vested Interest After Account Distribution.............. 26
ARTICLE 12 IN-SERVICE DISTRIBUTIONS AND WITHDRAWALS; LOANS
- ----------------------------------------------------------
12.1 Withdrawal of After-Tax Contributions............................... 27
12.2 In-Service Withdrawals from Profit Sharing Plans .................. 27
12.3 In-Service Withdrawals from 401(k) plans .......................... 27
12.4 In-Service Withdrawals from Money Purchase Plan or
Target Benefit Plan.............................................. 28
12.5 Loans ............................................................. 28
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ARTICLE 13 MAXIMUM LIMITATIONS ON ALLOCATIONS
13.1 Section 415 Definitions............................................. 29
13.2 No Participation in Other Qualified Plans........................... 31
13.3 Participation in Other Qualified Master or
Prototype Defined Contribution Plans.............................. 31
13.4 Participation In Another Qualified Plan, Other Than Master or
Prototype Plans................................................... 31
13.5 Estimated Limitation................................................ 31
13.6 Apportionment Between Plans......................................... 31
13.7 Excess Amounts...................................................... 32
13.8 Defined Benefit and Defined Contribution Plan....................... 32
ARTICLE 14 TOP-HEAVY PROVISIONS
- -------------------------------
14.1 Application of Article.............................................. 32
14.2 Top-Heavy Definitions............................................... 32
14.3 Minimum Allocation.................................................. 33
14.4 Apportionment of Minimum Benefits Between Multiple Plans............ 33
14.5 Minimum Vesting Schedule............................................ 33
14.6 Top Heavy Adjustments in Section 415 Fractions...................... 33
14.7 Additional Provisions For Paired Defined Contribution
and Defined Benefit Plans......................................... 34
ARTICLE 15 ACCOUNTS AND INVESTMENTS
- -----------------------------------
15.1 Separate Accounts................................................... 34
15.2 Investment Media; Participant Investment Directions................. 34
15.3 Rules for Exercise of Investment Options............................ 35
15.4 Segregated Accounts................................................. 35
15.5 Life Insurance Contracts............................................ 35
15.6 Mutual Fund Shares.................................................. 35
15.7 Expenses............................................................ 36
ARTICLE 16 ADMINISTRATION OF THE PLAN
- --------------------------------------
16.1 Plan Administrator.................................................. 36
16.2 Administration of Plan.............................................. 36
16.3 Reporting and Disclosure............................................ 36
16.4 Records............................................................. 36
16.5 Compensation and Expenses........................................... 36
16.6 Claims Procedure.................................................... 37
16.7 More than One Employer.............................................. 37
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ARTICLE 17 AMENDMENT, TERMINATION OR MERGER OF PLAN - ---------------------------------------------------- 17.l Amendment by Sponsor................................................ 37 17.2 Amendment by Employer............................................... 37 17.3 Restrictions on Amendment........................................... 37 17.4 Termination of Plan................................................. 38 17.5 Disposition and Termination of Trust................................ 38 17.6 Merger of Plans..................................................... 38 ARTICLE 18 TRANSFERS FROM OR TO OTHER QUALIFIED PLANS - ------------------------------------------------------- 18.1 Transfers from Another Plan of the Employer.......................... 38 18.2 Transfers to Other Plans............................................. 38 ARTICLE 19 MISCELLANEOUS. 19.1 Prohibited Diversion................................................. 38 19.2 Failure to Attain or Retain Qualification............................ 38 19.3 Nonalienation........................................................ 38 19.4 Qualified Domestic Relations Orders.................................. 38 19.5 Limitation on Rights Created by Plan................................. 39 19.6 Allocation of Responsibilities....................................... 39 19.7 Return of Contributions.............................................. 39 19.8 Current Address of Payee............................................. 39 19.9 Controlled Group..................................................... 39 19.10 Affiliated Service Groups............................................ 39 19.11 Other Aggregated Groups.............................................. 39 19.12 Leased Employees..................................................... 39 19.13 Control of Trades or Businesses by Owner Employee.................... 39 19.14 Application of Plan's Terms.......................................... 40 19.15 Rules of Construction................................................ 40 19.16 Governing Law........................................................ 40 19.17 Payment for Minor or Incompetent..................................... 40 |
The items listed below are defined, explained or clarified in the plan sections or articles indicated.
Adoption agreement......................................................... 2.1 Allocation rules........................................................... 8.7 Annual additions....................................................... 13.1(a) Beneficiary.......................................................... 2.2, 10.5 Code....................................................................... 2.3 Claims procedure.......................................................... 16.6 Compensation for Purposes of Code Section 415.......................... 13.1(b) (See also "plan compensation") Contribution percentage.................................................... 6.7 Deferral percentage........................................................ 5.7 Eligible employee.......................................................... 4.1 Employee................................................................... 2.4 Employer.......................................................... 2.5, 13.1(c) ERISA..................................................................... 2.10 Excess 401(k) savings contributions........................................ 5.9 Financial hardship............................................ 12.2(b), 12.3(c) 401(k) limits................................................... 5.2, 5.6, 5.9 401(m) limits................................................... 6.2, 6.6, 6.9 Hour of service........................................................... 3A.3 Higher paid group....................................................... 5.8(a) Limitation year........................................................ 13.1(h) Loans..................................................................... 12.5 Lower paid group........................................................ 5.8(b) Method of payment.................................................... 9.4, 10.2 |
One-year break in service................................................. 3A.4 Owner-employee............................................................ 2.15 Paired plans............................................................... 1.3 Participant............................................................... 2.16 Participation.................................................. Article IV, 4.3 Plan...................................................................... 2.17 Plan administrator........................................... Article XVI, 2.18 Plan compensation......................................................... 2.19 Plan service............................................... Article III, 8.7(e) Plan year................................................................. 2.13 Qualified domestic relations orders....................................... 20.4 Qualified joint and survivor annuity.................................... 9.5(a) Qualified voluntary employee contributions................................. 7.2 Retirement dates...................................................... 9.1, 9.2 Rollover contributions..................................................... 7.1 Segregated accounts....................................................... 15.4 Self-employed individual.................................................. 2.23 Shareholder-employee...................................................... 2.24 Sponsor................................................................... 2.25 Top-heavy definitions..................................................... 14.2 Trust..................................................................... 2.26 Trustee................................................................... 2.27 Vested interest............................................... 11.1, 3A.9, 3B.5 Withdrawals................................................... Article XII, 7.3 Year of service........................................................... 3A.2 |
ARTICLE 1
INTRODUCTION
1.1 ESTABLISMENT OF PLAN. The employer established this plan under the name specified in the adoption agreement.
1.2 PLAN DOCUMENTS. The plan consists of this defined contribution basic plan document, the adoption agreement executed by the employer, and the related trust instrument, as each may be amended from time to time.
In this basic plan document, cross references that are arabic numbers are to an article or section of this document, and cross references that begin with a capital letter are to the adoption agreement.
1.3 PAIRED PLANS.
(a) Two or more plans established using this basic plan document (or the
sponsor's defined benefit basic plan document) and standardized adoption
agreements may be paired plans. The Code requirements for qualification of
multiple plans will automatically be satisfied for paired plans, and the
employer who complies with the plans' provisions may rely upon their
qualification without obtaining individual determination letters from the
Internal Revenue Service.
(b) The requirements for paired plans are as follows:
(i) Each plan uses one of the sponsor's pairable standardized adoption
agreements. The following are pairable standardized adoption agreements:
adoption agreements numbered (a) 001,002, and 003, (b) 007 and 008, (c) 011,
012, 013 and 014, (d) 019 and 020 under this basic plan document; and
adoption agreement numbered 002 and 004 under the defined benefit basic plan
document (basic plan document 02).
(ii) Only one of such plans is (a) an integrated profit sharing plan,
(b) a non-integrated profit sharing plan, (c) a money purchase pension plan,
or (d) a defined benefit pension plan.
(iii) Only one of such plans is integrated with Social Security.
(iv) Each adoption agreement specifies the employer's other paired plan(s).
ARTICLE 2
DEFINITIONS
A word or term defined in this article (or in any other article) will have the same meaning throughout the plan unless the context clearly requires a different meaning.
2.1 ACTUAL DEFERRAL PERCENTAGE (ADP) shall mean, for a specified group of
participants for a Plan Year, the average of the ratios (calculated
separately for each participant in such group) of (1) the amount of employer
contributions actually paid over to the trust on behalf of such participant
for the plan year to (2) the participant's compensation for such Plan Year
(limited to the portion of the plan year in which an employee was a
participant, unless otherwise provied in the adoption agreement). Employer
contributions on behalf of any participant shall include: (1) any elective
deferrals made pursuant to the participant's deferral election, including
excess elective deferrals of members of the higher paid group, but exclusing
(a) Excess Elective Deferrals of the lower paid goup that arise solely from
elective deferrals made under the plan or plans of this employer and (b)
elective deferrals that are taken into account in the contribution percentage
test (provided the ADP test is satisfied both with and without exclusion of
these elective deferrals); and (2) at the election of the employer, qualified
non-
elective contributions and qualified matching contributions. For purposes of computing actual deferral percentages, an employee who would be a participant but for the failure to make elective deferrals shall be treated as a participant on whose behalf no elective deferrals are made.
2.2 ADOPTION AGREEMENT means the MetLife Security Insurance Company of Louisiana MetLife RetirePro Program adoption agreement executed by the employer to establish or amend the employer's plan and its related trust and to specify optional provisions as part of the employer's plan.
2.3 AVERAGE MONTHLY COMPENSATION means the monthly Plan Compensation of a Participant averaged over the period specified in the Adoption Agreement.
2.4 BENEFICIARY means an individual or entity designated by a participant or beneficiary, or by the plan, to receive any benefit payable upon the death of the participant or beneficiary.
2.5 CODE means the Internal Revenue Code of 1986, as amended.
2.6 EFFECTIVE DATE shall mean the date specified in the adoption agreement, but
no earlier than the first day of the plan year in which the adoption agreement
is executed, except as otherwise provided in this section. In the event that
this plan is an amended plan, the effective date of the following provisions
shall be determined as follows: (a) Section 8.2(b) is effective on the later of
the first day of the plan year beginning in 1986 or the initial effective date
of the employer's adoption of this plan; (b) Sections 2.11, 2.12, 2.13, 2.21,
2.22, 5.6, 5.7, 5.8, 5.9, 5.10, 6.6, 6.7, and 6.8 are effective on the later of
the first day of the plan year beginning in 1987 or the initial effective date
of the employer's adoption of the plan; (c) Sections 6.9, 8.6(f), 8.7(d) and
11.2 are effective on the later of the first day of the plan year beginning in
1989 or the initial effective date of the employer's adoption of the plan; and
(d) paragraphs (1) and (2) of section 13.1(b) are effective for plan years
beginning after September 19, 1991. In addition, if a section of the plan or the
adoption agreement specifies an effective date, such provision shall be
effective on the later of the date specified in such section or the initial
effective date of the employer's adoption of the plan.
2.7 ELECTIVE DEFERRALS (or 401(k) savings contributions) shall mean any employer
contributions made to the plan at the election of the participant, in lieu of
cash compensation, and shall include contributions made pursuant to a salary
reduction agreement or other deferral mechanism. With respect to any taxable
year, a participant's Elective Deferral is the sum of all employer contributions
made on behalf of such participant pursuant to an election to defer under any
qualified CODA as described in section 401(k) of the Code, any simplified
employee pension cash or deferred arrangement as described in section
402(h)(1)(B), any eligible deferred compensation plan under section 457, any
plan as described under section 501(c)(18), and any employer contributions made
on the behalf of a participant for the purchase of an annuity contract under
section 403(b) pursuant to a salary reduction agreement. Elective Deferrals
shall not include any deferrals properly distributed as Excess Amounts.
2.8 EMPLOYEE means (i) a person employed by the employer and, (ii) an employee
of any other employer required to be aggregated under Code Section 414(b), (c),
(m) or (o) with the employer maintaining the plan, or (iii) an individual
described in Section 19.12 who is deemed to be an employee of any such employer
under Code Sections 414(n) or 414(o). Employee includes a self-employed
individual.
2.9 EMPLOYER means the employer named in Part A of the adoption agreement and any other employer which has joined the plan.
No employer may adopt a standardized plan unless each related employer that is part of the same controlled group (as defined in Section 19.9) or the same affiliated service group (as defined in Section 19.10), or that is aggregated under Section 19.11, with the employer designated in Part A of the adoption agreement joins the plan. The failure of any such related employer to join the plan will cause it to be considered a nonstandardized plan so that the employers may not rely upon the plan's qualification under Code Section 401(a) unless they obtain an individual determination letter to such effect from the Internal Revenue Service.
In this plan, the term employer will refer to the employer named in Part A of the adoption agreement, to each adopting employer individually, or to all employers in the aggregate, as the context may require. General rules of construction appear in Section 16.7, "More Than One Employer.'
2.10 ERISA means the Employee Retirement Income Security Act of 1974, as amended.
2.11 EXCESS AGGREGATE CONTRIBUTIONS shall mean, with respect to Plan Year, the excess of:
(a) The aggregate Contribution Percentage Amounts taken into account in computing the numerator of the Contribution Percentage actually made on behalf of Higher Paid Group for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by the ACP test (determined by reducing contributions made on behalf of members of the Higher Paid Group in order of their Contribution Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining Excess Elective Deferrals pursuant to section 5.9(b) and then determining Excess Contributions pusuant to section 5.9(a).
2.12 EXCESS CONTRIBUTIONS shall mean, with respect to any Plan Year, the excess of:
(a) The aggregate amount of employer contributions actually taken into account in computing the ADP of Higher Paid Group for such Plan Year, over
(b) The maximum amount of such contributions permitted by the ADP test (determined by reducing contributions made on behalf of Higher Paid Group in order of the ADPs, beginning with the highest of such percentages).
2.13 EXCESS ELECTIVE DEFERRALS OR EXCESS 401(K) SAVINGS CONTRIBUTIONS shall mean those Elective Deferrals or 401(k) savings contributions that are includible in a participant's gross income under section 402(g) of the Code to the extent such participant's Elective Deferrals or 401(k) savings contributions for a taxable year exceed the dollar limitation under such Code section. Excess Elective Deferrals or Excess 401(k) Savings Contributions shall be treated as annual additions under the plan unless such amounts are distributed no later than the first April 15 following the close of the participant's taxable year.
2.14 LEVEL FUNDING AMOUNT means that level annual amount necessary to fund a Participant's Target Benefit, using the factors specified in the Adoption Agreement.
2.15 OWNER-EMPLOYEE means an individual who is the sole proprietor (if the employer is a proprietorship), or who is a partner owning more than 10 percent of either the capital or profits interest (if the employer is a partnership).
2.16 PARTICIPANT means an employee who has become a participant in the plan and whose participation has not ended.
A Participant is treated as benefiting under the Plan for any Plan Year during which the Participant received or is deemed to receive an allocation in accordance with section 1.410(b)-3(a).
2.17 PLAN means the employer's plan as set forth in this MetLife Security Insurance Company of Louisiana basic plan document and the adoption agreement signed by the employer, including all amendments to either document.
2.18 PLAN ADMINISTRATOR means the person or persons designated in the adoption agreement as plan administrator to control and manage the operation and administration of the employer's plan as provided in Article 16.
2.19 PLAN COMPENSATION.
(a) GENERAL DEFINITION. A participant's plan compensation for a plan year means compensation as that term is defined in Section 13.1(b) of the Plan, as modified in the adoption agreement. Solely for purposes of determining the amount of a participant's 401(k) savings contributions, after-tax savings contributions and their related matching contributions, plan compensation shall include employer contributions made pursuant to a salary reduction agreement or other arrangement which aare not includible in the gross income of the participant under Code Sections 125, 402(e)(3), 402(h)(1)(B) or 403(b). Compensation shall include only that compensation which is actually paid to the participant during the determination period. Except as provided elsewhere in the Plan, the determination period shall be the period elected by the Employer in the Adoption Agreement. If the Employer makes no election, the determination period shall be the Plan Year. For a self-employed individual, plan compensation means his earned income.
Notwithstanding the above, except with respect to determining the amount of a participant's 401(k) savings contributions, after-tax savings contributions and their related matching contributions, Compensation shall include any amount which is contributed by the Employer pursuant to a salary reduction agreement or other arrangement and which is not includible in the gross income of the Employee under sections 125, 402(e)(3), 402(h)(1)(B), or 403(b) of the Code, (if elected by the Employer in the Adoption Agreement).
For purposes of this subsection, earned income means net earnings from self employment in the trade or business with respect to which the plan is established, for which the personal services of the individual are a material income producing factor. Net earnings will be determined without regard to items excluded from gross income and the deductions allocable to such items. Net earnings are reduced by contributions by the emmployer to a qualified plan to the extent deductible under Code Section 404. Net earnings shall be determined with regard to the deduction allowed to the taxpayer by Code Section 164(f) for taxable years beginning after December 31, 1989.
For years beginning on or after January 1, 1989, and before January 1, 1994, the annual compensation of each participant taken into account for determing all benefits provided under the plan for any year shall not exceed $200,000. This limitation shall be adjusted by the Secretary at the same time and in the same manner
as under section 415(d) of the Code, except that the dollar increase in effect on January 1 of any calendar year is effective for years beginning in such calendar year and the first adjustment to the $200,000 limitation is effected on January 1, 1990.
For Plan Years beginning on or after January 1, 1994, the annual compensation of each Participant taken into account for determining all benefits provided under the Plan for any Plan Year shall not exceed $150,000, as adjusted for increases in the cost-of-living in accordance with section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any determination period beginning in such calendar year.
If the determination period consists of fewer than 12 months, the annual compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short plan year, and the denominator of which is 12.
In determining the compensation of a participant for purposes of this limitation, the rules of section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family'' shall include only the spouse of the Participant and any lineal decendents of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the adjusted annual compensation limitation is exceeded, then (except for purposes of determining the portion of compensation up to the integration level if this plan provides for permitted disparity), the limitation shall be prorated among such affected individuals in proportion to each such individual's compensation as determined under this section prior to the application of this limitation. If compensation for any prior determination period is taken into account in determining an employee's allocations or benefits for the current Plan Year, the compensation for such prior year is subject to the applicable annual compensation limit in effect for that prior year. For this purpose, for years beginning before January 1, 1990, the applicable annual compensation limit is $200,000. In addition, in determining allocations in Plan Years beginning on or after January 1, 1994, the annual compensation limit in effect for determination periods beginning before that date is $150,000.
(b) EXCEPTION. For purposes of Article 13 (Code Section 415 limits), the foregoing definition of plan compensation will not apply (see Section 13.1(b) for the applicable definition).
2.20 PLAN YEAR means the calendar year unless another plan year is specified in the adoption agreement.
2.21 QUALIFIED MATCHING CONTRIBUTIONS shall mean employer matching contributions which are subject to the distribution and nonforfeitability requirements of Code Section 401(k) when made.
2.22 QUALIFIED NON-ELECTIVE CONTRIBUTIONS shall mean contributions (other than Matching Contributions or Qualified Matching Contributions) made by the empolyer and allocated to participants' accounts that the participants may not elect to receive in cash until distributed from the plan; that are nonforfeitable when made; and that are distributable only in accordance with the distribution provisions that are applicable to Elective Deferrals and Qualified Matching Contributions.
2.23 SELF-EMPLOYED INDIVIDUAL means an individual who has earned income for the taxable year from the trade or business for which the plan is established (or who would have had earned income but for the fact that the trade or business had no net profits for the taxable year).
2.24 SHAREHOLDER-EMPLOYEE in any year means an employee or officer of an S corporation (as defined in Code Section 1361(a)) who owns, directly or indirectly, more than five percent of the outstanding stock of the employer during such year.
2.25 SPONSOR means MetLife Security Insurance Company of Louisiana or its successor.
2.26 TARGET BENEFIT means the monthly benefit set forth in the Adoption Agreement, which, when annualized, shall be the basis for calculating the Level Funding Amount, but may be more or less than the benefit actually payable upon retirement, death, disability, or termination of employment.
2.27 TRUST means the trust established under the instrument entitled MetLife RetirePro Program Trust Agreement for the payment of the benefits provided by the plan or such custodial accounts or annuity contracts which meet the requirements of Code Section 401(f).
2.28 TRUSTEE means the trustee named in the trust agreement to serve as trustee under the plan, or any successor trustee serving under the Trust Agreement.
2.29 STRAIGHT LIFE ANNUITY means an annuity payable in equal installments for the life of the Participant and that terminates upon the Participant's death.
ARTICLE 3
DEFINITIONS AND RULES RELATING TO SERVICE
PART A: HOURS OF SERVICE METHOD
3A.1 APPLICABILITY OF PART A. The definitions and rules in this Part A of Article 3 will apply unless in the adoption agreement the employer elected to have employees' service determined entirely or partly using the elapsed time method.
3A.2 YEAR OF SERVICE. A year of service of an employee is a 12 consecutive month computation period in which he completes at least 1,000 hours of service, or a smaller number of hours specified in the adoption agreement.
3A.3 HOUR OF SERVICE.
(a) Except as provided in subsection (b) below, an employee's hours of service will be counted by giving the employee credit for:
(i) each hour for which he is paid, or entitled to payment, for the performance of duties for the employer. These hours will be credited to him for the computation period in which the duties are performed; and
(ii) each hour for which he is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed (regardless of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence. No more than 501 hours of service will be credited under this subsection (ii) for any single continuous period (whether or not such period occurs within a single computation period). Hours under this subsection (ii) will he calculated and credited under Department of Labor Regulations, 29 C.F.R. $2503.200-2(b) and (c), which are incorporated herein by this reference; and
(iii) each hour for which back pay, regardless of mitigation of damages, is either awarded or agreed to by the employer. The same hours of service will not be credited both under subsection (i) or subsection (ii), as the case may be, and under this subsection (iii). These hours will be credited to the employee for the
computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made.
(iv) In addition to hours credited to an employee under subsections (i) through (iii) above, he will be credited with the number of hours (not exceeding 40 for a full week or a pro rata portion of 40 for a partial week) he normally would have worked except for the fact that he was absent on one of the following types of unpaid absence: (A) leave of absence for a period authorized by the employer under a leave policy applied uniformly to all employees, provided he returns to service with the employer at or before the expiration of such period; or (B) leave of absence for service in the armed forces of the United States, provided he returns to service with the employer within the period during which his reemployment rights are protected by law.
(v) Solely for purposes of determining whether a one-year break in service, as defined in section 3A.4, has occurred in a computation period, an employee who is absent from work for maternity or paternity reasons will receive credit for the hours of service which would otherwise have been credited to such employee but for such absence, (or in any case in which such hours cannot be determined, eight hours of service per day of such absence). For purposes of this subsection (v), an absence from work for maternity or paternity reasons means an absence (A) by reason of the pregnancy of the employee, (B) by reason of a birth of a child of the employee, (C) by reason of the placement of a child with the employee in connection with the employee's adoption of such child, or (D) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this subsection (v) will be credited (A) in the computation period in which the absence begins if th4 crediting is necessary to prevent a one-year break in service in that period, or (B) in all other cases, in the following computation period if necessary to prevent a one-year break in service in that computation period.
(b) If the employer so elects in the adoption agreement, an employee will be credited with the number of hours of service specified in this subsection (b) for a period if the employee would have been credited with at least one hour of service during such period under subsection (a) above:
(i) 10 hours of service per day;
(ii) 45 hours of service per week;
(iii) 95 hours of service per semi-monthly payroll period; or
(iv) 190 hours of service per month.
Only one such method may be elected and it must apply to all employees.
3A.4 ONE-YEAR BREAK IN SERVICE. A one-year break in service of an employee is
a 12-consecutive month computation period during which he completes one-half
or fewer of the number of hours of service required for a year of service under
Section 3A.2. The 12-month computation period will be the same period used to
determine a year of service under Section 3A.6 or Section 3A.7.
3A.5 EMPLOYMENT YEARS DEFINED. Employment years of an employee are 12-consecutive month periods beginning on the date he first completes an hour of service and on subsequent anniversaries of such date.
3A.6 ELIGIBILITY COMPUTATION PERIOD. For puposes of determining whether an employee has completed the service requirement (if any) for participation:
(a) The initial computation period will be his first employment year.
(b) Subsequent computation periods will be either (i) his subsequent employment years, or (ii) if the adoption agreement so specifies, plan years beginning with the plan year that starts during his first employment year regardless of whether the employee is entitled to be credited with 1,000 hours of service during his first employment year. For puposes of clause (ii) of the preceding sentence, an employee who is credited with 1,000 hours of service in both his first employment year and the plan year that starts during his first employment year will (unless his employment year and the plan year coincide) be credited with two years of service for purposes of eligibility to participate.
(c) If an employee has a one-year break in service, his 12-consecutive month eligibility computation periods will begin with his first employment year after such break. If necessary for purposes of measuring years of service for participation, subsequent 12-consecutive month computation periods will be either (i) if the adoption agreement so specifies under subsection (b)(i) above, subsequent employment years, or otherwise (ii) plan years beginning with the plan year which begins during his first employment year after such break.
3A.7 VESTING COMPUTATION PERIOD. For purposes of computing an employee's nonforfeitable right to his employer contributions account, an employee's computation periods will be either (a) plan years, or (b) if the adoption agreement so specifies, employment years.
3A.8 COUNTING YEARS OF SERVICE FOR PARTICIPATION. All of an employee's years of service with the employer are counted toward meeting the plan's participation eligibility requirement (if any), except that, if the plan provides for 100% vesting after two years or less of service, service before a one-year break in service which occurs before the employee satisfies the plan's requirement for eligibility will be disregarded unless the adoption agreement specifies otherwise. However, the preceding sentence will not apply if the employer's plan is a 401(k) plan.
If the service requirement to become a participant as specified in the adoption agreement includes a fractional year, an employee will not be required to complete any minimum number of hours of service to receive credit for such fractional year.
3A.9 YEARS OF SERVICE FOR VESTING. For purposes of determining a participant's vested percentage, all of his years of service will be counted, except that, if the adoption agreement specifically so provides, the following years of service will not be counted:
(a) years of service completed before age 18;
(b) years of service before the employer maintained this plan or a predecessor plan.
A plan is a predecessor plan if it was terminated on or after the date it was required to comply with ERISA and within five years before or after the effective date of this plan. A plan is not treated as a predecessor plan with respect to an employee unless he was a participant in such plan.
3A.10 SERVICE WITH OTHER ORGANIZATIONS.
(a) To determine whether an employee is a participant and to determine his
vested percentage, he will receive credit for hours of service under Section
3A.3 with the following entities (or as a leased employee under Code Section
414(n)) or Code section 414(o) as if those hours of service were credited to the
employee for service with the employer: any member of an affiliated service
group (under Code Section 414(m))including the employer, any corporation which
is included in a controlled group of corporations (under Code Section 414(b))
with the employer or any unincorporated trade or business which is under common
control (under Code Section 414(c)) with the employer, and any entity required
to be aggregated with the employer under Code Section 414(o). Service credited
under this subsection (a) shall be limited to the period that the other entities
were related to the employer in the manner described in the applicable Code
section, unless the employer has elected in the adoption agreement to recognize
service with any such entity for any period prior to the time such relationship
commenced.
(b) If the employer maintains a plan of a predecessor employer, service with the predecessor employer will be treated as service with the employer.
(c) If not treated as service with the employer under subsection (b) above, service with any entity specifically so designated in the adoption agreement will be treated as service with the employer.
PART B: ELAPSED TIME METHOD
3B.1 APPLICABILITY OF PART B. If in the MetLife Security Insurance Company of Louisiana MetLife RetirePro Program adoption agreement the employer elected to have employees' service determined entirely or partly using the elapsed time method, then to that extent the definitions and rules in this Part B will apply.
3B.2 SERVICE.
(a) IN GENERAL. Service of an employee includes all of the following:
(i) any period of his employment, whether or not continuous;
(ii) for a reemployed employee, any period of severance provided that his reemployment date occurs within one year after his severance date.
(b) YEARS OF SERVICE. To determine an employee's years of plan service, all of his plan service will be aggregated and each 365 days of such aggregated plan service will constitute one year of plan service. If any provision of the plan calls for completion of a fractional year of plan service, such fraction of 365 days of his aggregated plan service will satisfy the provision; for example, if one-half year of plan service is required, then such requirement will be met when the employee's aggregated plan service equals 183 days.
3B.3 DEFINITIONS RELATING TO SERVICE.
(a) EMPLOYMENT. An employee's employment means his service as an employee, beginning on his employment date or reemployment date and ending on his severance date.
(b) EMPLOYMENT DATE. An employee's employment date or reemployment date is the date on which he first completes an hour of service.
(c) REEMPLOYMENT DATE. In the case of an employee who Section 3B.2(a) (ii), the reemployment date is the date on which he first completes an hour of service after such period of severance.
(d) PERIOD OF SEVERANCE. A period of severance of an employee means a period beginning on his severance date and, if applicable, ending on his reemployment date.
In the case of an employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence will not constitute a period of severance. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the employee, (2) by reason of the birth of a child of the employee, (3) by reason of the placement of a child with the employee in connection with the employee's adoption of such child, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement.
Each employee will share in employer contributions for the period beginning on the date the employee commences participation under the plan and ending on the date on which such employee severs employment with the employer or is no longer a member of an eligible class of employees.
If the employer is a member of an affiliated service group (under section
414(m)), a controlled group of corporations (under section 414(b)), a group of
trades or businesses under common control (under section 414(c)) or any other
entity required to be aggregated with the employer pursuant to section 414(o)
and the regulations thereunder, service will be credited for any employment for
any period of time for any other member of such group. Service will also be
credited for any individual required under section 414(n) or section 414(o) and
the regulations thereunder to be considered an employee of any employer
aggregated under section 414(b), (c), or (m).
(e) SEVERANCE DATE. An employee's severance date is the earlier of:
(i) the date on which he quits, retires, is discharged or dies, or
(ii) the first anniversary of the first day of a period during which he is absent (with or without compensation) from performing duties for the employer for any reason other than quit, retirement, discharge or death, such as vacation, holiday, sickness, leave of absence or layoff.
(f) HOUR OF SERVICE. For purposes of this Part B of Article 3, an hour of service is an hour for which the employee is paid or entitled to payment for the performance of duties for the employer.
3B.4 CERTAIN SERVICE BEFORE ELIGIBILITY DISREGARDED. If the plan provides for 100% vesting after two years or less of plan service, plan service will be disregarded if it was completed before a period of severance of one year or more which occurs before the employee satisfied the plan's service requirement for eligibility. However, this section does not apply if the employer's plan is a 401(k) plan.
3B.5 SERVICE FOR VESTING. For purposes of determining a participant's vested percentage, all of his service will be counted except that, if the adoption agreement so provides the following service will not be counted:
(a) service completed before age 18;
(b) service before the employer maintained this plan or a predecessor plan.
A plan is a predecessor plan if it was terminated on or after the date it was required to comply with ERISA and within five years before or after the effective date of this plan. a plan is not treated as a predecessor plan with respect to an employee unless he was a participant in such plan.
3B.6 SERVICE WITH OTHER ORGANIZATIONS.
(a) To determine whether an employee is a participant and to determine his
vested percentage, service with the following entities (or as a leased employee
under code Section 414(n)) will count as service with the employer: any member
of an affiliated service group (under Code Section 414(m)), any corporation
which is included in a controlled group of corporations (under Section Code
414(b)) with the employer, any unincorporated trade or business which is under
common control (under Section Code 414(c)) with the employer, and any entity
aggregated with the employer under Code Section 414(o)). Service credited under
this subsection (a) shall be limited to the period that the other entities were
related to the employer in the manner described in the applicable Code section,
unless the employer has elected in the adoption agreement to recognize service
with any such entity for any period prior to the time such relationship
commenced.
(b) If the employer maintains a plan of a predecessor employer, service with the predecessor employer will be treated as service with the employer.
(c) If not treated as plan service with the employer under subsection (b) above, service with any entity specifically so designated in the adoption agreement will be treated as service with the employer.
ARTICLE 4
PARTICIPATION
4.1 ELIGIBLE EMPLOYEES. Each employee is eligible to participate in the plan (an eligible employee) unless he is not eligible. An employee is not eligible (a non-eligible employee) if:
(a) he is employed in a unit covered by a collective bargaining agreement between the employer and employee representatives where retirement benefits were the subject of good faith bargaining with the employer and the agreement does not call for his inclusion in the plan and if less than two percent of the employees of the employer who are covered pursuant to that agreement are professionals as defined in section 1.410(b)9(g) of the proposed regulations; the term "employee representatives" does not include any organization more than half of whose members are employees who are owners, officers or executives of the employer; or
(b) he is a nonresident alien and receives no compensation from the employer which constitutes income from sources within the United State; or
(c) he is a member of a class of employees explicitly excluded from eligibility in the adoption agreement; or
(d) he is an owner-employee explicitly excluded from eligibility in the adoption agreement; or
(e) he terminates employment during the plan year with not more than 500 hours of service and is not employed as of the last day of the plan year.
4.2 AGE AND SERVICE REQUIREMENTS. Any minimum age and service requirements are set forth in the MetLife Security Insurance Company of Louisiana MetLife RetirePro Program adoption agreement.
The minimum service requirement may not exceed one year of service (one-half year in the case of a plan with annual entry dates); however, if the employer's plan provides for full and immediate vesting after two years or less of service, the minimum service requirement may not exceed two years of service (one and one-half years in the case of a plan with annual entry dates). The Employer shall elect in Section B.2 of the Adoption Agreement whether to use the "Hours of Service" method or the "Elapsed Time" method.
The minimum age requirement may not exceed 21 20-1/2 in the case of a plan with annual entry dates.
4.3 PARTICIPATION.
(a) Each employee who, on the effective date of the plan, is an eligigle employee and has fulfilled the plan's age and service requirements (if any) will become a participant as of such date.
(b) Each employee (other than one who is a participant under subsection (a) above) will become a participant on the entry date when he is an eligible employee and satisfies the plan's age and service requirements (if any).
(c) Unless specified otherwise in the adoption agreement, the entry dates will be the first day of the first and seventh months of the plan year (January 1 and July 1 for calendar year plans). If the adoption agreement provides for additional or other entry dates, the entry dates will be as so specified; provided that the first day of the plan year will always be an entry date.
(d) If the employer's plan permits employee 401(k) savings contributions or after-tax employee contributions, each employee who has become a participant under the preceding subections of this section will be eligible to make 401(k) savings contributions and/or after-tax employee contributions subject to the applicable provisions of the plan and the adoption agreement, and such an employee will be considered a participant even if he elects not to make 401(k) savings contributions or after-tax employee contributions. However, an employee may not make 401(k) savings contributions and/or after-tax employee contributions before the date the employer signs the adoption agreement.
4.4 TERMINATION OF PARTICIPATION. An employee's participation will end when he is no longer an eligible employee due either to a change in his employment status or to the termination of his service as an employee because of disability, death, retirement or any other reason.
4.5 RE-ENTRY OF FORMER PARTICIPANT. If a former participant returns to service with the employer as an eligible employee, he will resume participation in the plan immediately upon his return.
4.6 TRANSFERS.
(a) If a non-eligible employee who satisfies the plan's age and service requirements (if any) for participation becomes an eligible employee due to a change in his employment status, he will become a participant immediately if he would have become a participant on a previous entry date had he always been an eligible employee.
(b) If a participant becomes ineligible due to a change in his employment status but has not incurred a break in service, such employee will be a participant again immediately upon returning to an eligible class of employees.
ARTICLE 5
EMPLOYEE 401(k) SAVINGS CONTRIBUTIONS
AVERAGE DEFERRAL PERCENTAGE TEST
5.1 ELIGIBILITY. If the MetLife Security Insurance Company of Louisiana adoption
agreement so provides, an employee who meets the requirements of Section 4.3 may
elect to make 401(k) savings contributions by payroll deduction and, if the
adoption agreement so provides, by deduction from a bonus payment under code
Section 401(k). 401(k) savings contributions are voluntary and no employee is
required to make such contributions.
5.2 LIMITS ON AMOUNT.
(a) IN GENERAL. Unless otherwise elected in the adoption agreement, the minimum amount of 401(k) savings contributions the participant may elect is 1 percent of his plan compensation. His 401(k) savings contributions in any plan year may not exceed whichever of the following is smallest: (a) the maximum amount permitted under Section 5.6 for an employee in the higher-paid group; (b) the maximum amount that, with other amounts allocated to his accounts hereunder, does not violate the limitations on annual additions under Article 13; or (c) any maximum or other limitation imposed by the plan administrator.
In addition, 401(k) savings contributions by a participant during a taxable year may not exceed the dollar limitation contained in section 402(g) of the Code in effect at the beginning of such taxable year.
(b) HARDSHIP WITHDRAWALS. Notwithstanding Section 5.1 and subsection (a) above, a participant who makes a hardship withdrawal under Section 12.3 may not make 401(k) savings contributions or after-tax employee contributions hereunder (or under any other plan maintained by the employer) for a period of 12 months following the date of the in-service withdrawal. Also, in the taxable year following the date of the withdrawal, such a participant may not make 401(k) savings contributions which, when added to his 401(k) savings contributions during the taxable year of the withdrawal, exceed the amount specified in the second paragraph of subsection (a) above.
(c) NONFORFEITABILITY. The participants accrued benefit from elective deferrals, qualified non-elective contributions, employee after-tax contributions and qualified matching contributions is non-forfeitable.
(d) DISTRIBUTION REQUIREMENTS. Elective deferrals are subject to the distribution requirements of Code Section 401(k)(2)(B).
5.3 PROCEDURES. The participant must file a written election form with the plan administrator indicating the amount of 401(k) savings contributions he wishes to make and agreeing to reduce his compensation by such amount. Subject to any rules specified in the adoption agreement or established by the plan administrator or sponsor, a participant may increase, decrease, discontinue or resume his 401(k) savings contributions during a plan year by filing an appropriate form with the plan administrator. A discontinuance of 401(k) savings contributions will be effective as soon as reasonable practicable after the plan administrator's receipt of the participant's election form. An increase or decrease of 401(k) savings contributions, or a resumption after a discontinuance, will be effective in accordance with any rules specified in the adoption agreement or established by the plan administrator or sponsor.
No change under the preceding paragraph may cause a participant's 401(k) savings contributions to exceed the maximum provided for under Section 5.2.
Either the plan administrator or the sponsor may establish reasonable rules of uniform application governing participants' elections and changes. Such rules may include the number and frequency of elections or changes during any plan year, effective dates for elections or changes (for example, the first day of the payroll period coinciding with or next following the applicable election or change date), cutoff dates for timely filing of elections or changes, and other rules to facilitate operations of this article.
Notwithstanding the preceding, an eligible employee will be permitted to change his election at least once each year.
5.4 COLLECTION OF 401(k) SAVINGS CONTRIBUTIONS. The employer will collect participants' 401(k) savings contributions using payroll or other procedures, including deductions from bonus payments, if elected in the adoption agreement. The employer will transfer the amounts collected to the trustee as of the earliest date when such contributions can reasonable be segregated from the employer's general assets, but not later than 90 days from the date on which such amounts would otherwise have been payable to the participant in cash.
For purposes of Code Section 414(h), it is specifically provided that partipants' 401(k) savings contributions under this article are employer contributions.
5.5 SAVINGS CONTRIBUTIONS ACCOUNT. A participant's 401(k) savings contributions will be credited to his 401(k) savings contributions account. Such account will be fully vested and nonforfeitable at all times.
5.6 401(k) LIMITS.
(a) As of the last day of each plan year, the average of the individual deferral
percentages (ADP) of the higher paid group (such average is called the HDP in
this section) may not exceed the average of the individual deferral percentages
(ADP) of the lower paid group (such average is called the LDP in this section)
by more than the amount specified in the following table:
IF LDP IS: HDP MAY NOT EXCEED: less than 2% two times LDP 2% but less two percentange points more than 8% than LDP 8% or higher 1.25 times LDP |
The determination and treatment of participants' deferral percentages will be subject to the requirements of any applicable regulations. As provided in such regulations, if the only employees eligible to make 401(k) savings contributions under this plan (and any other plan which must be aggregated with this plan under such regulations) are in the higher paid group, this plan will be deemed to meet the requirements of this Section 5.6.
See Section 6.9 for additional 401(k) limits that may be applicable in certain situations.
(b) Special Rules:
1. The ADP for any participant who is in the High Paid Group for the Plan Year and who is eligible to have Elective Deferrals (and qualified non-elective contributions or qualified matching contributions, or both, if treated as elective deferrals for purposes of the ADP test) allocated to his accounts under two or more arrangements described in Code section 401(k), that are maintained by the employer, shall be determinied as if such elective deferrals (and, if aplicable, such qualified non-elective
contributions or qualified matuching contributions, or both) were made under a single arrangment. If a Higher paid employee participates in two or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement.
2. In the event that this plan satisfies the requirements of sections
401(k), 401(a)(4), or 410(b) of the code only if aggregated with one or more
other plans, or if one or more other plans satisfy the requirements of such
sections of the Code only if aggregated with this plan, then this section shall
be applied by determining the ADP of employees as if all such plans were a
single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code section 401(k) only if they have the same
Plan Year.
3. For purposes of determining the ADP of a participant who is a 5-percent owner or one of the ten most highly-paid Higher Paid employees, the elective deferrals (and qualified non-elective contributions or qualified matching contributions, or both, if treated as elective deferrals for purposes of the ADP test) and Compensation of such participant shall include the elective deferrals (and, if applicable, qualified non-elective contributions and qualified matching contributions, or both) and compensation for the Plan Year of Family members (as defined in section 414(q)(6) of the Code). Family members, with respect to such higher paid group employees, shall be disregarded as separate employees in determining the ADP both for participants who are in the lower paid group and for participants who are in the higher paid group.
4. For purposes of determining the ADP test, elective deferrals, qualified non-elective contributions and qualified matching Contributions must be made before the last day of the twelve-month period immediately following the Plan Year to which contributions relate.
5. The employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of qualified non-elective contributions or qualified matching contributions, or both, used in such test.
6. The determination and treatment of the ADP amounts of any participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
5.7 DEFERRAL PERCENTAGE.
(a) BASIC DEFINITION. For purposes of Section 5.6, the deferral percentage of a participant for a plan year means his 401(k) savings contributions for such year computed as a percentage of his plan compensation for such year (to the nearest one-hundredth of a percentage point). If an employee is eligible to participate in 401(k) savings contributions but has not elected to make such contributions, he will nevertheless be taken into account as having made zero 401(k) savings contributions.
Notwithstanding the preceding paragraph, in the plan administrator's discretion, 401(k) savings contributions of a participant in the lower paid group will not be included when determining his deferral percentage to the extent that the requirements of Section 5.6 are met without taking such contributions into account, and such contributions may be used in performing the 401(m) tests if applicable to the employer's plan. See Section 6.7(b).
(b) EMPLOYER PROFIT SHARING CONTRIBUTIONS. If the employer's plan provides for employer profit sharing contributions and such contributions meet the requirements of this subsection (b), then, subject to the requirements of applicable regulations, the plan
administrator may elect to treat all or part of such contributions as if they were 401(k) savings contributions for purposes of subsection (a) above.
Employer profit sharing contributions meet the requirements of this subsection
(b) if they are allocated to participants using a nonintegrated allocation
formula, they are always fully vested when made, and they are subject to the
limitations on distribution of Code Section 401(k)(2)(B) (which means that they
are not available for in-service withdrawals before age 59-1/2). Also, any
employer profit sharing contributions not treated as 401(k) savings
contributions under the preceding paragraph must be nondiscriminatory.
The employer may make qualified Non-elective Contributions under the plan solely on behalf of employees in the lower paid group in an amount as are needed to meet the actual deferral percentage test. Notwithstanding any provision in this plan to the contrary, the Employer may, in its absolute discretion, selectively allocate Qualified Non-Elective Contributions on behalf of any one or a number of employees in the lower paid group.
In addition, in lieu of distributing Excess Contributions as provided in section 5.9(a) of the plan, or Excess Aggregate Contributions as provided in section 6.8(d)(iii) of the plan, the employer may make qualified Non-elective Contributions on behalf of any one or a number of lower paid group Employees to an extent that is sufficient to satisfy either the ADP test or the Average Contribution Percentage test, or both, pursuant to regulations under the Code.
The employer may elect in the adoption agreement to make Qualified Non-elective Contributions in addition to those required to satisfy the Actual Deferral Percentage Test or the Actual Contribution Percentage Test. Such Qualified Non-elective Contributions shall be referred to as Supplemental Qualified Non-elective Contributions. The employer may elect in the Adoption Agreement to allocate Supplemental Qualified Non-elective Contributions among all participants in the plan or solely among those participants in the lower-paid group. The amount of Supplemental Qualified Non-elective Contributions shall be determined in accordance with the employer's election in the Adoption Agreement.
(c) EMPLOYER MATCHING CONTRIBUTIONS. If the employer's plan provides for employer matching contributions, such contributions will not be included in determining a participant's deferral percentage under subsection (a) above. However, if such contributions meet the requirements of this subsection (c), and if the requirements of applicable regulations are met, the plan administrator may elect to treat all or part of such contributions as if they were 401(k) savings contributions for purposes of subsection (a) above. The plan administrator might elect to include such contributions, for example, if the employer elected either a dollar cap on matching contributions or a graded percentage for matching contributions with a higher match on the lower percentages of savings contributions (i.e., a bottom loaded match).
Employer matching contributions meet the requirements of this subsection (c) if they are always fully vested when made, and they are subject to the limitations on distribution of Code Section 401(k)(2)(B) (which means that they are not available for in-service withdrawals before age 59-1/2).
Employer matching contributions which are used in determining an employee's deferral percentage under subsection (a) above will not be used in determining his contribution percentage under Section 6.7.
Qualified Matching Contributions will be taken into account as Elective Deferrals for purposes of calculating the actual Deferral Percentages, subject to such other requirements as may be prescribed by the Secretary of the Treasury and shall be made as are needed to meet the actual Deferral Percentage test. The employer will make Qualifed Matching Contributions to the plan solely on behalf of participants who are lower paid group employees who make either 401(k) savings contributions and/or employee after-tax contributions to the plan. Notwithstanding any provision in this Plan to the contrary, the Employer may, in its absolute discretion, selectively allocate Qualified Matching Contributions on behalf of any one or a number of employees in the lower paid group.
(d) If an employee in the higher paid group makes 401(k) savings contributions or if employer profit sharing contributions or employer matching contributions that are used in determining such an employee's deferral percentage under subsection (a) above are made on his behalf to another plan maintained by the employer, his deferral percentage will be determined as if all such 401(k) savings contributions and employer profit sharing contributions and employer matching contributions (whichever may be applicable) were made under a single plan.
Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Code Section 401(k).
The employer may elect in the adoption agreement to make Qualified Matching Contributions in addition to those required to satisfy the Actual Deferral Percentage Test. Such Qualified Matching Contributions shall be referred to as Supplemental Qualified Matching Contributions. The employer may elect in the Adoption Agreement to allocate Supplemental Qualified Matching Contributions among all participants in the plan who make matchable savings contributions or solely among those participants in the lower-paid group who made matchable savings contributions. The amount of Supplemental Qualifed Non-elective Contributions shall be determined in accordance with the employer's election in the Adoption Agreement.
5.8 HIGHER AND LOWER PAID GROUPS DEFINED.
(a) An employee who is eligible to make 401(k) savings contributions is in the higher paid group for a plan year if during such plan year or the prededing plan year (1) he owns (or is considered to own within the meaning of Code Section 318) more than 5% of the outstanding stock of the employer or more than 5% of the capital or profits interest in the employer, (ii) his plan compensation (before reduction for 401(k) savings contributions) exceeds $75,000, (iii) his plan compensation (before reduction for 401(k) savings contributions) exceeds $50,000 and he is in the highest paid 20 percent of all employees, or (iv) he is an officer of the employer having annual plan compensation greater than 50% of the amount in effect under Code Section 415(b)(1)(A) for such plan year. The $75,000 and the $50,000 amounts in the preceding sentence will be adjusted in accordance with Code Section 414(q). A former employee who was a member of the higher paid group either when such employee terminated employment with the employer or at any time after such employee reached age 55 will continue to be treated as a member of the higher paid group.
(b) If an employee eligible to make 401(k) savings contributions is not in the higher paid group for a plan year, then he is in the lower paid group.
(c) In determining which employees are in the higher paid group under subsection
(a) above, the following special rules will apply:
(i) No more than the lesser of (A) 50 employees or (B) the greater of 10% of employees or three employees will be included in the higher paid group as officers under subsection (a)(iv) above. However, if no officer meets the criteria of subsection (a)(iv) above, the highest paid officer will be included under such subsection.
(ii) If an employee is included in the higher paid group under subsection
(a)(ii), (iii) or (iv) for the current plan year but was not so included for the
preceding plan year, he will be in the higher paid group for the current plan
year only if he is one of the 100 highest paid employees for the current plan
year.
(iii) A family member of either (A) a 5% owner under subsection (a)(i)
above, or (B) one of the 10 highest paid employees in the higher paid group
under subsection (a) above will not be considered an employee for purposes of
Section 5.6. Plan compensation of such person and any 401(k) savings
contributions by or (if applicable) employer matching or profit sharing
contributions on behalf of such person will be attributed to the higher paid
group member to the extent provided in applicable regulations. Also, the
adjustment of a higher paid group participant's 401(k) savings contributions
under Section 5.9 will be performed by adjusting the 401(k) savings
contributions of the participant and his family member(s) as and to the extent
required in applicable regulations. For this purpose, a family member means the
employee's spouse and his lineal ascendants or descendants (and their spouses).
(iv) For purposes of determining how many employees there are (and hence how many are in the highest paid 20 percent or are officers), an employee will be disregarded if he has not completed 6 months of service with the employer, he normally works less than 17-1/2 hours per week or 6 months during any year, he is under age 21, he is in a unit covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and the employer (except to the extent provided in regulations), or he is a nonresident alien with no U.S. source income.
5.9 MONITORING PARTICIPANTS' DEFERRAL PERCENTAGES; ADJUSTMENTS. The plan administrator or an administrative services provider--which may be the trustee or the sponsor--retained by the plan administrator to perform participant recordkeeping and other administrative duties) will monitor participants' deferral percentages to insure compliance with the requirements of Section 5.6 above. Any adjustments in participants' elections or actual 401(k) savings contributions necessary to meet the requirements of Section 5.6 will be made as follows. The plan administrator will reduce the deferral percentage of the participant (or participants) in the higher paid group with the highest deferral percentage until it reaches the deferral percentage of the participant (or participants) in the higher paid group with the next highest deferral percentage; next the plan administrator will reduce the deferral percentages of both or all such participants until they reach that of the participant with the next highest deferral percentage; and so on. The foregoing reductions will be made only to the extent necessary to meet the requirements of Section 5.6.
(a) EXCESS CONTRIBUTIONS. The plan administrator will adjust 401(k) savings
contributions elections by participants in the higher paid group in accordance
with the preceding paragraph as such time or times before or during a plan year
as the plan administrator deems advisable to insure that the requirements of
Section 5.6 are met as of the last day of the plan year.
If, notwithstanding the preceding sentence, the requirements of Section 5.6 are not met as of the last day of a plan year, such adjustments may be made after the end of a plan year in one or a combination of the following ways: (i) paying to a participant the
amount of his excess contributions plus earnings (or losses) on such excess,
(ii) recharacterizing the excess contributions of such a participant as
after-tax employee contributions during such year, or (iii) in the employer's
discretion, by making an employer contribution that meets the requirements of
Section 5.7(b) on behalf of employees in the lower paid group (or all employees,
if provided in the adoption agreement) in the amount needed so that the
requirements of Section 5.6 are met. For purposes of the preceding sentence,
excess contributions means 401(k) savings contributions by a participant in the
higher paid group in excess of the amount that would satisfy the requirements of
Section 5.6 above. Also, for purposes of such sentence, any such payment or
recharacterization of excess contributions will be designated as such by the
employer, and will be made by the end of the succeeding plan year to avoid plan
disqualification (and must be made within 2-1/2 months after the end of the
current plan year to avoid an excise tax on the employer equal to 10 percent of
the excess). However, the amount to be paid or recharacterized will be reduced
by any amounts relating to such plan year previously withdrawn by the
participant under Section 5.11. For purposes of clause (ii) of such sentence,
recharacterizing will be available only if the adoption agreement is a
non-standardized adoption agreement and permits after-tax employee
contributions.
Excess Contributions shall be allocated to Participants who are subject to the family member aggregation rules of Section 414(q)(6) of the Code in proportion to the Elective Deferrals (and amounts treated as Elective Deferrals] of each family member that is combined to determine the combined ADP.
A participant may treat his or her Excess Contributions as an amount distributed to the participant and then contributed by the participant to the plan. Recharacterized amounts will remain nonforfeitable and subject to the same distribution requirements as Elective Deferrals. Amounts may not be recharacterized by a higher paid group Employee to the extent that such amount in combination with other Employee Contributions made by that employee would exceed any stated limit under the plan on Employee Contributions.
Recharacterization must occur no later than two and one-half months after the last day of the Plan Year in which such Excess Contributions arose and is deemed to occur no earlier than the date the last higher paid group Employee is informed of the amount recharacterized and the consequences thereof. Recharacterized amounts will be taxable to the participant for the participant's tax year in which the participant would have received them in cash.
Determination of Income or Loss: Excess Contributions shall be adjusted for any income or loss for the plan year in which such contributions were made. Income or loss attributabe to the period between the end of the plan year and the date of distribution will be disregarded in determining income or loss.
Accounting for Excess Contributions: Excess Contributions shall be distributed from the participant's Elective Deferral account and Qualified Matching Contribution account (if applicable) in proportion to the participant's Elective Deferrals and Qualified Matching Contributions (to the extent used in the ADP test) for the Plan Year. Excess Contributions shall be distributed from the participant's Qualified Non-elective Contribution account only to the extent that such Excess Contributions exceed the balance in the Participant's Elective Deferral account and Qualified Matching Contribution account.
A distribution of excess contributions under this section may be made notwithstanding any otherwise applicable restrictions or spousal consent requirements on in-service withdrawals or distributions.
Any excess contributions distributed under this subsection will nevertheless be considered as annual additions for purposes of applying the limitations of Article 13.
The plan administrator will maintain records to show that the plan met the requirements of Section 5.6 (and Section 6.6) for each plan year (including records that show the extent to which employer profit sharing contributions and/or 401(k) savings contributions were used in performing the tests).
(b) EXCESS ELECTIVE DEFERRALS. A participant may assign to this plan any Excess Elective Deferrals made during a taxable year of the participant by notifying the plan administrator on or before March 1 following such taxable year of the amount of the Excess Elective Deferrals to be assigned to the plan. A participant is deemed to notify the plan administrator of any Excess Elective Deferrals that arise by taking into account only those Elective Deferrals made to this plan and any other plans of this employer.
Notwithstanding any other provision of the plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any participant to whose account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Electve Deferrals for such taxable year.
Determination of income of loss: Excess Elective Deferrals shall be adjusted for any income or loss for the plan year in which such contributions were made. Income or loss attributable to the period between the end of the plan year and the date of distribution will be disregarded in determining income or loss.
A withdrawal of an excess under this section may be made notwithstanding any otherwise applicable restrictions or spousal consent requirement on in-service withdrawals.
Any amounts withdrawn under this section will nevertheless be considered as annual additions for purposes of applying the limitations of Article 13 unless such amounts are distributed no later than the first April 15 following the close of the participant's taxable year.
The amount of any 401(k) savings contributions to be withdrawn under this section will be reduced by any amounts previously distributed or recharacterized under Section 5.9.
5.10 TREATMENT OF PARTICIPANT WHO REACHES $7,000 LIMIT.
(a) If a participant makes 401(k) savings contributions in a calendar year equal to $7,000 as adjusted in accordance with Code Section 402(g), his 401(k) savings contributions will immediately cease.
(b) This subsection (b) applies if the following conditions exist: (i) the employer's plan provides for employer matching contributions; (ii) the participant made savings contributions at a rate higher (as a percentage of his plan compensation) than the maximum rate for matching, as set forth in the adoption agreement; and (iii) the participant reaches the $7,000 limit (as so adjusted) during the plan year.
If the foregoing conditions exist, for purposes of employer matching contributions, the participant will be treated as if he made savings contributions as the maximum rate for matching starting on January 1 until he would have reached the $7,000 limit (or his termination of plan participation, if earlier).
(c) If participants are allowed to make after-tax employee contributions, and the adoption agreement so provides, any participant whose savings contributions are limited in accordance
with this section, may elect to make after-tax emloyee contributions in lieu of 401(k) savings contributions for the remainder of the plan year.
ARTICLE 6
AFTER-TAX EMPLOYEE SAVINGS CONTRIBUTIONS;
AVERAGE CONTRIBUTION PERCENTAGE TEST
6.1 ELIGIBILITY. If the MetLife Security Insurance Company of Louisiana adoption agreement so provides, an employee who meets the requirements of Section 4.3 may elect to make after-tax employee contributions by payroll deduction and, if the adoption agreement so provides, by deduction from a bonus payment. After-tax employee contributions are voluntary and no employee will be required to make such contributions. Employee contributions and earnings thereon are nonforfeitable at all times.
6.2 LIMITS ON AMOUNT. Unless otherwise elected in the adoption agreement, the
minimum amount of after-tax employee contributions the employee may elect is 1
percent of his plan compensation. His after-tsx employee contributions for any
plan year may not exceed whichever of the following is the smallest: (a) the
maximum amount permitted under Section 6.6 for an employee in the higher-paid
group; (b) the maximum amount that, with other amounts allocated to his accounts
hereuner, does not violate the limitations on annual additions under Article 13;
(c) any maximum or other limitation imposed by the plan administrator.
See the first sentence of Section 5.2(b) for an additional restriction on after-tax employee contributions that applies in certain cases to participants who made a hardship withdrawal.
6.3 PROCEDURES; PLAN ADMINISTRATOR RULES. The procedures for electing and changing after-tax employee contributions, and plan administrator rules therefore, will be similar to those described in Section 5.3.
6.4 COLLECTION OF AFTER-TAX EMPLOYEE CONTRIBUTIONS. The employer will collect participants' after-tax employee contributions using payroll or other procedures, including deductions from bonus payments, if elected in the adoption agreement. The employer will transfer the amounts collected to the trustee as of the earliest date on which such contributions can reasonably be segregated from the employer's general assets, but not later than 90 days from the date on which such amounts are received by the employer or the date on which such amounts would otherwise have been payable to the participant in cash.
6.5 AFTER-TAX EMPLOYEE CONTRIBUTIONS ACCOUNT. A participant's after-tax employee contributions will be credited to his after-tax employee contributions account. Such account will be fully vested and nonforfeitable at all times.
6.6 401(m) LIMITS. As of the last day of each plan year, the average of the individual contribution percentages of the higher-paid group (ACP) (such average is called the HCP in this section) may not exceed the average of the individual contribution percentages of the lower-paid group (ACP) (such average is called the LCP in this section) by more than the amount specified in the following table:
If LCP is HCP MAY NOT EXCEED
------------------ ------------------
less than 2% two times LCP
2% but less than 8% two percentage points
more than LCP
8% or more 1.25 times LCP
|
The determination and treatment of participants' contribution percentages will be subject to the requirements of any applicable regulations. As provided in such regulations, if the only employees eligible to make after-tax employee contributions or to receive employer matching contributions under this plan (and any other plan which must be aggregated with this plan under such regulations) are in the higher paid group, this plan will be deemed to meet the requirements of this Section 6.6.
See Section 6.9 for additional 401(m) limits that may be applicable in certain situations.
6.7 CONTRIBUTION PERCENTAGE DEFINED.
(a) BASIC DEFINITION. For purposes of this section, the contribution percentage of a participant for a plan year means the sum of any after-tax employee contributions he makes for such year and any employer matching contributions on his behalf for such year (Contribution Percentage Amounts), computed as a percentage of his plan compensation for such year (limited to the portion of the plan year in which an employee was a participant, unless otherwise elected in the adoption agreement) (to the nearest one-hundredth of a percentage point). The average of the individual contribution percentages will be referred to as the Average Contribution Percentage (ACP). However, employer matching contributions will not be included if they were used in determining the participant's deferral percentage under Section 5.7(c). If an employee is eligible to make after-tax employee contributions but has not elected to make such contributions, he will nevertheless be taken into account as having made zero after-tax employee contributions.
In computing the Average Contribution Percentage (ACP), the employer shall take into account and include as contribution percentage amounts, elective deferrals and qualified non-elective contributions under this plan or any other plan of the employer, as provided by the regulations for the Plan Year. Such Contribution Percentage Amounts shall not include Matching Contributions that are forfeited either to correct Excess Aggregate Contributions or because the contributions to which they relate are Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions. The amount of qualifed non-elective contributions that are made under Section 5.7 and taken into account for purposes of calculating the average contribution percentage, subject to such other requirements as may be prescribed by the Secretary of the Treasury, shall be such qualified non-elective contributions that are needed to meet the average contributions percentage test. The amount of Elective Deferrals taken into account as Contribution Percentage Amounts for purposes of calculating the Average Contribution Percentage, subject to such other requirements as may be prescribed by the Secretary of the Treasury, shall be such elective deferrals that are needed to meet the Average Contribution Percentage Test.
(b) EMPLOYEE 401(k) SAVINGS CONTRIBUTIONS. If the employer's plan provides for employee 401(k) savings contributions, such contributions by a participant in the lower paid group will be included in determining his contribution percentage to the extent that, under the second paragraph of Section 5.7(a), such contributions are not used in determining his deferral percentage.
(c) EMPLOYER PROFIT SHARING CONTRIBUTIONS. If the employer's plan provides for employer profit sharing contributions that meet the requirements of Section 5.7(b), such contributions on behalf of a participant will be included in determining his contribution percentage to the extent that, under the first paragraph of Section 5.7(b), such contributions are not used in determining his deferral percentage.
(d) The higher-paid group and the lower-paid group are defined in Section 5.8(a) and (b) (including the special rules in Section 5.8(c)).
6.8 SPECIAL RULES.
(a) The contribution percentage of an employee in the higher paid group who makes after-tax employee contributions or for whom employer matching contributions are made (or for whom employer profit sharing contributions or elective deferrals or qualified nonelective contributions which are used in determining such employee's contribution percentage are made to any other qualified plan maintained by the employer will be determined as if all such after-tax employee contributions and employer matching contributions (and, if applicable, employer profit-sharing contributions or elective deferrals or qualified nonelective contributions) were made under a single plan.
In addition, if the employer's plan meets the requirements of Code Sections
401(m), 401(a)(4) or 410(b) only if aggregated with one or more other plans, or
if one or more other plans meet the requirements of such sections of the Code
only if aggregatee with the employer's plan, then the contribution percentage of
a participant will be determined by treating all such plans as a single plan.
For plan years beginning after December 31, 1989, plans may be aggregated in
order to satisfy section 401(m) of the Code only if they have the same Plan
Year.
(b) The plan administrator will monitor and adjust participants' contribution percentages to insure compliance with the requirements of Section 6.6. Such monitoring and adjustments will be accomplished under procedures similar to those specified in the first paragraph of Seciton 5.9.
(c) Compliance with Section 6.6 will be determined after taking into account any amounts paid to participants, first under Section 5.9.(b).
(d) (i) If necessary, the plan administrator will reduce the after-tax employee contributions and if applicable matching contributions (and, if applicable in determining such participant's contribution percentage, his 401(k) savings contributions or employer profit sharing contributions on his behalf) for a participant in the higher paid group by such amount as may be necessary to meet the requirements of Section 6.6. Any reductions under the preceding sentence will apply pro rata to such contributions.
(ii) Any reduction in employer matching contributions will be effected by forfeiting the necessary amount if forfeitable. Otherwise, such reduction will be effected by distributing the necessary amount (plus earnings) to the participant. Any reduction in a participant's after-tax employee contributions (or, if applicable, 401(k) savings contributions) will be effected by distributing the necessary amount (plus earnings) to the participant. Any such distribution may be made notwithstanding any otherwise applicable restrictions or spousal consent requirements on in-service distributions.
Any amount forfeited under this subsection (ii) will be treated in accordance with Section (8.4(c); provided that no such forfeiture will ever be reallocated to the accounts of participants in the higher paid group.
(iii) Excess Aggregate Contributions. Notwithstanding any other provision of this plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed no later than the last day of each Plan Year to participants to whose accounts such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions shall be allocated to participants who are subject to the family member aggregation rules of Section 414(q)(6) of the Code among the family members in proportion to the Employee and Matching Contributions (or amounts treated as Matching Contributions) of each family member
that is combined to determine the combined ACP. If such Excess Aggregate Contributions are distributed more than 2-1/2 months after the last day of the Plan Year in which such excess amounts arose, a ten (10) percent excise tax will be imposed on the employer maintaining the plan with respect to those amounts. Excess Aggregate Contributions shall be treated as annual additions under the plan.
Determination of Income or Loss: Excess Aggregate Contributions shall be adjusted for any income or loss for the plan year in which such contributions were made. Income or loss allocable to the period between the end of the plan year and the date of distribution will be disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions: Forfeitures of Excess Aggregate Contributions shall be applied to reduce employer contributions for the plan year. If the excess exceeds employer contributions, forfeitures of excess aggregate contributions shall be allocated after all other forfeitures under the plan, to the Matching Contributions account of each lower paid group participant who made 401(k) savings contributions or employee after-tax contributions in the ratio which each such participant's compensation bears to the total compensation of all such participants for such plan year.
Accounting for Excess Aggregate Contributions: Excess Aggregate Contributions shall be forfeited, if forfeitable of distributed on a pro-rata basis from the participant's Employee Contribution account, Matching Contribution account, and Qualified Matching Contribution account (and, if applicable, the participant's Qualified Non-elective Contribution account or Elective Deferral account, or both).
(e) Multiple Use: If one or more higher paid group employees participate in both a CODA and a plan subject to the ACP test maintained by the employer and the sum of the ADP and ACP of those higher paid group employees subject to either or both tests exceeds the Combined Limit, then the ACP of those higher paid group employees who also participate in a CODA will be reduced (beginning with such higher paid group employee whose ACP is the highest) so that the limit is not exceeded. The amount by which each higher paid group employee's Contribution Percentage Amounts is reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the higher paid group employees are determined after any corrections required to meet the ADP and ACP tests. Multiple use does not occur if either the ADP or ACP of the higher paid group employees does not exceed 1.25 multiplied by the ADP and ACP of the lower paid group employees of such other limitations pursuant to regulations under the Code.
(f) For purposes of determining the Contribution Percentage test, Employee after-tax Contributions are considered to have been made in the Plan Year in which contributed to the trust. Matching Contrbutions and Qualified Non-elective Contrbutions will be considered made for a Plan Year if made no later than the end of the twelve-month period beginning on the day after the close of the Plan Year.
(g) The determination and treatment of the Contribution Percentage of any participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
6.9 ADDITIONAL LIMITS FOR PLANS SUBJECT TO BOTH 401(k) and 401(m) LIMITS.
(a) APPLICABILITY OF THIS SECTION. This section will apply if this plan (or any other plan which is aggregated with this plan under applicable regulations) provides for both 401(k) savings contributions and either after-tax employee contributions or employer matching contributions) (or both) on behalf of any
employee in the higher paid group. If so, the limitations specified in subsection (b) below will apply in addition to the limitations set forth in Sections 5.6 and 6.6.
(b) COMBINED LIMIT. The sum of the HDP under Sections 5.6 and 5.7 and the HCP under Sections 6.6 and 6.7 cannot exceess the sum of the following:
(i) 125 percent of the LDP (under Sections 5.6 and 5.7) or the LCP (under Sections 6.6 and 6.7); and
(ii) two percentage points more than such LDP or such LCP, whichever is not used in (i), but in no event more than twice such smaller amount.
(c) CORRECTION OF VIOLATION. If the sum of the HDP and the HCP exceed the
limit specified in subsection (b), the employer will first reduce the
contribution percentages of participants in the higher paid group in accordance
with Section 6.8(d), and will second reduce the deferral percentages of
participants in the higher paid group in acccordance with Section 5.9, to the
extent necessary to meet subsection (b). Subject to the multiple use rules of
Section 6.8(e), the employer may limit the participants affected by such
reductions to those participants who are subject to both the 401(k) limits and
the 401(m) limits. If any other plan maintained by the employer is also taken
into account in applying the limits specified in this section, the employer may
designate the plan which will be involved in correcting any violation of the
limits.
ARTICLE 7
ROLLOVERS AND DEDUCTIBLE EMPLOYEE
CONTRIBUTIONS
7.1 ROLLOVER CONTRIBUTIONS.
(a) (i) With the approval of the plan administrator, an employee may make a
rollover transfer to the plan of cash in an amount which constitutes (i) an
eligible rollover distribution (as defined in Section 402(c)(4) of the Code) or
Section 403(a)(4) of the Code or (ii) a rollover contribution (as defined in
Section 408(d)(3) of the Code). Any amounts rolled over to this plan from an
individual retirement account or annuity must consist solely of amounts
originally transferred to such account or annuity from another qualified plan
and may not include any nondeductible contributions by the employee to such
account or annuity.
(ii) With the approval of the plan administrator, an employee may cause any amount to be transferred directly to the trustee of this plan from the trustee or custodian of a qualified plan or annuity or individual retirement account or annuity in a trustee-to-trustee transfer. In the case of such transfers, amounts consisting of the following will be accounted for separately: employer contributions to a defined benefit or money purchase plan, employer contributions to a profit-sharing or 401(k) plan, employee 401(k) savings contributions, after-tax employee contributions, and qualified voluntary employee contributions. The employee will be responsible for providing the plan administrator with records that will reflect such amounts separately.
(b) The employer, the plan administrator and the trustee have no responsibility for determining the propriety of, proper amount or time of, or status as a tax free transaction of any transfer under subsection (a) above.
(c) If an employee who is not yet a participant makes a transfer under subsection (a) above, he will be considered to be a participant with respect to administering such transferred amount only. He will not be a participant for any other purpose of the plan until he
completes the requirements for participation under Article 4. If elected in the adoption agreement, such an employee may take loans secured by his rollover contribution account.
(d) The employer or plan administrator in its discretion may direct the return to the employee (or the retransfer to another trustee or custodian designated by the employee) of any transfer to the extent that such return is deemed necessary to insure the continued qualification of this plan under Code Section 401(a) or that holding such contribution hereunder would be administratively burdensome.
(e) The plan administrator will maintain a rollover account in the name of each employee who makes a rollover contribution under this section, and will credit such rollover to his rollover account as soon as practicable after receipt thereof by the trustee. The plan administrator will maintain a transfer account in the name of each employee on whose behalf a trustee-to-trustee transfer is made under this section, and will credit such transferred amount to his transfer account as soon as practicable after receipt thereof by the trustee. Any amounts separately accounted for under a transfer account will be separately accounted for hereunder as subaccounts within the employee's transfer account. An employee's rollover account and all amounts credited thereto (including earnings) will be fully vested and nonforfeitable at all times. An employee's transfer account and all amounts credited thereto (including earnings) will be fully vested and nonforfeitable at all times.
7.2 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS.
(a) The provisions of this section apply if the employer's execution of the adoption agreement constitutes the amendment and restatement of an existing qualified plan under which participants made qualified voluntary employee contributions for taxable years before 1987.
(b) Any such qualified voluntary employee contributions by a participant will be held in a separate subaccount for such participant within his rollover account which will be fully vested and nonforfeitable at all times.
(c) No part of a participant's qualified voluntary employee contributions account will be used to purchase life insurance or will be taken into account in determining the participant's eligibility for or the amount of any loan hereunder to the participant.
7.3 WITHDRAWALS.
(a) AMOUNTS. Unless the adoption agreement otherwise provides, a participant may upon reasonable advance written notice to the plan administrator withdraw all or any portion of his rollover account or qualified voluntary employee constributions subaccount. If the adoption agreement so provides, an employee who is not yet a participant and has made a rollover contribution may withdraw all or any portion of his rollover account. The plan administrator may establish reasonable minimum withdrawal amounts.
Notwithstanding the preceding paragraph, amounts separately accounted for under a transfer account will be subject to restrictions on withdrawal as follows (unless the plan from which such amounts were transferred imposes more or less restrictive conditions upon in-service withdrawals): employer contributions to a defined benefit or money purchase plan are not available for in-service withdrawal; employee 401(k) savings contributions are available for in-service withdrawal only under Section 12.3; employer contributions to a 401(k) plan which were used in determining the deferral percentages of participants are not available for in-service withdrawal; other employer contributions to a profit-sharing plan, after-tax employee contributions and qualified voluntary employee contributions are available for in-service withdrawal.
(b) PAYMENT. Any withdrawal under this section will be paid to the participant as soon as practicable after the valuation date following the plan administrator's receipt of the participant's withdrawal form; however, the plan administrator may approve an earlier payment of all or some of the amount to be withdrawn if such earlier payment would not be detrimental to the interests of the other participants. Unless limited by the investment vehicle, the investments to be liquidated to pay such withdrawal to the participant will be liquidated pro rata from the participant's accounts.
(c) QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS. If a participant has not attained age 59-1/2 and is not disabled at the time he makes a withdrawal or receives a distribution from his qualified voluntary employee contributions account, he will be subject to a federal income tax penalty unless he completes a valid rollover transfer to a qualifed plan or individual retirement plan within 60 days after the date of distribution.
ARTICLE 8
EMPLOYER CONTRIBUTIONS; AMOUNT AND
ALLOCATION
8.1 AMOUNT OF EMPLOYER CONTRIBUTION.
(a) For each plan year that the plan is in effect, the employer will contribute in cash the amount (if any) determined according to the provisions of this article. If, due to miscalculation or error, the employer's contribution exceeds the amount prescribed or determined by the employer, such excess may, at the election of the employer, be treated as a contribution for the succeeding plan year or years.
(b) The employer's contribution may be paid in a single sum or installments, but the total amount will be paid to the trustee not later than the time (including extensions thereof) prescribed by law for filing the employer's federal income tax return for its taxable year beginning with or within the plan year.
8.2 PROFIT-SHARING PLANS. If the employer's plan is a profit-sharing plan, the following will apply:
(a) AMOUNT. Unless specified otherwise in the adoption agreement, for each plan year the employer will contribute whatever amount (if any) the employer determines in its discretion; the employer will not be obligated to contribute any particular amount in a plan year or to make any contribution at all in any particular plan year. However, if in the adoption agreement the employer elected a formula for determining the contribution for a plan year, the employer will contribute the amount determined under such formula. Such a formula may include the contribution of a flat dollar amount to the account of each participant who is eligible to share in the allocation of the employer's contribution. If in the adoption agreement, the employer elected to make a minimum contribution, the employer will contribute the amount of such minimum contribution.
If elected in the adoption agreement, for each contribution period the employer will contribute an amount which will equal the contribution the employer determined to make for all participants entitled to receive an allocation for such period in the MetLife Security Insurance Company of Louisiana adoption agreement.
The plan administrator will select a contribution period, which may be the plan year or a period shorter than the plan year such as each month, three months (quarterly), four months (tri-annual) or six months (semi-annual). Employer contributions for a contribution period will be transferred to the trustee within a reasonable time
after the end of such period. However, the total amount of the employer's contributions for a plan year will be paid to the trustee by the time specified in Section 8.1(b).
(b) SOURCE OF CONTRIBUTIONS. Unless the MetLife Security Insurance Company of Louisiana adoption agreement provides otherwise, the employer's contribution for any year will not be limited to the employer's net profits for such year or its accumulated earnings.
(c) PERSONS ENTITLED TO SHARE IN CONTRIBUTIONS. The persons entitled to share in any employer contributions for a plan year are described in Section 8.6.
(d) CREDITING EMPLOYER CONTRIBUTINS: ALLOCATION FORMULA. Any employer contributions for a plan year will be credited to the employer contributions accounts of each person entitled to share therein (determined under Section 8.6) in accordance with Section 8.7.
(e) FORFEITURES. Forfeitures will be disposed of in accordance with the employer's election under the adoption agreement. Subject to Section 11.4, forfeitures will be released as soon as practicable following the participant's separation from service.
(f) EMPLOYER CONTRIBUTIONS ACCOUNT. The plan administrator will maintain a separate employer contributions account for each participant. Employer contributions allocated to a participant will be credited to his employer contributions account. No forfeitures will occur solely as a result of an employee's withdrawal of employee contributions.
8.3 MONEY PURCHASE PENSION PLANS. If the employer's plan is a money purchase pension plan, the following provisions will apply:
(a) AMOUNT. For each contribution period the employer will contribute an amount which will equal the contribution required for all participans entitled to receive an allocation such period under the contribution formula elected by the employer in the MetLife Security Insurance Company of Louisiana adoption agreement.
The plan administrator will select a contribution period, which may be the plan year or a period shorter than the plan year such as each month, three months (quarterly), four months (tri-annual) or six months (semi-annual). Employer contributions for a contribution period will be transferred to the trustee within a reasonable time after the end of such period. However, the total amount of the employer's contributions for a plan year will be paid to the trustee by the time specified in Section 8.1(b).
(b) PERSONS ENTITLED TO SHARE IN CONTRIBUTIONS. The persons entitled to receive an allocation of employer contributions for a contribution period are described in Section 8.6. However, if the adoption agreement provides for a contribution period more frequent than the plan year, a participant may be required to have completed a minimum period of service and/or be an employee on the last day of a contribution period (or to have left employment during such period because of retirement, death or disability) in order to receive an employer contribution for such period.
(c) CREDITING EMPLOYER CONTRIBUTIONS: ALLOCATION FORMULA. Employer contributions for a contribution period will be credited to the employer contributions accounts of each person entitled to share therein (determined under Section 8.6) in accordance with the allocation formula selected in Section 8.7.
(f) FORFEITURES. Any forfeitures occuring during a contribution period will be disposed of in accordance with the employer's election under the adoption agreement. No forfeitures will occur
solely as a result of an employee's withdrawal of employee contributions. Subject to section 11.4, forfeitures will be released as soon as practicable following the participant's separation from service.
(e) EMPLOYER CONTRIBUTIONS ACCOUNT. The plan administrator will maintain a separate employer contributions account for each participant. Employer contributions Employer contributions allocated to a participant will be credited to his employer contributions account.
8.4 TARGET BENEFIT PLANS. If the employer's plan is a target benefit plan, the following provisions will apply:
(a) AMOUNT. For each plan year the employer will contribute on behalf of each participant entitled to receive an allocation for such year, the level funding amount which is projected to be necessary to fund his target benefit (determined under Section 8.8). The employer's contribution will be equal to the sum of the level funding amounts projected as necessary to fund the target benefits of all participants entitled to receive an allocation for such year.
(b) PERSONS ENTITLED TO SHARE IN CONTRIBUTIONS. The persons entitled to receive an allocation of employer contributions for a plan year are described in Section 8.6.
(c) CREDITING EMPLOYER CONTRIBUTIONS: ALLOCATION FORMULA. Employer contributions equal to the level funding amount (determined under Section 8.8) for a plan year will be credited to the employer contributions accounts of each person entitled to share therein (determined under Section 8.6).
(d) FORFEITURES. Any forfeitures occurring during a plan year will be used solely to reduce employer contributions for such plan year. No forfeitures will occur solely as a result of an employee's withdrawal of employee contributions. Subject to Section 11.4, forfeitures will be released as soon as practicable following the participant's separation from service.
(e) EMPLOYER CONTRIBUTION ACCOUNT. The plan administrator will maintain a separate employer contribution account for each participant. Employer contributions allocated to a participant will be credited to his employer contribution account.
8.5 EMPLOYER MATCHING CONTRIBUTIONS.
(a) MATCHING CONTRIBUTIONS. Matching Contribution shall mean an employer contribution made to this or any other defined contribution plan on behalf of a participant on account of an Employee after tax Contribution made by such participant, or on account of a participant's Elective Deferral, under a plan maintained by the employer. Notwithstanding the foregoing, in the csse of a standardized plan, a matching contribution shall mean an employer contribution made to such plan on behalf of a Participant on account of a Participant's Elective Deferral, under such Plan. If specified in the adoption agreement, for each matching period the employer will make a matching contribution in cash on behalf of each participant who made 401(k) savings contributions and/or after-tax employee contributions during such matching period. However, if the adoption agreement so provides, a participant will be required to have completed a minimum period of service and/or be an employee on the last day of a matching period (or to have left employment during such period because of retirement, death or disability] in order to receive an employer matching contribution for such period.
The amount of such matching contribution will be as specified in the adoption agreement. However, (a) matching contributions on behalf of participants in the higher-paid group will be made only to the extent that such contributions do not cause the average of the deferral percentages or the contribution percentages of such
participants to exceed the limits provided under Section 5.6 or 6.6 (whichever
may be applicable); and (b) the employer will not make a matching contribution
with respect to any 401(k) savings contributions or after-tax employee
contributions that are distributed to the participant under Section 5.9 or
Section 6.8, or with respect to any 401(k) savings contributions that are
recharacterized as after-tax employee contributions under Section 5.9 (unless
under the terms of the employer's plan such after-tax employee contributions
would also be matched).
If the employer has selected a discretionary matching contribution formula in the adoption agreement, such contributions shall be allocated under one or more of the following methods: (a) each eligible participant shall receive an equal allocation as a percentage of the participant's matchable savings contributions during such plan year or matching period; (b) each eligible participant in the lower-paid group shall receive an equal allocation as a percentage of such participant's matchable savings contributions during such plan year or matching period, and each eligible participant in the higher-paid group shall receive an equal allocation as a percentage of such participant's matchable savings contributions during such plan year or matching period, provided that the percentage of matchable savings contributions allocated to the eligible participants in the lower-paid group is greater than the percentage of matchable savings contributions allocated to the eligible participants in the higher paid group; (c) such contributions will be allocated solely among the eligible participants in the lower-paid group as an equal percentage of such participant's matchable savings contributions during such plan year or matching period; or (d) two or more salary ranges will be established such that the employer matching contribution as a percentage of plan compensation which is allocated to the participants in the lowest salary range is the greatest and the allocation of employer matching contributions as a percentage of plan compensation decreases as the salary ranges increase. The employer may limit discretionary matching contributions to a specified percentage of each participant's matchable savings contributions, to a specified dollar amount.
The plan administrator will select the matching period, which may be the plan year or a period shorter than the plan year such as each month, three months (quarterly), four months (tri-annual) or six months (semi-annual). Matching contributions for a matching period will be transferred to the trustee within a reasonable time after the end of such period. However, the total amount of the employer's matching contributions for a plan year will be paid to the trustee by the time specified in Section 8.1(b).
Matching Contributions shall be vested in accordance with the vesting schedule selected in the adoption agreement. In any event, Matching Contributions shall be fully vested at normal retirement age, upon the complete or partial termination of the profit-sharing plan, or upon the complete discontinuance of employer contributions.
Forfeitures of Matching Contributions, other than Excess Aggregate Contributions, shall be made in accordance with section 8.2.
(b) MATCHING CONTRIBUTIONS ACCOUNT. The plan administrator will maintain a matching contributions account for each participant for whom the employer makes a matching contribution. Matching contributions on behalf of the participant for a matching period will be credited to his matching contributions account.
(c) USE OF FORFEITURES. Forfeitures occurring during a matching period, will be applied according to the method specified in the adoption agreement. Forfeitures of Excess Aggregate Contributions shall be made in accordance with Section 6.8(6)(iii).
If the forfeitures occurring in a matching period exceed the amount of employer matching contributions required for such period, the excess will be carried over to a succeeding plan year. Any forfeitures not applied at the end of a plan year will be applied in accordance with the adoption agreement.
(d) SOURCE OF CONTRIBUTIONS. Unless specified otherwise in the adoption agreement, the employer will make the matching contributions required under this section regardless of whether the employer has current or accumulated profits.
(e) SUPPLEMENTAL PROFIT SHARING CONTRIBUTIONS. If in the MetLife Security Insurance Company of Louisiana MetLife RetirePro Program adoption agreement the employer elects profit sharing contributions or supplemental contributions, the employer may make such contributions. Such contributions (if any) are in addition to any matching contributions the employer makes. Such contributions will be allocated to separate employer profit sharing contributions accounts on behalf of participants accordance with the adoption agreement and Section 8.2, except that any forfeitures from such accounts will be applied in accordance with subsection (c) above instead of Section 8.2(e).
8.6 PERSONS ENTITLED TO SHARE IN ALLOCATIONS.
(a) APPLICATION OF THIS SECTION. The rules in this section will determine which
persons are entitled to an allocation of employer contributions for a plan year
under a profit-sharing, a target benefit, contributions for a plan year under a
profit-sharing, a target benefit, or a money purchase pension plan or of
employer supplemental profit-sharing contributions under a 401(k) plan. See
Section 8.5 (a) for entitlement to an employer matching contribution.
(b) LAST DAY OF PLAN YEAR RULE. If provided in the adoption agreement, a person will not be entitled to an allocation of employer contributions unless he was still an active employee at the end of the plan year.
(c) YEAR OF SERVICE RULE. If provided in the adoption agreement, a person will not be entitled to an allocation of employer contributions unless during such plan year he completed at least 1,000 hours of service (or such smaller number of hours of service as is specified in the adoption agreement for a year of service). In the case of a person who first became an employee during a plan year, the number of hours of service required will be prorated based on the date when he became an employee.
(d) LAST DAY OF PLAN YEAR AND YEAR OF SERVICE. If provided in the adoption agreement, a person will not be entitled to an allocation of employer contributions unless he satisfies the requirements of subsections (b) and (c) as of the end of the plan year.
(e) EXCEPTION. The requirements of subsections (b), (c) and (d) above will not apply to a person who terminated employment with the employer during the plan year because of retirement, death or disability.
(f) STANDARDIZED PLANS. Notwithstanding the above, if selected in the adoption agreements, in a standardized plan, all participants in the plan are entitled to receive an allocation of employer contributions, unless they have less than or equal to 500 hours of service and are not employed on the last day of the plan year.
8.7 ALLOCATION RULES.
(a) APPLICATION OF THIS SECTION. This section governs the allocation of employer contributions for a plan year under a profit sharing or money purchase pension plan or employer contributions for a plan year under a profit sharing or money purchase pension plan or employer supplemental profit-sharing contributions under a 401(k) plan. See Section 8.4(c)
for the allocation of employer contributions under a traget benefit plan (and any forfeitures used to reduce employer contributions) and Section 8.5(a) for the allocation of employer matching contributions (and any forfeitures used to reduce employer matching contributions).
As used in this section, the term participant includes any person entitled to share in the allocation of employer contributions (and/or forfeitures) for the plan year.
(b) MINIMUM CONTRIBUTION FORMULA. If in the adoption agreement the employer elected a minimum contribution formula, employer contributions (and any forfeitures) will be allocated first so that each participant (or, if elected in the adoption agreement, each participant who is not a key employee--as defined in Section 14.2(a)) receives the minimum contribution required under such formula.
(c) NON-INTEGRATED FORMULA. If in the adoption agreement the employer elected a non-integrated formula, employer contributions will be allocated so that each participant who is entitled to receive an allocation of the employer's contribution receives an equal contribution as either a percentage of his plan compensation or a flat dollar amount for the plan year (employer contributions to a profit-sharing plan or employer supplemental profit-sharing contributions to a 401(k) Plan), or so that each participant receives the percentage of his plan compensation for the plan year specified in the adoption agreement (money purchase pension plan). However, notwithstanding the above, if selected in the adoption agreement, a nonstandardized plan may require a prrticipant to satisfy the requirements of subsection (b), (c), or (d) of Section 8.6.
(d) INTEGRATED FORMULA.
(i) Notwithstanding any section of the plan to the contrary, this subsection (i) applies to the allocation of employer contributions under a profit-sharing plan or employer supplemental profit-sharing contributions to a 401(k) plan where the employer elected an integrated formula in the adoption agreement. However, the integrated formula shall not be taken into account with respect to 401(k) plan contributions. Employer contributions for the plan year plus any forfeitures will be allocated to participant's accounts as follows:
Step One: Contributions and forfeitures will be allocated to each participant's total compensation bears to all participants' total compensation bears to all participants' total compensation, but not in excess of 3% of each participant's compensation.
Step Two: Any contributions and forfeitures remaining after the allocation in Step One will be allocated to each participant's account in the ratio that each participant's account in the ratio that each participant's compensation for the plan year in excess of the integration level bears to the excess compensation of all participants but not in excess of 3% of each Participant's Plan Compensation. For purposes of this Step Two, in the case of any Participant who has exceeded the cumulative permitted disparity limit described below, such Participant's total Plan Compensation for the Plan year will be taken into account.
Step Three: Any contributions and forfeitures remaining after the allocation in Step Two will be allocated to each participant's account in the ratio that the sum of each participant's total compensation and compensation in excess of the integration level bears to the sum of all participants total compensation and compensation in excess of the integratin level, but not in excess of the profit-sharing maximum disparity rate. For purposes of this Step Three, in the case of any Participant who has exceeded the cumulative
permitted disparity limit described below, two times such Participant's total Plan Compensation for the Plan Year will be taken into account.
Step Four: Any remaining employer contributions or forfeitures will be allocated to each participant's account in the ratio that each participant's total compensation for the plan year bears to all participants' total compensation for that year.
Except as otherwise provided in the adoption agreement, the profit-sharing maximum disparity rate will be equal to 2.7%. If the adoption agreement so provides, the profit-sharing maximum disparity rate will be equal to the lesser of:
(A) 2.7%; or
(B) the applicable percentage determined in accordance with the table below:
If the integration level
the applicable
is more than but not more than percentage is:
------------ ----------------- --------------
$0 Y* 2.7%
X* 80% of TWB 1.3%
80% of TWB Y** 2.4%
|
*X=the greater of $10,000 or 20 percent of the TWB
**Y=any amount more than 80% of the TWB but less than 100% of the TWB.
TWB= the Social Security Taxable Wage Base.
(ii) This subsection (ii) applies to the allocation of employer contributions under a money purchase pension plan where the employer elected an integrated formula in the adoption agreement. Such allocations will be performed so that each paticipant receives the percentage of his total plan compensation for the plan year specified in the adoption agreement (the "base contibution percentage"), plus a percentage and not to exceed the lesser of the base contribution percentage or the money purchase maaximum disparity rate of such participant's compensation in excess of the integration level.
Except as otherwise provided in the adoption agreement, the money purchase maximum disparity rate is 5.7%. If the adoption agreement so provides, the money purchase maximum disparity rate will be equal to the lesser of:
(A) 2.7%; or
(B) the applicable percentage determined in accordance with the table below:
If the integration level
the applicable
is more than but not more than percentage is:
------------ ----------------- --------------
$0 X* 2.7%
X* 80% of TWB 1.3%
80% of TWB Y** 2.4%
|
*X=the greater of $ 10,000 or 20 percent of the TWB
**Y=any amount more than 80% of the TWB but less than 100% of the TWB.
TWB=the Social Security Taxable Wage Base.
(iii) Unless the employer elects a lower maximum disparity rate in (i) or
(ii) above, the integration level shall be equal to the taxable wage base. The
taxable wage base is the maximum amount of earnings which may be considered as
wages for a year under section 3121(a)(1) of the Code in effect as of the
beginning of the plan year.
(iv) OVERALL PERMITTED DISPARITY LIMITS.
(A) ANNUAL OVERALL PERMITTED DISPARITY LIMIT.
Notwithstanding the preceding paragraphs, for any Plan Year this Plan benefits any Participant who benefits under another qualified plan or simplified employee pension, as defined in Section 408(k) of the Code, maintained by the Employer that provides for permitted disparity (or imputes disparity), Employer contributions and forfeitures will be allocated to the account of each Participant who either completes more than 500 hours of service during the Plan Year or who is employed on the last day of the Plan Year in the ratio that such Participants' total Plan Compensation bears to the total Plan Compensation of all Participants.
(B) CUMULATIVE PERMITTED DISPARITY LIMIT. Effective for Plan Years beginning on or after January 1, 1995, the cumulative permitted disparity limit for a Participant is 35 total cumulative permitted disparity years. Total cumulative permitted disparity years means the number of years credited to the Participant for allocation or accrual purposes under this Plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the Employer. For purposes of determining the Participant's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the Participant has not benefitted under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the Participant has no cumulative permitted disparity limit.
(e) PLAN COMPENSATION. For purposes of determining allocations to a
participant's account under this section (and, if applicable, under Section 8.5
(c)) plan compensation means the participant's plan compensation for the plan
year under Section 2.19, adjusted as follows:
(i) Unless otherwise provided in the adoption agreement, excluding any plan
compensation paid to the participant before he became a participant under
Section 4.3 or after he ceased to be a participant under Section 4.4.
(ii) Excluding any plan compensation during the plan year above the cap (if any) specified in the adoption agreement.
(iii) Excluding any items of plan compensation specified in the adoption agreement. However, no items of plan compensation will be excluded if the effect of such exclusion would be to use for plan purposes a higher percentage of the total plan compensation of employees in the higher paid group than the percentage of total plan compensation used for plan purposes for employees in the lower paid group.
Notwithstanding subsections (ii) and (iii) above, no items of compensation will be excluded if in the adoption agreement the employer elects an integrated formula for allocations to participants' accounts (provided that the employer may in the adoption agreement elect a dollar cap on compensation which is above the Social Security wage base for such year).
8.8 DETERMINATION OF LEVEL FUNDING AMOUNT. For purposes of determining a Participant's Target Benefit, a Participant's years of projected participation under the Plan is the sum of (1) and (2),
where (1) is the number of years during which the Participant benefitted under this Plan beginning with the latest of: (a) the first Plan Year in which the Participant benefitted under the Plan, (b) the first Plan Year taken into account in the Target Benefit formula, and (c) any Plan Year immediately following a Plan Year in which the Plan did not satisfy the safe harbor for target benefit plans in Regulations section 1.401(a)(4)-8(b)(3), and ending with the last day of the current Plan Year, and (2) is the number of years, if any, subsequent to the current Plan Year through the end of the Plan Year in which the Participant attains normal retirement age.
For purposes of this definition of years of projected participation, if this
Plan is a prior safe harbor plan, the Plan is deemed to satisfy the safe harbor
for target benefit plans in Regulations Section 1.401(a)(4)-8(b)(3) and a
Participant is treated as benefiting under the Plan in any Plan Year beginning
prior to January 1, 1994. A prior safe harbor plan is a plan that (1) was
adopted and in effect on September 19, 1991, (2) which on that date contained a
stated benefit formula that took into account service prior to that date, and
(3) satisfied the applicable nondiscrimination requirements for target benefit
plans for those prior years. For purposes of determining whether a Plan
satisfies the applicable nondiscrimination requirements for target benefit plans
for Plan Years beginning before January 1, 1994, no amendments after September
19, 1991, other than amendments necessary to satisfy section 401(l) of the Code,
will be taken into account. For purposes of this Section, Average Annual
Compensation means the average of a Participant's annual Plan Compensation, as
defined in Section 2.19, over the three-year consecutive Plan Year period ending
in the current year or in any prior year that produces the highest average. If
the Participant has less than three years of participation in this Plan, Plan
Compensation is average over the Participant's total period of participation.
For each Plan Year, the Employer will contribute for each Participant who is eligible to receive an allocation, the annual Level Funding Amount calculated below. The annual Level Funding Amount with respect to a Participant will be determined each year as follows:
Step 1: Calculate the present value of the Participant's Target Benefit, as set forth in the Adoption Agreement (assuming a normal retirement date of age 65) by multiplying the Target Benefit by the applicable factor in Table I of the Appendix to the Adoption Agreement.
Step 2: Calculate the excess, if any, of the amount determined in Step 1 over the "theoretical reserve."
Step 3: Amortize the result in Step 2 by multiplying it by the applicable factor from Table II. For the Plan Year in which the Participant attains normal retirement age and for any subsequent Plan Year, the applicable factor is 1.0.
For purposes of this section, the theoretical reserve is determined according to
(i) and (ii) below:
(i) Initial Theoretical Reserve. A Participant's theoretical reserve as of the last day of the Participant's first year of projected participation (year 1) is zero. However, if this Plan is a prior safe harbor plan with a stated benefit formula that takes into account Plan Years prior to the first plan year this Plan satisfies the safe harbor in Regulations section 1.401(a)(4)-8(b)(3)(c), the initial theoretical reserve is determined as follows:
(A) Calculate as of the last day of the Plan Year immediately preceding year 1 the present value of the Target Benefit, using the actuarial assumptions, the provisions of the Plan, and the Participant's Plan Compensation as of such date. For a Participant who is beyond normal retirement age during year 1,
the Target Benefit will be determined using the actuarial assumptions, the provisions of the Plan, and the Participant's Plan Compensation as of such date, except that the straight life annuity factor used in that determination will be the factor applicable for the Participant's normal retirement age.
(B) Calculate as of the last day of the Plan Year immediately preceding year 1 the present value of future employer contributions, i.e., the contributions due each Plan Year using the actuarial assumptions, the provisions of the Plan (disregarding those provisions of the Plan providing for the limitations of section 415 of the Code or the minimum contributions under section 416 of the Code), and the Participant's Plan Compensation as of such date, beginning with year 1 through the end of the Plan Year in which the Participant attains normal retirement age.
(C) Subtract the amount determined in (B) from the amount determined in (A). )C
(ii) Accumulate the initial theoretical reserve determined in (i) and the Employer contributions (as limited by Section 415 of the Code, but without regard to any required minimum contributions under Section 416 of the Code) for each Plan Year beginning in year 1 up through the last day of the current Plan Year (excluding contribution(s) (if any) for the current Plan Year) using the Plan's interest assumption in effect for each such year. In any Plan Year following the Plan Year in which the Participant attains normal retirement age, the accumulation is calculated using an interest rate of 0%. For purposes of determining the level of annual Employer contributions necessary to fund the Target Benefit, the calculations in (i) and (ii) above will be made as of the last day of each Plan Year, on the basis of the Participant's age on the Participant's last birthday, using the interest rate in effect on the last day of the prior Plan Year.
ARTICLE 9
BENEFITS UPON RETIREMENT OR DISABILITY
9.1 RETIREMENT DATES.
(a) NORMAL RETIREMENT DATE. A participant may retire on his normal retirement date. His normal retirement date is his 65th birthday unless the employer specifies another date in the adoption agreement; any other date may not be later than his 65th birthday or, if later, the 5th anniversary of the first day of the plan year in which he commenced participation. If a participant's normal retirement date is the date he completes a specified number of years of participation, years of participation in any predecessor plan will be counted toward meeting the requirement.
If, for plan years beginning before January 1, 1988, normal retirement age was determined with reference to the anniversary of the participation commencement date (more than 5 but not to exceed 10 years), the anniversary date for participants who first commenced participation under the plan before the first plan year beginning on or after January 1, 1988, shall be the earlier of (A) the tenth anniversary of the date the participant commenced participation in the plan (or such anniversary as had been elected by the employer, if less than 10) or (B) the fifth anniversary of the first day of the first plan year beginning on or after January 1, 1988. The participation commencement date is the first day of the first plan year in which the participant commenced participation in the plan.
(b) EARLY RETIREMENT DATE. If the employer selects an early retirement provision in the adoption agreement, a participant may retire on any date on or after he meets the age and service requirements specified in the adoption agreement for early retirement. A participant who terminates his employment after
having satisfied the service but not the age requirement for early retirement specified in the adoption agreement will become eligible to receive early retirement benefits upon satisfaction of the age requirement.
(c) LATE RETIREMENT DATE. If a participant continues in employment after his normal retirement date, he may continue to make 401(k) savings contributions and/or after-tax employee contributions (if applicable in the employer's plan) until his later retirement date, and he will continue to share in employer contributions and forfeitures in accordance with the plan's allocation formula until his late retirement date.
9.2 DISABILITY RETIREMENT.
(a) A participant will be considered to have retired if he leaves the employer's service because of total and permanent disability. Total and permanent disability means a permanent physical or mental impairment which prevents the participant from engaging in any substantial gainful occupation or employment. The permanence and degree of such impairment shall be supported by medical evidence.
(b) The plan administrator will determine whether a participant has a total and permanent disability under uniform rules of general application, and the plan administrator's determination will be final.
9.3 RETIREMENT BENEFITS.
(a) A participant who retires will be fully vested and will receive benefit payments based upon the total amount credited to his account. The participant will receive: (i) in the case of a single sum payment, the total amount credited to his accounts at the date the distribution is made; (ii) in the case of an annuity contract such total amount will be used to purchase such annuity contract; or (iii) in the case of installment payments, the first such installment will be based on such total amount, and subsequent installments will be based on such total amount, and subsequent installments will be based on the total amount credited to the participant's accounts at the date of each such installment.
(b) The date of distribution to a retired participant (or the date of the first installment payment to the retired participant) will be the earliest practicable date afer the valuation date coincident with or next following either (i) the participant's retirement date or, (ii) such later date as the paticipant designates, subject to the required distribution date rules of Section 9.8. However, if the participant's account balance(s) exceed $3,500 distribution before normal retirement date will not be made (or installment payments will not commence) unless the participant and his spouse consents thereto in accordance with applicable regulations.
(c) The consent of the participant and the participant's spouse shall be obtained in writing within the 90-day period ending on the annuity starting date. The annuity starting date is the first day of the first period for which an amount is paid as an annuity or any other form. The plan administrator shall notify the participant and the participant's spouse of the right to defer any distribution until the participant's account balance is no longer immediately distributable. Such notification shall include a general description of the material features, and an explanation of the relative values of, the optional forms of benefit available under the plan in a manner that would satisfy the notice requirements of section 417(a)(3), and shall be provided no less than 30 days and no more than 90 days prior to the annuity starting date. However, distribution may commence less than 30 days after the notice described in the preceding sentence is given, provided the distribution is one to which sections 401(a)(11) and 417 of the Code do not apply, the plan administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution option), and the Participant, after receiving the notice, affirmatively elects a distribution.
Notwithstanding the foregoing, only the participant need consent to the commencement of a distribution in the form of a qualified joint and survivor annuity while the account balancea is immediately distributable. (Furthermore, if payment in the form of a qualified joint and survivor annuity is not required with respect to the participant pursuant to section 10.6 of the plan, only the participant need consent to the distribution of an account balance that is immediately distributable.) Neither the consent of the participant nor the participant's spouse shall be required to the extent that a distribution is required to satisfy section 401(a)(9) or section 415 of the Code. In addition, upon termination of this plan if the plan does not offer an annuity option (purchased from a commercial provider) and if the employer or any entity within the same controlled group as the employer does not maintain another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7)of the Code), the participant's account balance may, without the participant's consent, be distributed to the participant. However, if any entity within the same controlled group as the employer maintains another defined contribution plan (other than an employee stock ownership plan as defined in section 4975(e)(7) of the Code) then the participant's account balance will be transferred, without the participant's consent, to the other plan if the participant does not consent to an immediate distribution.
An account balance is immediately distributable if any part of the account balance could be distributed to the participant (or surviving spouse) before the participant attains or would have attained if not deceased) the later of normal retirement age or age 62.
9.4 METHOD OF PAYMENT. Subject to the rules specified in this article, a participant's retirement benefit will be paid to him on one or more of the
following methods, as elected by the participant:
(a) one or more payments within one taxable year of the participant;
(b) approximately equal monthly, quarterly, semi-annual or annual over a period certain not exceeding the life expectancy of the participant or the joint life and last survivor expectancy of the participant and his designated beneficiary;
(c) applied toward the purchase of a fixed annuity contract with payments over a period of time not exceeding the lifetime of the participant or the lifetimes of the participant and his designated beneficiary.
9.5 MARRIED PARTICIPANTS.
(a) QUALIFIED JOINT AND SURVIVOR ANNUITY. Except in the case of a participant in an exempt profit sharing or 401(k) plan (as defined in subsection (d) below) or in the case of a participant with a small account (as defined in subsection (e) below), retirement benefits to a married participant will be paid in the form of the purchase and delivery of a qualified joint and survivor annuity unless the participant elects otherwise in writing during the 90-day period ending on the annuity starting date. The participant may elect to have such annuity distributed upon attainment of the earliest retirement age under the plan. The earliest retirement age is the earliest date on which, under the plan, the participant could elect to receive retirement benefits. Such an election must be accompanied by his spouse's qualified consent (other than the participant's election of a joint and survivor annuity giving the spouse a 50% or greater survivorship interest). At any time before the
commencement of benefits, the participant may make and revoke such an election without limit as to the number of elections. The making of such an election requires his spouse's qualified consent; revocation of such an election does not.
A qualified joint and survivor annuity is an immediate annuity for the life of the participant with a survivor annuity for the life of the participant's spouse which is 50 percent of the amount of the annuity payable during the joint lives of the participant and the participant's spouse. The qualified joint and survivor annuity is the amount of benefit that can be purchased with the participant's vested interest in his accounts.
(b) JOINT AND SURVIVOR NOTICE.
(i) The plan administrator will provide each married participant no less than 30 days and no more than 90 days prior to the annuity starting date with a written explanation of: the terms and conditions of a qualified joint and survivor annuity; the participant's right to make and the effect of an election to waive the qualified joint and survivor annuity form of benefit; the rights of a participant's spouse; and the right to make, and the effect of, a revocation of a previous election to waive the qualified joint and survivor annuity.
(ii) Notwithstanding the other requirements of the notice requirements prescribed by this section and section 10.3 with respect to a preretirement qualified retirement annuity; notice need not be given to a participant if (1) the plan "fully subsidizes" the costs of a qualified joint and survivor annuity or qualified preretirement survivor annuity, and (2) the plan does not allow the participant to waive the qualified joint and survivor annuity or qualified preretirement survivor annuity and does not allow a married participant to designate a nonspouse beneficiary. For purposes of this section, a plan fully subsidizes the costs of a benefit if no increase in cost, or decrease in benefits to the participant may result from the participant's failure to elect another benefit.
(c) QUALIFIED CONSENT. A waiver of a qualified joint and survivor annuity or a qualified preretirement survivor annuity. Any waiver of a qualified joint and survivor annuity or a qualified preretirement survivor annuity shall not be effective unless: (a) the participant's spouse consents in writing to the election; (b) the election designates a specific beneficiary, including any class of beneficiaries or any contingent beneficiaries, which may not be changed without spousal consent (or the spouse expressly permits designations by the participant without any further spousal consent); (c) the spouse's consent acknowledges the effect of the election; and (d) the spouse's consent is witnessed by a plan representative or notary public. Additionally, a participant's waiver of the qualified joint and survivor annuity shall not be effective unless the election designates a form of benefit payment which may not be changed without spousal consent (or the spouse expressly permits designations by the participant without any further spousal consent). If it is established to the satisfaction of a plan representative that there is no spouse or that the spouse cannot be located, a waiver will be deemed a qualifed consent.
Any consent by a spouse obtained under this provision (or establishment that the consent of a spouse may not be obtained) shall be effective only with respect to such spouse. A consent that permits designations by the participant without any requirement of further consent by such spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary, and a specific form of benefit where applicable, and that the spouse voluntarily elects to relinquish either or both of such rights. A revocation of a prior waiver may be made by a participant without the consent of the spouse at any time before the commencement of benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the participant has received notice as provided in Section 9.5(b) with respect to a qualified joint and survivor annuity or Section 10.3(b) with respect to a qualified preretirement survivor annuity.
The requiement for a qualified consent is waived if the participant establishes to the plan administrator's satisfaction that there is no spouse or that the spouse cannot be located or under other circumstances described in regulations under Code Section 417. The requirement of a qualified consent is also waived for any election or revocation by a participant which has the effect of increasing the survivorship interest of the spouse.
(d) EXEMPT PROFIT SHARING PLANS. Is a plan which meets the Safe Harbor Rules under Section 10.6. In a profit sharing plan or 401(k) plan, the sole beneficiary of a married participant in the event of his death before retirement benefits commence is his spouse, unless his spouse has agreed otherwise in a qualified consent (as defined in subsection (c) above) (see Section 10.5(a)). Therefore, such a plan is exempt from the qualified joint and survivor annuity requirement of subsection (a) above. Under an exempt profit sharing or 401(k) plan, a participant will receive his retirement benifit in the form of a lump sum payment under Section 9.4(a) unless the participant elects otherwise.
However, a profit sharing or 401(k) plan is not exempt from the qualified joint and survivor annuity requirement if the participant in fact elects an annuity form of payment under Section 9.4(c). Also a profit sharing or 401(k) plan is not exempt from such requirement with respect to any participant for whom the plan is a direct or indirect transferee of a defined benefit pension plan, a money purchase pension plan (including a target benefit plan) or a stock bonus or profit sharing plan which provides for a life annuity form of payment to the participant; however, this plan will not be treated as a transferee plan solely by reason of a rollover from any such other plan. In addition, a profit sharing plan will not be considered exempt unless the participant's spouse is the beneficiary of any insurance on the participant's life, unless his spouse agrees otherwise in a qualified consent.
(e) SMALL ACCOUNT DEFINED. A small account is an account with a vested balance that does not exceed $3,500. In applying the $3,500 rule, all accounts or portions of accounts from which the claimant is entitled to payment are added together except for accounts attributable to qualified voluntary employee contributions. If the present value of a participant's account balance is zero, such participant shall be deemed to have received a distribution of such vested account balance. Except as otherwise provided in the adoption agreement, a small account will be distributed as soon as practicable following termination of employment or retirement in the form of a single sum payment.
(f) TRANSITION RULES. The provisions of this section apply to any participant who is credited with at least one hour of service on or after August 23, 1984. They apply to any other participant in accordance with Section 10.7 who was credited with at least one hour of service between September 1, 1974, and August 23, 1984 (a transition participant).
9.6 UNMARRIED PARTICIPANTS. Except in the case of an exempt profit sharing or 401(k) plan (as defined in Section 9.5(d) or as provided in Section 9.5(f), unless the participant elects otherwise, benefits to an unmarried participant will be paid in the form of an annuity providing periodic payments for the lifetime of the participant in the amount that can be purchased with the participant's vested interest in his accounts.
9.6A. DIRECT ROLLOVER REQUIREMENTS. This Section applies to distributions made on or after January 1, 1993.
(a) ELECTION TO MAKE DIRECT ROLLOVER. Notwithstanding any provision of the plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.
(b) DEFINITIONS.
(1) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution(s) that is reasonably expected to total less than $200 during a year.
(2) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified plan described in section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.
(3) DISTRIBUTEE. A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse.
(4) DIRECT ROLLOVER. A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee.
9.7 DISTRIBUTION REQUIREMENTS.
RULES APPLICABLE TO INSTALLMENT PAYMENTS. The following rules will apply to benefits payable in the form of installments under Section 9.4(b).
Life expectancy of the participant and the participant's spouse is calculated as of the required beginning date (see Section 9.8) or if elected by the participant (or the spouse, if required) by the time distributions are required to begin, will be recalculated annually thereafter. The life expectancy of a designated beneficiary other than the participant's spouse will be calculated as of the required distribution date and payments for any 12 consecutive month period after such date will be based on such life expectancy less the number of whole years passed since such date. Life expectancy and joint and last survivor expectancy are computed using the return multiples in Section 1.72-9 of the Income Tax Regulations.
(a)(1) Subject to 9.5, Joint and Survivor Annuity Requirements, the requirements of this article shall apply to any distribution of a participant's interest and will take precedence over any inconsistent provisions of this plan. Unless otherwise specified, the provisions of this article apply to calendar years beginning after December 31, 1984.
(2) All distributions required under this article shall be determined and made in accordance with the proposed regulations under section 401(a)(9), including the minimum distribution incidental benefit requirement of section 1.401(a)(9)-2 of the proposed federal income tax regulations.
(b) REQUIRED BEGINNING DATE. The entire interest of a participant must be distributed or begin to be distributed no later than the participant's required beginning date.
(c) LIMITS ON DISTRIBUTION PERIODS. As of the first distribution calendar year, distributions, if not made in a single-sum, may only be made over one of the following periods (or a combination thereof):
(i) the life of the participant,
(ii) the life of the participant and a designated beneficiary,
(iii) a period certain not extending beyond the life expectancy of the participant, or
(iv) a period certain not extending beyond the joint and last survivor expectancy of the participant and a designated beneficiary.
(d)(1) DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR. If the participant's interest is to be distributed in other than a single sum, the following minimum distribution rules shall apply on or after the required beginning date.
(d)(2) INDIVIDUAL ACCOUNT.
(a) If a participant's benefit is to be distributed over (1) a period not extending beyond the life expectancy of the participant or the joint life and last survivor expectancy of the participant and the participant's designated beneficiary or (2) a period not extending beyond the life expectancy of the designated beneficiary, the amount required to be distributed for each calendar year beginning with distributions for the first distribution calendar year, must at least equal the quotient obtained by dividing the participant's benefit by the applicable life expectancy.
(b) For calendar years beginning before January 1, 1989, if the participant's spouse is not the designated beneficiary, the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the participant.
(c) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with distributions for the first distribution calendar year shall not be less than the quotient obtained by dividing the participant's benefit by the lesser of (1) the applicable life expectancy or (2) if the participant's spouse is not the designated beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed regulations. Distributions after the death of the participant shall be distributed using the applicable life expectancy in section 9.7(d)(2)(a) above as the relevant divisor without regard to Proposed Regulations section 1.401(a)(9)-2.
(d) The minimum distribution required for the participant's first distribution calendar year must be made on or before the participant's required beginning date. The minimum distribution for other calendar years, including the minimum distribution for the distribution calendar year in which the employee's required beginning date occurs, must be made on or before December 31 of that distribution calendar year.
(d)(3) OTHER FORMS.
(a) If the participant's benefit is distributed in the form of an annuity purchased from an insurance company, distributions thereunder shall be made in accordance with the requirements of Section 401(a)(9) of the Code and the proposed regulations thereunder.
9.8 REQUIRED BEGINNING DATE. Distribution to any participant (whether active, retired or otherwise terminated) must be made, or installment or annuity payments must begin, no later than April 1 following the calendar year in which he reaches age 70-1/2 (the required beginning date). See Section 10.4(c) for definitions.
9.9 TRANSITIONAL RULE.
(a) IN GENERAL. This section will aply if the employer's execution of the adoption agreement constitutes an amendment and restatment of an existing plan that was in effect before 1984, and with respect to which one or more participants had made the designations described in this section. Notwithstanding the requirements of Sections 9.7, but subject to the spousal protection and small benefits provisions of Section 9.5, distributions on behalf of any employee may be made provided that each of the following requirements is satisfied (regardless of when such distribution commences):
(i) the distribution is one which would not have disqualified the plan under Code Section 401(a)(9) as in effect before amendment by the Deficit Reduction Act of 1984;
(ii) the distribution is in accordance with a method of distribution designated by the employee whose interest in the plan is being distributed or, if the employee is deceased, by a beneficiary of such employee;
(iii) such designation was in writing, was signed by the employee or the beneficiary, and was made before January 1, 1984;
(iv) the employee had accrued a benefit under the plan as of December 31, 1983; and
(v) the method of distribution designated by the employee or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the employee's death, the beneficiaries of the employee listed in order of priority.
(b) DISTRIBUTIONS ON DEATH. A distribution upon death will not be covered by this transitional rule unless the designation contains the information described in subsection (a) above with respect to the distributions to be made upon the death of the employee.
(c) PRESUMPTION OF DESIGNATION. For any distribution which commenced before January 1, 1984, and continued after December 31, 1983, the employee, or the beneficiary, to whom such distribution is being made will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirement in subsections (a)(i) and (v) above.
(d) REVOCATION OF DESIGNATION. If such a designation is revoked, any subsequent form of distribution must satisfy the requirements of Code Section 401(a)(9) and the proposed regulations thereunder as in effect at the time of distribution. If a designation is revoked subsequent to the date distributions are required to begin, the plan must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed which would have been required to have been
distributed to satisfy section 401(a)(9) of the Code and the proposed regulations thereunder, but for the section 242(b)(2) election. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in section 1.401(a)(9)-2 of the proposed regulations. Any changes in the original or a subsequent designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter directly or indirectly the period over which distributions are to be made under the designation (for example, by altering the relevant measuring life). In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 in section 1.401(a)(9) of the proposed regulations shall apply.
9.10 DATE BENEFIT PAYMENTS BEGIN. Unless the participant elects otherwise (but subject to the required distribution date rule in Section 9.7), distribution of benefits under the plan will begin no later than the 60th day following the close of the plan year in which the latest of the following events occurs:
(a) the termination of the participant's employment with the employer;
(b) the participant attains age 65 or the participant's normal retirement date, if earlier;
(c) the tenth anniversary of the year in which the participant began participation in the plan.
Notwithstanding the foregoing, the failure of a participant and spouse to consent to a distribution while a benefit is immediately distributable, within the meaning of section 9.3 of the plan, shall be deemed to be an election to defer commencement of payment of any benefit sufficient to satisfy this section.
9.11 ANNUITIES NONTRANSFERABLE. Any annuity contract distributed to a participant, spouse or beneficiary under the plan must be nontransferable. The terms of any annuity contract purchased and distributed by the plan to a participant or spouse shall comply with the requirements of this Plan.
ARTICLE 10
BENEFITS UPON DEATH
10.1 BENEFITS UPON DEATH.
(a) DEATH DURING EMPLOYMENT OR AFTER RETIREMENT.
(1) IN GENERAL. If a participant dies while employed by the employer or after retirement (including disability retirement), his beneficiary will receive: (i) in the case of a single sum payment, the total amount credited to the participant's accounts at the date distribution is made; (ii) in the case of an annuity contract, such total amount will be used to purchase such annuity contract; or (iii) in the case of installment payments, the first such installment will be based on such total amount, and subsequent installments will be based on the total amount credited to the participant's accounts at the date of each such installment.
(2) SPECIAL RULE FOR ACCOUNTS INVESTED IN CERTAIN ANNUITY CONTRACTS. If all or any portion of the participant's account is invested in an annuity contract, and the terms of the contract so provide, the participant's beneficiary will receive a death benefit equal to the sum of (a) the total amount credited to the participant's accounts which is not invested in such annuity contract as of the distribution date and (b) the greatest of: (i) the total amount credited
to the participant under the contract at the date distribution is made; (ii) the excess of the total contributions to the contract over total withdrawals from the contract; or (iii) the highest amount credited to the contract as of the end of the calendar year in which any fifth anniversary of the initial acquisition of the contract occurred. This paragraph (2) will become effective on the date that a contract providing for such death benefit is acquired.
(b) DEATH AFTER OTHER TERMINATION OF EMPLOYMENT. If a participant dies after termination of employment for any reason other than retirement (including disability retirement), his beneficiary will receive death benefits determined as follows:
(i) If the participant died before forfeiture of the nonvested portion of his accounts under Section 11.4, the vested amount in the participant's accounts will be determined and the balance will be forfeited immediately, death benefits will be based upon the vested amounts remaining after such forfeiture, and such amount will be applied as provided in subsection (a) above.
(ii) If the participant dies after forfeiture of the nonvested portion of his accounts under Section 11.4, death benefits will be based upon the vested amounts remaining after such forfeiture, and such amount (reduced by any prior payments to the participant before his death) will be applied as provided in subsection (a) above.
(c) DATE OF DISTRIBUTION. The date of distribution to a beneficiary (or the date of the first installment payment to the beneficiary) will be the earliest practicable date after the valuation date coincident with or next following either (i) the date when the plan administrator has received such evidence of the participant's death and such evidence of the beneficiary's (or beneficiaries') right to receive such distribution as the plan administrator deems necessary, or (ii) such later date as the beneficiary designates, subject to Section 10.4. However, where the participant's spouse is the beneficiary under Section 10.5(a), payment will be made within 90 days after the participant's death (unless under the circumstances, 90 days is unreasonably short); however, the spouse may elect to defer payment until after the valuation date next following the participant's death.
10.2 METHOD OF PAYMENT. Subject to the requirements of Section 10.3, death benefits will be paid in one or a combination of the following methods:
(a) one or more payments within one taxable year of the beneficiary;
(b) approximately equal monthly, quarterly, semi-annual or annual installments over a period certain permitted under Section 10.4;
(c) applied toward the purchase of a fixed annuity contract providing for payments over a period permitted under Section 10.4.
The method of payment will be elected by the beneficiary unless the participant in his designation of beneficiary form designated the form of payment.
10.3 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.
(a) Unless an optional form of benefit has been selected within the election period pursuant to a qualified consent as defined in 9.5(c) if a participant dies before the annuity starting date then the participant's vested account balance shall be applied toward the purchase of an annuity for the life of the surviving spouse. The surviving spouse may elect to have such annuity distributed within a reasonable period after the participant's death.
(b) Notice. In the case of a qualified preretirement survivor annuity as described in section (a), the plan administrator shall provide each participant within the applicable period for such participant a written explanation of the qualified preretirement survivor annuity in such terms and in such manner as would be comparable to the explanation provided for meeting the requirements of section 9.5(b)(i) applicable to a qualified joint and survivor annuity.
The applicable period for a participant is whichever of the following periods ends last: (i) the period beginning with the first day of the plan year in which the participant attains age 32 and ending with the close of the plan year preceding the plan year in which the participant attains age 35; (ii) a reasonable period ending after the individual becomes a participant; (iii) a reasonable period ending after section 9.5(b)(ii) ceases to apply to the participant; (iv) a reasonable period ending after this article first applies to the participant. Notwithstanding the foregoing, notice must be provided within a reasonable period ending after separation from service in the case of a participant who separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period ending after the enumerated events described in (ii), (iii) and (iv) is the end of the two-year period beginning one year prior to the date the applicable event occurs, and ending one year after that date. In the case of a participant who separates from service before the plan year in which age 35 is attained, notice shall be provided within the two-year period beginning one year prior to separation and ending one year after separation. If such a participant thereafter returns to employment with the employer, the applicable period for such participant shall be redetermined.
(c) Definitions. For purposes of Section 10.3, the following definitions shall apply:
(1) ELECTION PERIOD: The period which begins on the first day of the plan year in which the participant attains age 35 and ends on the date of the participant's death. If a participant separates from service prior to the first day of the plan year in which age 35 is attained, with respect to the account balance as of the date of separation, the election period shall begin on the date of separation.
PRE-AGE 35 WAIVER: A participant who will not yet attain age 35 as of the end of any current plan year may make a special qualified election to waive the qualified preretirement survivor annuity for the period beginning on the date of such election and ending on the first day of the plan year in which the participant will attain age 35. Such election shall not be valid unless the participant receives a written explanation of the qualified preretirement survivor annuity in such terms as are comparable to the explanation required under section 9.5(b)(i). Qualified preretirement survivor annuity coverage will be automatically reinstated as of the first day of the plan year in which the participant attains age 35. Any new waiver on or after such date shall be subject to the full requirements of this article.
(2) SPOUSE (SURVIVING SPOUSE): The spouse or surviving spouse of the participant, provided that a former spouse will be treated as the spouse or surviving spouse and a current spouse will not be treated as the spouse or surviving spouse to the extent provided under a qualified domestic relations order as described in section 414(p) of the Code.
(3) ANNUITY STARTING DATE: The first day of the first period for which an amount is paid as an annuity or any other form.
(4) VESTED ACCOUNT BALANCE: The aggregate value of the participant's vested account balances derived from employer and employee contributions (including rollovers), whether vested before or upon death, including the proceeds of insurance contracts, if any, on the participant's life. The provisions of this article shall apply to a participant who is vested in amounts attributable to employer contributions, employee contributions (or both) at the time of death or distribution.
10.4 LIMITATION ON INSTALLMENT OR ANNUITY PAYMENT OF DEATH BENEFITS.
(a) IN GENERAL. This section 10.4 governs payment of death benefits where the form of payment is not covered by an election made before January 1, 1984 by a participant or beneficiary as described in Section 9.9.
(b) DEATH DISTRIBUTION PROVISIONS.
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the participant dies after distribution of his or her interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the participant's death.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the participant dies before distribution of his or her interest begins distribution of the participant's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the participant's death except to the extent that an election is made to receive distributions in accordance with (a) or (b) below:
(a) if any portion of the participant's interest is payable to a designated beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the participant died;
(b) if the designated beneficiary is the participant's surviving spouse, the date distributions are required to begin in accordance with (2)(a) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the participant died and (2) December 31 of the calendar year in which the participant would have attained age 70-1/2.
If the participant has not made an election pursuant to this section 10.4(b)(2) by the time of his or her death, the participant's designated beneficiary must elect the method of distribution no later than the earlier of (1) December 31 of the calendar year in which distributions would be required to begin under this section, or (2) December 31 of the calendar year in which contains the fifth anniversary of the date of death of the participant. If the participant has no designated beneficiary, or if the designated beneficiary does not elect a method of distribution, distribution of the participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the participant's death.
(3) For purposes of Section 10.4(b)(2) above, if the surviving spouse dies after the participant, but before payments to such spouse begin, the provisions of section 10.4(b)(2) with the exception of paragraph (b) therein, shall be applied as if the surviving spouse were the participant.
(4) For purposes of this section 10.4(b), any amount paid to a child of the participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority.
(5) For the purposes of this section 10.4(b), distribution of a participant's interest is considered to begin on the participant's required beginning date (or, if section 10.4(b)(3) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to section 10.4(b)(2) above). If distribution in the form of an annuity irrevocably commences to the participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences.
(c) DEFINITIONS FOR THIS SECTION AND SECTION 9.7.
(1) APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and last survivor expectancy) calculated using the attained age of the participant (or designated beneficiary as of the participant's (or designated beneficiary's) birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. If life expectancy is being recalculated, the applicable life expectancy shall be the life expectancy as so recalculated. The applicable calendar year shall be the first distribution calendar year, and if life expectancy is being recalculated such succeeding calendar year.
(2) DESIGNATED BENEFICIARY. The individual who is designated as the beneficiary under the plan in accordance with section 401(a)(9) and the proposed regulations thereunder.
(3) DISTRIBUTION CALENDAR YEAR. A calendar year for which a minimum distribution is required. For distributions beginning before the participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the participant's required beginning date. For distribtuions beginning after the participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to section 10.4(b) above.
(4) LIFE EXPECTANCY. Life expectancy and joint and last survivor expectancy are computed by use of the expected return multiples in Tables V and VI of section 1.72-9 of the federal income tax regulations.
Unless otherwise elected by the participant (or spouse, in the case of distributions described in section 10.4(b)(2) above) by the time distributions are required to begin, life expectancies shall be recalculated annually. Such election shall be irrevocable as to the participant (or spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse beneficiary may not be recalculated.
(5) PARTICIPANT'S BENEFIT.
(a) The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date.
(b) Exception for second distribution calendar year. For purposes of paragraph (a) above, if any portion of the minimum distribution for the first distribution calendar year is made in the second distribution calendar year on or before the required beginning date, the amount of the minimum distribution made in the second distribution calendar year shall be treated as if it had been made in the immediately preceding distribution calendar year.
(6) REQUIRED BEGINNING DATE.
(a) GENERAL RULE. The required beginning date of a participant is the first day of April of the calendar year following the calendar year in which the participant attains age 70-1/2.
(b) TRANSITIONAL RULES. The required beginning date of a participant who attains age 70-1/2 before January 1, 1988, shall be in accordance with (1) or (2) below:
(1) NON-5-PERCENT OWNERS. The required beginning date of a participant who is not a 5-percent owner is the first day of April of the calendar year following the calendar year in which the later of retirement or attainment of age 70-1/2 occurs.
(2) 5-PERCENT OWNERS. The required beginning date of a participant who is a 5-percent owner during any year beginning after December 31, 1979, is the first day of April following the later of:
(i) the calendar year in which the participant attains age 70-1/2, or
(ii) the earlier of the calendar year with or within which ends the plan year in which the participant becomes a 5-percent owner, or the calendar year in which the participant retires.
The required beginning date of a participant who is not a 5-percent owner who attains age 70-1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990.
(c) 5-PERCENT OWNER. A participant is treated as a 5-percent owner for purposes of this section if such participant is a 5-percent owner as defined in section 416(i) of the Code (determined in accordance with section 416 but without regard to whether the plan is top-heavy) at any time during the plan year ending with or within the calendar year in which such owner attains age 66-1/2 or any subsequent plan year.
(d) Once distributions have begun to a 5-percent owner under this section, they must continue to be distributed, even if the participant ceases to be a 5-percent owner in a subsequent year.
10.5 BENEFICIARY.
(a) DESIGNATION OF BENEFICIARY AND METHOD OF PAYMENT. A participant may designate one or more beneficiaries on a form or other instrument filed with, and acceptable to, the plan administrator, and may revoke or change such designation in like manner at any time. The beneficiary may elect for form of payment under Section 10.2 (subject to the requirements of Section 10.3); however, the participant may in the designation of beneficiary form or other instrument specify the form of payment (subject to Section 10.3) and death benefits will be paid in such form. If a beneficiary is permitted to elect the method of payment of a benefit payable to him, he may designate one or more beneficiaries to receive any amount remaining undistributed at his death.
Notwithstanding the preceding paragraph, in an exempt profit sharing plan or 401(k) plan as described in section 9.5(d), the sole beneficiary of a married participant is the participant's spouse, unless the spouse consents or has consented to the designation of another beneficiary in a qualified consent (as defined in Section 9.5(c)).
(b) PAYMENT IN ABSENCE OF DESIGNATION OF BENEFICIARY. Any portion of a participant's death benefit which is not disposed of by a
designation of beneficiary, for any reason whatsoever, will be paid to the participant's spouse if the spouse survives him, otherwise to the participant's estate in a lump sum.
(c) PAYMENT UNDER PRIOR DESIGNATION OF BENEFICIARY. The plan administrator will be fully protected in directing payment in accordance with a prior designation of beneficiary if such direction (i) is given before receipt by the plan administrator of a later designation or (ii) is due to the inability of the plan administrator to verify the authenticity of a later designation.
10.6 SAFE HARBOR RULES.
(a) This section shall apply to a participant in a profit-sharing plan and 401(k) plan, and to any distribution, made on or after the first day of the first plan year beginning after December 31, 1988, from or under a separate account attributable solely to accumulated deductible employee contributions, as defined in section 72(o)(5)(B) of the Code, and maintained on behalf of a participant in a money purchase pension plan, (including a target benefit plan) if the following conditions are satisfied:
(1) the participant does not or cannot elect payments in the form of a life annuity; and
(2) on the death of a participant, the participant's vested account balance will be paid to the participant's sruviving spouse, but if there is no surviving spouse, or is the surviving spouse has consented in a manner conforming to a qualified election, then to the participant's designated beneficiary. The sruviving spouse may elect to have distribution of the vested account balance commence within the 90-day period following the date of the participant's death. The account balance shall be adjusted for gains or losses occurring after the participant's death in accordance with the provisions of the plan governing the adjustment of account balances for other types of distributions. This section 10.6 shall not be operative with respect to a participant in a profit-sharing plan or 401(k) plan if the plan is a direct or indirect transferee of a defined benefit plan, money purchase plan, a target benefit plan, stock bonus, or profit-sharing plan which is subject to the survivor annuity requirements of section 401(a)(11) and section 417 of the Code. If this section 10.6 is operative, then the provisions of section 10.3 shall be inoperative.
(b) The participant may waive the spousal death benefit described in this section at any time provided than no such waiver shall be effective unless it satisfies the conditions of section 9.5(c) that would apply to the participant's waiver of the qualified preretirement survivor annuity.
(c) For purposes of this section 10.6, vested account balance shall mean, in the case of a money purchase pension plan or a target benefit plan, the participant's separate account balace attributable solely to accumulated deductible employee contributions within the meaning of section 72(o)(5)(B) of the Code. In the case of a profit-sharing plan, vested account balance shall have the same meaning as provided in section 10.3(c)(4).
10.7 TRANSITIONAL RULES.
(a) Any living parcipant not receiving benefits on August 23, 1984, who would otherwise not receive the benefits prescribed by the previous sections of this article must be given the opportunity to elect to have the prior sections of this article and section 9.5 apply if such participant is credited with at least one hour of service under this plan or a predecessor plan in a plan year beginning on or after January 1, 1976, and such participant has at least 10 years of vesting service when he or she separated from service.
(b) Any living participant not receiving benefits on August 23, 1984, who was credited with a least one hour of service unde this plan or a predecessor plan on or after September 2, 1974, and who is not otherwise credited with any service in a plan year beginning on or after January 1, 1976, must be given the opportunity to have his or her benefits paid in accordance with section (d) of 10.7.
(c) The respective opportunities to elect (as described in sections (a) and (b) above) must be afforded to the appropriate participants during the period commencing on August 23, 1984, and ending on the date benefits would otherwise commence to said participants.
(d) Any participant who has elected pursuant to section (b) of this article and ay participant who does not elect under section (a) except that such participant does not have at least 10 years of vesting service when he or she separates from service, shall have his or her benefits distributed in accordance with all of the following requirements if benefits would have been payable in the form of a life annuity:
(i) AUTOMATIC JOINT AND SUVIVOR ANNUITY. If benefits in the form of a life annuity become payable to a married participant who:
(1) begins to receive payments under the plan on or after normal retirement age; or
(2) dies on or after normal retirement age while still working for the emloyer, or
(3) begins to receive payments on or after the qualified early retirement age; or
(4) separates from service on or after attaining normal retirement age (or the qualified early retirement age) and after satisfying the eligibility requirements for the payment of benefits under the plan and thereafter dies before beginning to receive such benefits; then such benefits will be received under this plan in the form of a qualified joint and survivor annuity, unless the participant has elected otherwise during the election period. The election period must begin at least 6 months before the participant attains qualified early retirement age and end not more than 90 days before the commencement of benefits. Any election hereunder will be in writing and may be changed by the participant at any time.
(ii) Election of early survivor annuity. A participant who is employed after attaining the qualified early retirement age will be given the opportunity to elect, during the election period, to have a survivor annuity payable on death. If the participant elects the survivor annuity, payments under such annuity must not be less than the payments which would have been made to the spouse under the qualified joint and survivor annuity if the participant has retired on the day before his or her death. Any election under this provision will be in writing and may be changed by the participant at any time. The election period begins on the later of (1) the 90th day before the participant attains the qualified early retirement age, or (2) the date on which participation begins, and ends on the date the participant terminates employment.
(iii) For purposes of this section (d):
(a) Qualified early retirement age is the latest of:
(i) the earliest date, under the plan, on which the participant may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning before the participant reaches normal retirement age, or
(iii) the date the participant begins participation.
(b) Qualified joint and survivor annuity is an annuity for the life of the participant with a survivor annuity for the life of the spouse as described in plan section 9.5(a).
ARTICLE 11
TERMINATION OF EMPLOYMENT AND VESTED INTEREST
11.1 VESTED INTEREST IN ACCRUED BENEFIT.
(a) VESTING SCHEDULE. A participant will have a vested and nonforfeitable interest in that percentage of his employer contributions account or matching contributions account determined under the vesting schedule specified in the adoption agreement.
(b) FULL VESTING. Regardless of a participant's vesting under the vesting
schedule, the participant becomes fully vested in his employer contributions
account or matching contributions account upon the earlier of (i) his attaining
his normal retirement date while he is still employed by the employer; (ii) his
attaining his early retirement date as specified in the adoption agreement while
he is still employed by the employer; or (iii) upon disability retirement under
Section 9.2, or upon his death while he is still an employee.
11.2 CHANGES IN VESTING SCHEDULE. After the adoption of any amendment that changes the vesting schedule or that directly or indirectly affects the computation of a participant's vested percentage, or any shift in or out of a vesting schedule because of a plan's top-heavy status, any participant having three or more years of service will have his vested percentage determined under whichever schedule gives him the higher vested percentage.
11.3 PAYMENT OF VESTED INTEREST. A participant's vested interest in his accrued
benefit will be paid to him, or payments will begin, on a date elected by the
participant and will be paid to him following his separation from service in one
or more of the methods described in Section 9.4 as elected by the participant.
The participant's election as to either time or form of payment will be subject
to the rules, other than sections 9.1, 9.2, and 9.3 of Article 9. In the case of
(a) a newly adopted plan or (b) an amendment or restatement that deferred all
distributions until the participant's early or normal retirement date, the
adoption agreement may provide that no distribution in the form of a single sum
shall be made to a highly compensated employee prior to his early or normal
retirement date, unless such employee executes a covenant not to compete in a
form acceptable to the employer.
11.4 FORFEITURE OF NON-VESTED INTEREST. A participant will forfeit the non-vested portion of his account balance on the day after he incurs a period of five consecutive one-year breaks in service (or, if the employer's plan counts service for vesting purposes using the elapsed time rules of Article 3B, a period of severance of 60 months in length). The plan administrator may release the non-vested portion of a participant's account balance as a forfeiture on the earlier of the day he receives a distribution of his vested account balance or the day after he incurs a one-year break in service. However, if a participant resumes employment before a period of five consecutive one-year breaks in service (or a period of severance of 60 months in length, as the case may be) has been incurred, the non-vested portion of such participant's account shall be restored.
11.5 PROTECTIONS UPON RESUMPTION OF EMPLOYMENT. A former participant who returns to employment with the employer after a period of one or more one-year breaks in service will nevertheless receive credit for all his prior years of service for vesting and accrual purposes.
11.6 CALCULATING VESTED INTEREST AFTER ACCOUNT DISTRIBUTION. Where a participant's employer contributions account or matching contributions account is charged with a withdrawal or distribution at a time when he is not fully vested in such account, the remaining balance of the participant in such account will be credited to a separate account within the participant's employer contributions account or matching contributions account, or accounting records will be maintained in a manner which has the same effect as establishing a separate account. The participant's vested interest in any such separate account at any subsequent time will be equal to an amount ("Y") determined by the formula:
Y = P(AB + D) - D
where P is his vested percentage at such time; AB is the account balance in such separate account at such time; and D is the amount of the withdrawal or distribution. The term remaining balance as used in this section means a participant's interest in his employer contributions account or matching distribution remaining after a withdrawal or distribution of a portion or all of his vested interest therein.
ARTICLE 12
IN-SERVICE DISTRIBUTIONS AND WITHDRAWALS LOANS
12.1 WITHDRAWAL OF AFTER-TAX CONTRIBUTIONS.
(a) AMOUNT. Except as otherwise provided in the adoption agreement, a participant whose employment has not terminated may upon reasonable advance notice to the plan administrator (and spousal consent, if applicable) withdraw all or any portion of his after-tax employee contributions account to the extent not previously withdrawn.
(b) PAYMENT AND PLAN ADMINISTRATOR RULES. Any withdrawal under this section will be paid to the participant as soon as practicable after the valuation date next following the plan administrator's receipt of the participant's withdrawal request; however the plan administrator may approve an earlier payment of some or all of the amount to be withdrawn if such earlier payment would not be detrimental to the interests of the other participants. If elected in the adoption agreement, notwithstanding Sections 5.1 and 6.1, a participant who makes an in-service withdrawal under this section may not make a 401(k) savings contribution or after-tax employee contribution for a period of up to 12 months following the date of such in-service withdrawal. However, the employer may elect in the adoption agreement to limit the suspension of after-tax employee contributions to in-service withdrawals made prior to the date that the participant attains age 59 1/2.
The plan administrator or the sponsor may establish reasonable minimum or maximum withdrawal amounts and reasonable limitations on the frequency or number of withdrawals during a plan year. No forfeitures will occur solely as a result of an employee's making of an in-service withdrawal.
(c) SEPARATE CONTRACT. For purposes of Code Section 72, a participant's after-tax employee contributions account attributable to post-1986 after-tax employee contributions will be accounted for separately and will be treated as a separate contract under the plan for income tax purposes.
(d) SPECIAL RULES. If the employer's execution of the adoption agreement constitutes the amendment and restatement of an existing plan to which one or more participants made after-tax contributions
before 1987, such contributions will be accounted for separately, and for federal income tax purposes any withdrawals or distributions from the plan will be deemed to be a withdrawal or distribution of such contributions until they are exhausted.
12.2 IN-SERVICE WITHDRAWALS FROM PROFIT SHARING PLANS.
(a) IN GENERAL. This section applies only if the employer's plan is a profit sharing plan (other than a 401(k) plan). To the extent provided in the adoption agreement, a participant whose employment has not terminated may make withdrawals from his accounts. The adoption agreement may limit such in-service withdrawals to financial hardship situations, or, as long as the requirements set forth in section 12.2(c) are met, may permit in-service withdrawals for reasons other than financial hardship.
Notwithstanding the preceding paragraph, an in-service withdrawal will be permitted under the following circumstances: (i) termination of the plan without the establishment of a successor plan; (ii) the sale or other disposition to an unrelated entity of at least 85 percent of the assets used by the employer in a trade or business, provided the employee continues in employment with the purchaser of the assets; or (iii) the sale or other disposition to an unrelated entity of a subsidiary of the employer, provided the employee continues in employment with the subsidiary.
(b) FINANCIAL HARDSHIP. For purposes of this section, financial hardship means any of the circumstances specified in Section 12.3(c).
The request for a hardship withdrawal under this section will be in writing on such form as the plan administrator may prescribe and will be filed with the plan administrator. The plan administrator may require a participant to submit such information or other evidence as is necessary to make the determination of financial hardship. The plan administrator may rely upon the accuracy of any information or materials submitted by the participant. The plan administrator will determine the existence of a financial hardship and the amount necessary to meet such financial hardship, and any such determination will be binding on the participant.
(c) AMOUNT. A participant may withdraw the amount he specifies, provided that a withdrawal may not exceed the smallest of whichever the following limitations applies.
(i) the participant's total vested account balances;
(ii) in the case of a hardship withdrawal, the amount determined by the plan administrator as necessary to meet the participant's financial hardship; or
(iii) in the case of a non-hardship withdrawal, the amount attributable to
employer contributions which have been on deposit in the plan for at least two
years; provided that this limitation will apply only to employees who have been
participants in the plan for less than five years. The limitation in this
Section 12.2(c)(iii) will not apply to withdrawals after a participant has
attained age 59-1/2 if such withdrawals are permitted in the adoption agreement.
(d) SPOUSAL CONSENT TO IN-SERVICE WITHDRAWALS. Unless the plan is an exempt profit sharing plan (as defined in Section 9.5(d)), a married participant's spouse must consent to an in-service withdrawal under this section in a qualified consent meeting the requirements of Section 9.5(c).
(e) PAYMENT AND PLAN ADMINISTRATOR RULES. Provisions governing the payment of a withdrawal under this section and plan administrator rules for such withdrawals are found at Section 12.1(b).
12.3 IN-SERVICE WITHDRAWALS FROM 401(K) PLANS.
(a) IN GENERAL. This section applies only if the employer's plan is a 401(k) plan. Except as otherwise provided in the adoption agreement, a participant whose employment has not terminated may make withdrawals from his accounts subject to the limitations of this section and the adoption agreement.
(b) AVAILABILITY AND AMOUNT. The availability and amount of in-service withdrawals will be subject to the restrictions specified below.
(i) 401(K) SAVINGS CONTRIBUTIONS ACCOUNT. A participant may make in- service withdrawals from his 401(k) savings contributions account in the event of financial hardship only. The maximum withdrawal from the participant's 401(k) savings contributions account is the smaller of the amount of his 401(k) savings contributions, without earnings or investment gains (except any income allocable to 401(k) savings contributions as of December 31, 1988), or the amount needed to alleviate his financial hardship.
(ii) EMPLOYER CONTRIBUTIONS AND MATCHING CONTRIBUTIONS ACCOUNTS. To the extent provided in the adoption agreement, a participant may make in-service withdrawals from his employer contributions account (employer supplemental profit-sharing contributions) and/or matching contributions account. The adoption agreement may limit such in-service withdrawals to financial hardship situations, or any permit in-service withdrawals for reasons other than financial hardship; there may be different rules for withdrawals from employer contributions accounts and matching contributions accounts.
If elected in the adoption agreement, notwithstanding sections 5.1 and 6.1, a participant who makes an in-service withdrawal under this section may not make a 401(k) savings contribution or after-tax employee contribution for a period of up to 12 months following such in-service withdrawal. However, the employer may elect in the adoption agreement to limit the suspension of employer contributions or matching contributions to in-service withdrawals made prior to the date that the participant attains age 59 1/2.
The maximum in-service withdrawal from a participant's employer contributions account or matching contributions account is determined under the same limitations set forth in Section 12.2(c).
(c) FINANCIAL HARDSHIP.
(i) An in-service withdrawal will be on account of financial hardship only if the participant has an immediate and heavy financial need and the withdrawal is necessary to meet the need.
(ii) A withdrawal will be deemed to be on account of an immediate and heavy need if it is occasioned by (A) a deductible medical expense (within the meaning of Code Section 213(d)) incurred by or necessary for the participant or his spouse, children or dependent; (B) purchase of the participant's principal residence (not including mortgage payments); (C) tuition and related educational fees for the next 12 months of post-secondary education for the participant or his spouse, child or dependent; (D) rent or mortgage payments to prevent the participant's eviction from or the foreclosure of the mortgage on his principal residence; or (E) such other event or circumstance as the Internal Revenue Service permits.
(iii) A withdrawal will be deemed necessary to satisfy the participant's financial needs if either (A) the participant has made all non-hardship withdrawals and obtained all nontaxable loans available under all of the employer's qualified retirement plan; and each such other plan which provides for 401(k) savings contributions
contains restrictions similar to those in Section 5.2(b); or (B) the participant satisfies such other requirements as may be prescribed by the Internal Revenue Service.
(iv) A participant must establish to the plan administrator's satisfaction both that the participant has an immediate and heavy financial need and that the withdrawal is necessary to meet the need (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution), as provided in subsections (ii) and (iii) above.
A participant's application for a hardship withdrawal will be in writing on such form and containing such information (or other evidence or materials establishing the participant's financial hardship) as the plan administrator may require. The plan administrator's determination of the existence of and the amount needed to meet a financial hardship will be binding on the participant.
(d) Notwithstanding subsection (b) above,
(i) to the extent provided in the adoption agreement, a participant may make in-service withdrawals from his 401(k) plan accounts after he has reached age 59-1/2; and
(ii) a participant may make in-service withdrawals from his 401(k) accounts under the circumstances described in the second paragraph of 12.2(a).
(e) MISCELLANEOUS. The spousal consent requirements are as specified in
Section 12.2(d), and the payment procedures and plan administrator rules for
withdrawals are as specified in Section 12.1(b).
12.4 IN-SERVICE WITHDRAWALS FROM MONEY PURCHASE PLAN OR TARGET BENEFIT PLAN In- service withdrawals are not permitted from employer contribution accounts under a money purchase plan or a target benefit plan.
12.5 LOANS. If the MetLife Security Insurance Company of Louisiana MetLife
RetirePro Program adoption agreement so provides, loans will be available from
the plan. If loans are available, the plan administrator will establish
guidelines and procedures for loans from the plan to participants in specific
instances, which guidelines may include limitations on the number of loans that
may be outstanding to a participant at any time or on the frequency of loans.
Each loan must be approved by the plan administrator and must conform to the
loan guidelines and procedures. The guidelines and procedures must be formulated
and administered so that they conform with ERISA Section 408(b)(1) and ERISA
Reg. Section ss. 2550.408-I(d). In addition, the following requirements of this
Section must be satisfied.
(a) Loans are available to all participants and any other person required by the Department of Labor and the Code on a reasonably equivalent basis. However, no loan will be made to a participant who is an owner-employee or a shareholder employee unless such person has at his expense has obtained an administrative exemption from ERISA's prohibited transaction rules from the Department of Labor with respect to such loan (unless the Department of Labor has issued a prohibited transaction class exemption covering such loans). Any loan will be evidenced by a promissory note or other writing permitted under applicable law signed by the participant.
(b) Loans shall not be made available to highly compensated employees (as defined in section 5.8 of the Plan) in an amount greater than the amount made available to other employees.
(c) Loans are adequately secured and bear a reasonable rate of interest. However, no more than 50% of a participant's nonforfeitable accrued benefit may be pledged as collateral.
Each loan hereunder will be a participant-directed investment for the benefit of the participant requesting such loan; accordingly, any default in the repayment of principal or interest of any loan hereunder will reduce the amount available for distribution to such participant (or his beneficiary). Thus, any loan hereunder will be effectively and adequately secured by the participant's accounts.
(d) (i) No participant loan exceeds the amount of 50% of the participant's vested account balances (excluding his qualified voluntary employee contributions account, if any).
Also, the maximum loan (including outstanding loans) will depend upon the vested amount in a participant's accounts (excluding his qualified voluntary contributions account, if any) as of the valuation date immediately preceding the date when the loan is made, determined under the following table:
Vested amount in Accounts Maximum Loan - ------------------------- ------------- 0-$100,000 50% of vested accounts Over $100,000 $50,000 |
The $50,000 maximum loan limit in the above table will be reduced by treating the highest outstanding loan balance during the one-year period ending on the date of the current loan as being outstanding on such date.
(ii) Except as provided in the next sentence, the maximum term of a loan will be five years. If a participant requests a loan for the acquisition of the principal residence of the participant, the maximum repayment period will be determined by reference to bank loans for the same purpose.
(e) Except for a profit sharing plan or a 401(k) plan (which are exempt from the spousal consent requirements - see Section 9.5(d)), a participant obtains the consent of his or her spouse, if any, within the 90 day period before the time the account balance is used as security for the loan. A new consent is required if the account balance is used as security for any increase in the loan balance, for renegotiation, extension, renewal, or other revision of the loan. However, spousal consent is not necessary if the total amount of loans outstanding hereunder does not exceed $3,500. The consent will comply with the requirements of Section 9.5(c). The consent of any subsequent spouse will not be necessary in order to foreclose the plan's security interest in the participant's account balance if the participant's then spouse validly consented to the original use of the account balance as security (or if the participants was unmarried at such time).
If a valid spousal consent has been obtained in accordance with this section, then, notwithstanding any other provision of this plan, the portion of the participant's vested account balance used as a security interest held by the plan by reason of a loan outstanding to the participant shall be taken into account for purposes of determining the amount of the account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than 100% of the participant's vested account balance (determined without regard to the preceding sentence) is payable to the surviving spouse, then the account balance shall be adjusted by first reducing the vested account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse.
(f) the plan administrator may require a participant to agree to repay the principal and interest of a loan through regular payroll
deduction payments from the participant's compensation. The plan administrator may establish back-up repayment procedures for participants who do not make payroll deduction repayment; except as may otherwise be permitted under Treasury regulations, any such back-up procedures will provide for substantially level amortization payments made quarterly or more frequently.
If a participant defaults on any payment of interest or principal of a loan hereunder or defaults upon any other obligation relating to such loan, the plan administrator may take (or direct the trustee to take) such action or actions as it determines to be necessary to protect the interest of the plan. Such actions may include commencing legal proceedings against the participant, or foreclosing on any security interest in the participant's account or other security given in connection with a loan hereunder. In the event of a default, foreclosure on the participant's note and attachment of one or more of the participant's accounts given as security will not occur until a distributable event occurs in the plan.
An assignment or pledge of any portion of the participant's interest in the plan and a loan, pledge, or assignment with respect to any insurance contract purchased under the plan, will be treated as a loan under this section.
(g) In the case of any participant with one or more loans outstanding hereunder, the amount available for distribution to such participant (or his beneficiary) will consist of the participant's vested account balance(s) (not including the outstanding principal and accrued but unpaid interest on such loans), plus the notes representing such loans.
ARTICLE 13
MAXIMUM LIMITATIONS ON ALLOCATIONS
13.1 SECTION 415 DEFINITIONS. For purposes of this Article 13, the following definitions apply:
(a) ANNUAL ADDITIONS means the sum of the following amounts allocated on behalf of a participant for a limitation year:
(i) all employer contributions (including compensation reduction amounts under any profit-sharing plan with a qualified compensation reduction feature under Code Section 401(k)),
(ii) all forfeitures, and
(iii) all after-tax employee contributions.
For this purpose, any excess amount applied under Section 13.7 to reduce employer contributions will be considered annual additions for such limitation year.
(iv) Amounts allocated after March 31, 1984, to an individual medical account (as defined in Code Section 415(1)(2)) which is part of a pension or annuity plan maintained by the employer are treated as annual additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3) under a welfare benefit fund (as defined in Code Section 419(e)) maintained by the employer, are treated as annual additions to a defined contribution plan.
(b) COMPENSATION. As elected by the employer in the adoption agreement compensation shall mean all of the participant's compensation as defined below, except that elective deferrals, etc.,
will not be included even if they are for other plan purposes. However, elective deferrals will not be included for Code section 415 compensation or the top-heavy minimum at plan section 14.3(b):
(1) Information required to be reported under sections 6041, 6051, and 6052 of the Code. (Wages, Tips and Other Compensation as reported on Form W-2) Compensation is defined as wages as defined in section 3401(a) and all other payments of compensation to an employee by the employer (in the course of the employer's trade or business) for which the employer is required to furnish and employee a written statement under sections 6041(d), 6051(a)(3) and 6052 of the Code. Compensation must be determined without regard to any rules under section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2)).
(2) Section 3401(a) wages. Compensation is defined as wages within the meaning of section 3401(a) for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in section 3401(a)(2)).
(3) 415 safe-harbor compensation. Compensation is defined as wages, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the employer maintaining the plan to the extent that the amounts are includible in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements, or other expense allowances under a nonaccountable plan (as described in Reg. Sec. 1.62-2(c))), and excluding the following:
(i) employer contributions to a plan of deferred compensation which are not includible in the employee's gross income for the taxable year in which contributed, or employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the employee, or any distributions from a plan of deferred compensation;
(ii) amounts realized from the exercise of a non-qualified stock option or when restricted stock (or property) held by the employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;
(iii) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and
(iv) other amounts which received special tax benefits or contributions made by the employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the employee).
(4) For any self-employed individual compensation will mean earned income.
(5) For limitation years beginning after December 31, 1991, for purposes of applying the limitations of this article, compensation for a limitation year is the compensation actually paid or includible in gross income during such year.
Notwithstanding the preceding sentence, compensation for a participant who is permanently and totally disabled (as defined in
Section 22(e)(3) of the Code) is the compensation such participant would have received for the elimination year if the participant had been paid at the rate of compensation paid immediately before becoming permanently and totally disabled; such imputed compensation for the disabled participant may be taken into account only if the participant is not a highly compensated employee (as defined in Section 5.8 of the Plan) and contributions made on behalf of such participant are nonforfeitable when made.
(c) EMPLOYER means the employer that adopts this plan and all members of a controlled group of corporations (as defined in Section 414(b) of the Code as modified by Section 415(h)), all trades or businesses (whether or not incorporated) which are under common control as defined in Section 414(c) of the Code as modified by Section 415(h)), all affiliated service groups (as defined in Section 414(m) of the code) of which the adopting employer is a part, and all entities aggregated with the employer under Code Section 414(o).
(d) DEFINED BENEFIT FRACTION for any year means a fraction:
(i) whose numerator is the sum of the participant's projected annual benefits under all the defined benefit plans (whether or not terminated) maintained by the employer, and
(ii) whose denominator of which is the lesser of 125 percent of the
dollar limitation determined for the limitation year under sections 415(b) and
(d) of the Code or 140 percent of the highest average compensation, including
any adjustments under section 415(b) of the Code.
Notwithstanding the above, if the participant was a participant as of the first day of the first limitation year beginning after December 31, 1986, in one or more defined benefit plans maintained by the employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the participant had accrued as the close of the last limitation year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of section 415 for all limitation years beginning before January 1, 1987.
(e) DEFINED CONTRIBUTION FRACTION for any year means a fraction:
(i) whose numerator is the sum of the annual additions to the participant's account under all the defined contribution plans (whether or not terminated) maintained by the employer for the current and all prior limitation years (including the annual additions attributable to the participant's nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the employer and the annual additions attributable to all welfare benefit funds (as defined in Section 419(e) of the Code) and individual medical accounts as defined in section 415(1)(2) of the Code, and
(ii) whose denominator is the sum of the maximum aggregate amounts for
the current and all prior limitation years of service with the employer
(regardless of whether a defined contribution plan was maintained by the
employer). The maximum aggregate amount in any limitation year is the less of
(A) 1.25 multiplied by the dollar limitation determined under sections 415(b)
and (d) of the Code, or (B) 35% of the participant's compensation for such year.
If the employee was a participant as of the end of the first day of the first limitation year beginning after December 31, 1986, in one or more defined contribution plans maintained by the employer which were in existence on May 6, 1986, the numerator of the defined contribution fraction will be adjusted if the sum of the
defined contribution fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this plan. Under the adjustment an amount equal to the product of (i) the excess of the sum of the fractions over 1.0 times (ii) the denominator of the defined contribution fraction will be permanently subtracted from the numerator of the defined contribution fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last limitation year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the plan made after May 5, 1986, but using the section 415 limitation applicable to the first limitation year beginning on or after January 1, 1987. The annual addition for any limitation year beginning before January 1, 1987 shall not be recomputed to treat all employee contributions as annual additions.
(f) EXCESS AMOUNT MEANS the excess of the participant's annual additions for the limitation year over the maximum permissible account.
(g) HIGHEST AVERAGE COMPENSATION means the average compensation for the three consecutive years of plan service with the employer that produce the highest average.
(h) LIMITATION YEAR means the calendar year or another 12-consecutive month period elected by the employer in the adoption agreement. All qualified plans of the employer must use the same limitation year. If the limitation year is amended to a different 12-consecutive month period, the new limitation year must begin on a date within the limitation year in which the amendment is made (or any other 12-consecutive month period adopted for all plans of the employer pursuant to a written resolution adopted by the employer).
(i) MASTER OR PROTOTYPE PLAN means a plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service.
(j) MAXIMUM PERMISSIBLE AMOUNT. The maximum annual addition that may be contributed or allocated to a participant's account under the plan for any limitation year shall not exceed the lesser of (i) the defined contribution dollar limitation or (ii) 25 percent of the participant's compensation for the limitation year. The compensation limitation referred to in (ii) shall not apply to any contribution for medical benefits (within the meaning of section 401(h) or section 419A(f)(2) of the Code) which is otherwise treated as an annual addition under section 415(l)(1) or 419A(d)(2) of the Code. If a short limitation year is created because of an amendment changing the limitation year to a different 12 consecutive month period, the maximum permissible amount for the short limitation year will not exceed the amount set forth in clause (i) of the preceding sentence multiplied by a fraction whose numerator is the number of months in the short limitation year and whose denominator is 12.
(k) PROJECTED ANNUAL BENEFIT means the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the participant would be entitled under the terms of the plan assuming his employment continues until normal retirement age under the plan (or current age, if later), and his compensation for the current limitation year and all other relevant factors used to determine benefits under the plan will remain constant for all future limitation years.
(l) Defined contribution dollar limitation means $30,000 or if greater, one-fourth of the defined benefit dollar limitation set forth in section 415(b)(1) of the Code as in effect for the limitation year.
13.2 NO PARTICIPATION IN OTHER QUALIFIED PLANS. If the participant does not participate in, and has never participated in another
qualified plan or a welfare benefit fund, as defined in Code Section 419(e),
maintained by the employer, or an individual medical account, as defined in
section 415(1)(2) of the Code, maintained by the employer, which provides an
annual addition as defined in section 13.1(a), the amount of annual additions
which may be allocated under this plan on a participant's behalf for a
limitation year may not exceed the lesser of the maximum permissible amount or
any other limitation contained in this plan. If the employer contribution that
would otherwise be contributed or allocated to the participant's account would
cause the annual additions for the limitation year to exceed the maximum
permissible amount, the amount contributed or allocated will be reduced under
Section 13.7 so that the annual additions for the limitation year will equal the
maximum permissible amount.
13.3 PARTICIPATION IN OTHER QUALIFIED MASTER OR PROTOTYPE DEFINED CONTRIBUTION
PLANS. If, in addition to this plan, the participant is covered under any other
qualified master or prototype defined contribution plan maintained by the
employer or a welfare benefit fund (as defined in Code Section 419(e))
maintained by the employer or an individual medical account as defined in Code
Section 415(1)(2), maintained by the employer which provides an annual addition
as defined in Section 13.1 during any limitation year, the amount of annual
additions which may be credited under this plan on a participant's behalf for a
limitation year may not exceed the maximum permissible amount, reduced by the
sum of any annual additions allocated to the participant's accounts for the same
limitation year under such other defined contribution plans and welfare benefit
funds. If the annual additions with respect to the participant under other
defined contribution plans and welfare benefit funds maintained by the employer
are less that the maximum permissible amount and the employer contribution that
would otherwise be contributed or allocated to the participant's account under
this plan would cause the annual additions for the limitation year to exceed
this limitation, the amount contributed or allocated will be reduced so that the
annual additions under all such plans and funds for the limitation year will
equal the maximum permissible amount. If the annual additions with respect to
the participant under such other defined contribution plans and welfare benefit
funds in the aggregate are equal to or greater than the maximum permissible
amount, no amount will be contributed or allocated to the participant's account
under this plan for the limitation year.
13.4 PARTICIPATING IN ANOTHER QUALIFIED PLAN, OTHER THAN MASTER OR PROTOTYPE PLANS. If the participant is covered by another plan which is a qualified defined contribution plan other than a master or prototype plan, annual additions allocated under this plan on behalf of any participant will be limited in accordance with the provisions of Section 13.3 through 13.6, as though the other plan were a master or prototype plan, unless the employer provides other limitations in the adoption agreement.
13.5 ESTIMATED LIMITATION. Before determining a participant's actual compensation for the limitation year, the employer may determine the maximum permissible amount on the basis of a reasonable estimation of the participant's annual compensation for such limitation year uniformly determined for all participants similarly situated. Any employer contribution (including allocation of forfeitures) based on estimated annual compensation will be reduced by any excess amounts carried over from prior years. As soon as administratively feasible after the end of the limitation year, the maximum permissible amount for the limitation year will be determined on the basis of the participant's actual compensation for such limitation year.
13.6 APPOINTMENT BETWEEN PLANS.
(a) If pursuant to section 13.5 or as a result of the allocation of forfeitures, a participant's annual additions under this plan and such other plans would result in an excess amount for a limitation year,
the excess amount will be deemed to consist of the annual additions last allocated, except that annual additions attributable to a welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date.
(b) If, in the application of Section 13.3, an excess amount was allocated to a participant on an allocation date of this plan which coincides with an allocation date of another plan, the excess amount attributed to this plan will be the product of:
(i) the total excess amount allocated as of such date, times
(ii) the ratio of (A) annual additions allocated to the participant for the limitation year as of such date under this plan, to (B) the total annual additions allocated to the participant for the limitation year as of such date under this and all other qualified master or prototype defined contribution plans.
(c) Any excess amounts attributed to this plan will be disposed of as provided in Section 13.7.
13.7 EXCESS AMOUNTS. If there is an excess amount with respect to a participant for a limitation year, such excess amount will be disposed of as follows:
(a) Any elective deferrals or after tax employee contributions will be returned to the participant to the extent that the distribution or return would reduce the excess amounts in the participant's account.
(b) If after the application of subsection (a) an excess amount still exists, and the participant is covered by the plan at the end of the limitation year, the excess amount in the participant's account will be used to reduce employer contributions (including any allocation of forfeitures) for such participant in the next limitation year, and each succeeding year if necessary.
(c) If after the application of subsection (a) an excess amount still exists and the participant is not covered by the plan at the end of a limitation year, the excess amounts will be held unallocated in a suspense account. The suspense account will be applied to reduce future employer contributions (including allocation of any forfeitures) for all remaining participants in the next limitation year, and each succeeding limitation year if necessary. Any such suspense account will not participate in the allocation of the trust's investment gains and losses.
(d) If a suspense account is in existence at any time during a particular limitation year, all amounts in the suspense account must be allocated and reallocated to participants' accounts before any employer or any employee contributions may be made to the plan for the limitation year. Excess amounts may not be distributed to participants or former participants.
13.8 DEFINED BENEFIT AND DEFINED CONTRIBUTION PLAN. If the employer maintains or at any time maintained, a qualified defined benefit plan (other than a defined benefit plan which is a paired plan with this plan) covering any participant in this plan, the sum of the participant's defined benefit plan fraction and defined contribution plan fraction will not exceed 1.0 in any limitation year. The annual additions which may be credited to the participant's account under this plan for any limitation year will be limited in accordance with the adoption agreement.
ARTICLE 14
TOP-HEAVY PROVISIONS
14.1 APPLICATION OF ARTICLE. If the plan is or becomes top-heavy in any plan year beginning after December 31, 1983, the provisions of this Article 14 will supersede any conflicting provision in the
plan or adoption agreement (except provisions added or attached to the adoption agreement to coordinate the top-heavy minimum contributions or benefits with another plan of the employer).
14.2 TOP-HEAVY DEFINITIONS.
(a) KEY EMPLOYEE means any employee or former employee (and the beneficiaries of
such employee) who at any time during the determination period was (i) an
officer of the employer if such individual's annual compensation exceeds 50
percent of the dollar limitation under Code Section 415(b)(1)(A); (ii) an owner
(or considered an owner under Section 318 of the Code) of one of the ten largest
interests in the employer if such individual's compensation exceeds 100 percent
of the dollar limitation under Section 415(c)(1)(A) of the Code; (iii) a 5-
percent owner of the employer; or (iv) a 1 percent owner of the employer who has
an annual compensation of more than $150,000. Annual compensation means
compensation as defined in section C of the Adoption Agreement, but including
amounts contributed by the employer pursuant to a salary reduction agreement
which are excludible from the employee's gross income under section 125, section
402(e)(3), section 402(h)(1)(B) or section 403(b) of the Code. The determination
period is the plan year containing the determination date and the 4 preceding
plan years. The determination of who is a key employee will be made in
accordance with Section 416(i)(1) of the Code and the regulations thereunder.
(b) TOP-HEAVY PLAN means this plan if any of the following conditions exist for any plan year:
(i) If the top-heavy ratio for this plan exceeds 60% and this plan is not part of any required aggregation group or permissive aggregation group of plans.
(ii) If this plan is a part of a required aggregation group of plans but not part of a permissive aggregation group and the top-heavy ratio for the group of plans exceeds 60%.
(iii) If this plan is a part of a required aggregation group and part of a permissive aggregation group of plans and the top-heavy ratio for the permissive aggregation group exceeds 60%.
(c) TOP-HEAVY RATIO means the following:
(i) If the employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the employer has not
maintained any defined benefit plan which during the 5-year period ending on the
determination date(s) has or has had accrued benefits, the top-heavy ratio for
this plan alone or for the required or permissive aggregation group as
appropriate is a fraction, the numerator of which is the sum of the account
balances of all key employees as of the determination date(s) (including any
part of any account balance distributed in the 5-year period ending on the
determination date(s)), and the denominator of which is the sum of all account
balances (including any part of any account balance distributed in the 5-year
period ending on the determination date(s)), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top heavy ratio are increased to reflect any contribution not
actually made as of the determination date but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(ii) If the employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the employer maintains or has maintained one or more defined benefit plans which during the 5-year period ending on the determination date(s) has or has had any accrued benefits, the top-heavy ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of account balances
under the aggregated defined contribution plan or plans for all key employees, determined in accordance with (i) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all key employees as of the determination date(s), and the denominator of which is the sum of the account balances under the aggregated defined contribution plan or plans for all participants determined in accordance with (i) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all participants as of the determination date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the top-heavy ratio are increased for any distribution of an accrued benefit made in the 5-year period ending on the determination date.
(iii) For purposes of (i) and (ii) above the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12 month period ending on the determination date, except as provided in Code Section 416 and the regulations thereunder for the first and second plan years of a declined benefit plan. The account balances and accrued benefits of a participant who is not a key employee but who was a key employee in a prior year, or who has not been employed by any employer maintaining the plan at any time during the 5-year period ending on the determination date will be disregarded. The calculation of the top-heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code Section 416 and the regulations thereunder. Qualified voluntary employee contributions will not be taken into account for purposes of computing the top heavy ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the determination dates that fall within the same calendar year.
The accrued benefit of a participant other than a key employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C) of the Code.
(d) PERMISSIVE AGGREGATION GROUP means the required aggregation group of plans plus any other plan of the employer which, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Code Sections 401(a)(4) and 410.
(e) REQUIRED AGGREGATION GROUP means (i) each qualified plan of the employer in
which at least one key employee participates or participated at any time during
the determination period (regardless of whether the plan has terminated), and
(ii) any other qualified plan of the employer which enables a plan described in
subsection (i) to meet the requirements of Code Sections 401(a)(4) or 410.
(f) DETERMINATION DATE for any plan year subsequent to the first plan year means the last day of the preceding plan year, and for the first plan year of the plan, the last day of that year.
(g) VALUATION DATE is the date as of which account balances or accrued benefits are valued for purposes of calculating the top-heavy ratio. The valuation date is the determination date.
(h) PRESENT VALUE of benefits for purposes of computing the top-heavy ratio will be discounted only for mortality and interest. Unless adopted otherwise, the following factors will apply: five percent interest and the UP-1984 mortality table.
14.3 MINIMUM ALLOCATION.
(a) Except as otherwise provided in (3) and (4) below, the employer contributions and forfeitures allocated on behalf of any participant who is not a key employee shall not be less than the lesser of (i) 3% of such participant's compensation, or (ii) in the case where the employer has no defined benefit plan which designates this plan to satisfy Section 401 of the Code, the largest percentage of employee contributions and forfeitures, as a percentage of the key employee's compensation, as limited by section 401(a)(17) of the Code, allocated on behalf of any key employee for that year. The minimum allocation is determined without regard to any social security contribution. This minimum allocation shall be made even though, under other plan provisions, the participant would not otherwise be entitled to receive an allocation or would have received a lesser allocation for the year because of the participant's failure to complete any required amount of service (or any equivalent provided in the plan), the participant's failure to make mandatory employee contributions to the plan or compensation less than a stated amount. However, this section does not apply to any participant who was not employed by the employer on the last day of the plan year. Neither Elective Deferrals nor Matching Contributions may be taken into account for the purpose of satisfying the minimum top-heavy contribution requirements.
(b) For purposes of computing the minimum allocation, compensation will mean plan compensation as defined in Section C of this Adoption Agreement as limited by section 401(a)(17) of the Code. Compensation for this purpose will include any compensation to a participant during a plan year before he became a participant or after he ceased to be a participant.
(c) The minimum allocation required (to the extent required to be nonforfeitable under Code Section 416(b)) may not be forfeited under Code Section 411(a)(3)(B) or 411(a)(3)(D).
14.4 APPORTIONMENT OF MINIMUM BENEFITS BETWEEN MULTIPLE PLANS.
(a) To prevent duplication of the minimum allocation required under Section 14.3(a) above, if any participant in this plan is covered under any other defined contribution plan or plans of the employer (whether or not such plans are paired plans), the required minimum allocation will be satisfied first from the money purchase plan, if any, and the minimum required allocation from the profit-sharing plan (or plans) will be reduced by the minimum allocation provided under the money purchase plan.
(b) The provisions in Section 14.3(a) will not apply to any participant to the extent the participant is covered under a defined benefit plan (or plans) of the employer and the employer has provided in the adoption agreement that the minimum allocation or benefit requirement applicable to top-heavy plans will be met in the other plan or plans.
14.5 MINIMUM VESTING SCHEDULE. For any plan year in which this plan is top-heavy, one of the top-heavy vesting schedules elected by the employer in the adoption agreement will automatically apply to the plan. The top-heavy vesting schedule applies to all accrued benefits within the meaning of Section 411(a)(7) of the Code except those attributable to 401(k) savings contributions or after-tax employee contributions, including benefits accrued before the effective date of Code Section 416 and benefits accrued before the plan became top-heavy. Further, no decrease in a participant's nonforfeitable percentage may occur in the event the plan's status as top-heavy changes for any plan year. However, this section does not apply to the account balances of any employee who does not have an hour of service after the plan has initially become top-heavy and such employee's account balance attributable to employer contributions and forfeitures will be determined without regard to this section.
14.6 TOP HEAVY ADJUSTMENTS IN SECTION 415 FRACTIONS. If the plan is a top-heavy plan for any plan year, the denominators of the defined benefit fraction and the defined contribution fraction will be determined for a plan year by substituting "1.0" for "1.25" each time it appears in Section 13.1, unless the employer provides in the adoption agreement for the additional top heavy minimum benefit requirements of Code Section 416(h) and provided further that this plan is not super top-heavy. This plan is super top-heavy in any plan year if it would be top-heavy under Section 14.2(h) substituting 90% for 60% wherever 60% appears.
14.7 ADDITIONAL PROVISIONS FOR PAIRED DEFINED CONTRIBUTION AND DEFINED BENEFIT PLANS.
(a) This section is applicable if the employer has adopted paired plans of the sponsor which include a defined benefit plan and one or more defined contribution plans.
(b) (i) The subsection (b) will apply in any plan year for which the plan is top-heavy but not super top-heavy unless in the adoption agreement for the employer's paired defined benefit plan, the employer has elected to apply the defined benefit fraction and the defined contribution fraction in all plan years by substituting "1.0" for "1.25" in each place it appears in Section 13.1.
(ii) The defined contribution plan employer contributions and forfeitures allocated on behalf of any participant who is not a key employee will not be less than the amount provided in (A) below unless in the adoption agreement for the employer's paired defined benefit plan the employer elects to provide the top-heavy minimum accrued benefit in such defined benefit plan and to have (B) below apply in this plan:
(A) For each non-key employee who is not a participant in paired defined benefit plan, 4% of his compensation; or for each non-key employee who is also a participant in the paired defined benefit plan, 7-1/2% of his compensation.
(B) For each non-key employee who is not a participant in the paired defined benefit plan, 4% of his compensation; or for each plan, no minimum contribution (because he will receive the 3% minimum accrued benefit under the paired defined benefit plan).
(c) (i) This subsection (c) will apply in any plan year in which the plan is super top-heavy or in all plan years if in the adoption agreement for the employer's paired defined benefit plan, the employee has elected to apply the defined benefit fraction and the defined contribution fraction in all plan years by substituting "1.0" for "1.25" in each place it appears in Section 13.1.
(ii) The defined contributed plan employer contributions and forfeiture allocated on behalf of any participant who is not a key employee will not be less than the amount provided in (A) below unless in the adoption agreement for the employer's paired defined benefit plan the employer elects to provide the top-heavy minimum accrued benefit in such defined benefit plan and to have (B) below apply in this plan:
(A) For each non-key employee who is not a participant in paired defined benefit plan, 3% of his compensation; or for each non-key employee who is also a participant in the paired defined benefit plan, 5% of his compensation.
(B) For each non-key employee who is not a participant in the paired defined benefit plan, 3% for hi compensation; or for each non-key employee who is also a participant in the paired defined benefit plan, no minimum contribution (because he will receive the 2% minimum accrued benefit under the paired defined benefit plan).
(d) Provisions similar to Sections 14.3(b) and (c) and 144(a) will apply to minimum allocations under this section.
ARTICLE 15
ACCOUNTS AND INVESTMENTS
15.1 SEPARATE ACCOUNTS
(a) The plan administrator shall create and maintain separate accounts for each
participant's 40(k) savings contributions, after-tax employee contributions,
employer contributions, matching employer contributions, and rollover
contributions (and any qualified voluntary employee contributions); a
participant's rollover account may contain subaccounts as provided in Section
7.1(a)(ii). Earnings will be credited to such accounts (and subaccounts) in
accordance with the provisions of this article. Such accounts will be primarily
for accounting purposes and will not restrict the operation for the trust or
require separate earmarked investments for any account; however, specific
investments may be earmarked to participants' accounts if a permitted investment
medium under Section 15.2 so provides.
(b) The plan administrator may itself maintain records of participants' accounts or the plan administrator may arrange for such records to be maintained by an outside service provider (which may be the sponsor or trustee or a contractor of the sponsor or trustee). If the plan administrator arranges with a service provider to maintain records of participants' accounts, the plan administrator will provide such information as is necessary for the service provider to maintain such accounts as required herein.
15.2 INVESTMENT MEDIA; PARTICIPANT INVESTMENT DIRECTIONS
(a) The MetLife Security Insurance Company of Louisiana MetLife RetirePro Program may impose requirements concerning the investment media or vehicles in which contributions to the employer's plan must be invested, and the employer agrees to observe such requirements as a condition of participating in this prototype plan.
(b) Subject to any requirements imposed under subsection (a) above, permissible investment media may include, but are not limited to, contracts issued by an insurance company (including such contracts providing for investments in a separate account maintained by the insurance company), segregated accounts invested in one or more of savings or notice accounts, deposits in or certificates issued by a bank, insurance or annuity contracts, assets specified by the participant (Section 15.4), or shares of one or more investment companies or mutual funds (Section 15.6). In addition, if elected in the adoption agreement, the plan may invest in qualifying employer securities as permitted under ERISA Section 407(d)(3).
(c) Unless the adoption agreement otherwise provides, the employer shall have the sole discretion to direct the investment of the employer's contributions to a money purchase plan or target benefit plan among the permissible investment media. Unless the adoption agreement otherwise provides, participants shall have the sole discretion to direct the investment of all contributions to a profit-sharing plan or 401(k) plan among the permissible investment media.
(d) Subject to the sponsor's requirements under subsection (a) above, the employer will determine the investment of any account over which the participant does not exercise investment control under subsection (c) above. In making such investment determinations, he employer will establish investment policies or rules of general application which do not discriminate among participants.
(e) This subsection will apply where participants' accounts under the employer's plan are commingled for investment purposes (in contrast to aggregated accounts whose valuation is governed by Section 15.4). In such a case, the assets of the plan (or each separate investment fund thereunder consisting of investments in a particular investment vehicle) will be valued at their fair market value as of each valuation date. As of each valuation date, the investment earnings and gains or losses in asset value since the preceding valuation date will be allocated to participants' accounts in the plan (or in each separate investment fund) in proportion to the balance in each such accounts as a fraction of the aggregate account balances as of the preceding valuation date. The last business day of the plan year is a valuation date; the sponsor or employer may designate other valuation dates.
15.3 RULES FOR EXERCISE OF INVESTMENT OPTIONS. Any designation of investments by participants will be subject to nondiscriminatory general rules established by the plan administrator or the MetLife RetirePro Program; such rules may include:
(a) restrictions on the minimum amount or percentage of any contribution which may be placed in any particular investment medium;
(b) restrictions on the use of different amounts or percentages for different types of contributions;
(c) minimums or maximums (or both) on the amount which may be invested or transferred to or from any particular investment medium; and
(d) restrictions on the time and frequency of designations, changes in designations and transfers from one investment medium to another including the required advance notice.
These rules may differ from different types of contributions. The effective date of any change in a participant's election respecting allocation of contributions among investment options or any transfer from one option to another must coincide with a valuation date for each option.
15.4 SEGREGATED ACCOUNTS.
(a) The provisions of this section will apply to the extent that the sponsor or employer designates segregated accounts as permitted investment media. A segregated account is one in which all or a portion of one or more of a participant's accounts are invested in individual investments which are not commingled with investments for other participants' accounts. Examples of investments for segregated accounts include, but are not limited to, interest hearing savings or notice accounts or certificates or other savings instruments maintained or issued by a bank or other thrift institution, life insurance or annuity contracts issued by a life or self-directed investment accounts. Earnings and investment gains and losses of assets held in a segregated account and dividends or credits earned on insurance contracts will be credited solely to such account.
(b) Where the employer designates self-directed accounts as a permissible investment medium, the participant will be subject to such administrative rules and restrictions on permissible investments as the sponsor may impose. However, such rules and restrictions will not conflict with the terms of this plan.
(c) The last business day of the plan year is a valuation date for segregated accounts. the sponsor or employer may designate other valuation dates. The trustee will determine the fair market value of the plan's segregated accounts as of each valuation date and will report such value of the plan administrator. Each participant with a
self-directed account will arrange for a statement of the value of the assets therein as of each valuation date and will provide such statement to the trustee; the trustee may rely upon such statement in making the valuations referred to in the preceding sentence.
15.5 LIFE INSURANCE CONTRACTS. Where the MetLife RetirePro Program permits and the employer designates life insurance contracts as permissible investment media, such contracts will be treated as segregated investments held in a segregated account under Section 15.4, and the following restrictions and rules will apply:
(a) OWNERSHIP OF CONTRACTS. The trustee, if the Plan is trusteed, or custodian, if the Plan has a custodial account, shall apply for and will be the owner of any insurance contract purchased under the terms of this Plan. The insurance contract(s) must provide that proceeds will be payable to the trustee (or custodian, if applicable), however, the trustee (or custodian) shall be required to pay over all proceeds of the contract(s) to the participant's beneficiary in accordance with the distribution provisions of this plan. A participant's spouse will be the designated beneficiary of the proceeds in all circumstances unless a qualified election has been made in accordance with section 9.5, Joint and Survivor Annuity Requirements, if applicable. Under no circumstances will the trust (or custodial account) retain any part of the proceeds.
Any dividends or credits earned on life insurance contracts will be allocated to the account of the participant derived from employer contributions in which the contract is held.
(b) LIMITS ON AMOUNTS.
(i) Ordinary life - For purposes of this subsection, ordinary life insurance contracts are contracts with both nondecreasing death benefits and nonincreasing premiums. If such contracts are purchased, less than 1/2 of the aggregate employer contributions allocated to the participant will be used to pay the premiums attributable to them.
(ii) Term and universal life - no more than 1/4 of the aggregate employer contributions allocated to the participant will be used to pay the premiums on term life insurance contracts, universal life insurance contracts, and all other life insurance contracts which are not ordinary life.
(iii) Combination - The sum of 1/2 of the ordinary life insurance premiums and all other life insurance premiums will not exceed 1/4 of the aggregate employer contributions allocated to the participant.
(c) DISTRIBUTIONS. Upon commencement of benefits, life insurance contracts on a participant's life will be converted to cash or an annuity and distributed to the participant, subject to the plan's provisions on distributions.
(d) CONFLICTS. In the event of any conflict between the terms of this plan and the terms of any insurance contract hereunder, the plan provisions will control.
(e) TRANSACTION WITH PARTICIPANT. The purchase and sale of policies between a participant and the trustee will be permitted in conformance with the applicable class exemption from prohibited transactions issued by the Department of Labor.
15.6 MUTUAL FUND SHARES.
(a) The provisions of this section will apply to the extent that the sponsor or employer designates share of one or more investment companies or mutual funds as permitted investment media.
(b) The trustee will as soon as reasonably practicable after receipt for a contribution invest such contribution in shares and fractional shares of such mutual funds in accordance with the investment instructions applicable to such contribution.
(c) Upon receipt of instructions to transfer an amount invested in one mutual fund to another mutual fund, the trustee will as soon as reasonably practicable thereafter redeem sufficient shares of one mutual fund and purchase shares of the other mutual fund in order to carry out such instructions; such transfer may be carried out by exchange or shares if permitted by the mutual funds involved.
(d) Upon receipt of instructions to redeem shares, the trustee will redeem shares in one or more mutual funds as instructed in order to make a cash disbursement, whether a plan distribution or withdrawal, loan, payment of expenses or otherwise.
(e) The trustee will reinvest all dividends and capital gains or other distributions received on shares of a mutual fund in additional shares of such fund; where permitted such investment will be carried out by the trustee's electing to receive such dividends and distributions in the form of additional shares.
(f) All mutual fund shares purchased, received, redeemed or exchanged by the trustee under the foregoing subsections of this section will be credited to or debited from the appropriate account as directed by the plan administrator. All such transactions will be effected at the current public offering price or net asset value of the mutual fund shares or as otherwise described in the then current prospectus pertaining to such mutual fund.
(g) Investment income and gains or losses in value of each mutual fund in which participants' accounts are invested will automatically and continuously be credited or debited as a function of the net asset value of the shares of such fund and the reinvestment of dividends and other distributions in additional shares of such fund. Accordingly, to the extent that the assets of the employer's plan are invested in shares of such mutual funds, each business day will be a valuation date.
With respect to mutual funds which are not open end funds, the last business day of the plan year is a valuation date. The employer only designate other valuation dates with the consent of the trustee. The trustee will determine the fair market value of the shares of such mutual funds as of each valuation date and will report such value to the plan administrator.
(h) The trustee will deliver to the plan administrator any notices of shareholder meetings, proxy and proxy-soliciting materials, prospectuses and annual or other reports to shareholders received by the trustee relating to shares of a mutual fund held in the trust fund. The plan administrator will in turn deliver such items to each participant whose account is invested in such shares. Within the time limit imposed by the trustee or the plan administrator, each participant may indicate in writing how the shares credited to his accounts are to be voted. The plan administrator will deliver such written instructions to the trustee who will vote the shares in the manner indicated.
Alternatively, arrangements may be made whereby the mutual fund or investment company sends any such materials directly to the participant and the participant sends voting instructions directly to the mutual fund or investment company.
15.7 EXPENSES. Any fees and expenses will be paid by the employer unless it elects not to pay any or all such fees and expenses; in such event, any fee or expense not paid by the employer will be paid from the trust and will be allocated to the accounts of participants or to collective investment funds in which accounts are invested in a manner which reasonably reflects the
accounts and investment funds that generated such fees and expenses. Approximations may be used wherever it is not feasible to allocate such expenses on an exact basis. The employer may reimburse the trust for any fees and expenses paid by the trust. Such reimbursement shall not be deemed to be a contribution for purposes of Code Sections 404 and 415.
ARTICLE 16
ADMINISTRATION OF THE PLAN
16.1 PLAN ADMINISTRATOR. The employer will be the plan administrator for purposes of ERISA, and any reference in this document or the adoption agreement to the plan administrator means the employer. The employer may in the adoption agreement designate an individual or a group of individuals acting as a committee to act of the employer's behalf in carrying out its duties as plan administrator. Such persons may, but need not, be plan participants or employees, partners, or officers of the employer. The employer will notify the trustee of any such appointment. The employer may remove any such individual or committee member at any time with or without cause, by filing written notice of his removal with the trustee. Any such individual or committee member may resign at any time by filing his written resignation with the employer and the trustee. A vacancy however arising, will be filed by the employer.
If the employer does not appoint an individual or committee to act for the employer, the employer will carry out the responsibilities of the plan administrator. If the employer is a sole proprietorship, in the event of the sole proprietor's death, his executor or administrator will be the plan administrator. If the employer is a partnership, in the event of the death of all the partners, the executor or administrator of the last to die will be the plan administrator.
16.2 ADMINISTRATION OF PLAN. The plan administrator is a named fiduciary of the plan and will be the agent for receiving service of legal process on the plan. He will control and manage the operation and administration of the plan and will have all powers and authority necessary or appropriate to carry out is provisions. He will interpret and apply all terms of the plan to particular cases or circumstances. He will make all final determinations concerning eligibility and status of employees, participants, vested interests, the right to benefits and all other rights hereunder, and all other matters concerning plan administration and interpretation. All determinations and actions of the plan administrator are conclusive and binding upon the employer, employees, beneficiaries, and all other persons, except as otherwise provided herein or by law. The plan administrator will exercise his powers in a non-discriminatory manner and will apply uniform administrative rules of general application to insure that persons in similar circumstances are treated alike.
16.3 REPORTING AND DISCLOSURE. The plan administrator will prepare file, submit, distribute or make available any documents, plan descriptions, reports, statements, forms or other information to any government agency, employee, former employee, or beneficiary as may be required by law or by the plan.
16.4 RECORDS. The plan administrator will record his acts and decisions, and will prepare and maintain all data and records necessary or helpful to the plan's administration. The employer will supply all information required by the plan administrator to administer the plan, and the plan administrator may rely upon the accuracy of such information.
16.5 COMPENSATION AND EXPENSES. The plan administrator will serve without compensation unless otherwise determined by the employer, but no employee of the employer will be compensated
for his service as plan administrator. All reasonable expenses of operating and administering the plan will be paid by the employer or from the assets of the trust fund, as provided in Section 15.7. Such expenses include the compensation of all persons employed or retained by the plan administrator (such as attorneys, accountants, actuaries, or other consultants or specialists), premiums for insurance or bonds protecting the plan or trust and required by law or deemed advisable by the plan administrator, and all other fees, expenses or costs of plan administration.
16.6 CLAIMS PROCEDURE. Any request for benefits (the claim) by a participant or his beneficiary (the claimant) will be filed in writing with the plan administrator. Within a reasonable period after receipt of a claim, the plan administrator will provide written notice to any claimant whose claim has been wholly or partly denied, including:
(a) the reasons for denial;
(b) the plan provisions on which the denial is based;
(c) any additional material or information necessary to perfect the claim and the reasons it is necessary; and
(d) the plan's claims review procedure.
A claimant will be given a full and fair review by the plan administrator of the denial of his claim if he makes a written request for review within sixty (60) days after notification of the denial. The claimant may review pertinent documents and may submit issues and comments in writing. The plan administrator will render a written decision on review promptly and will include specific reasons for the decision and references to the plan provisions on which the decision is based.
16.7 MORE THAN ONE EMPLOYER. If more than one employer has adopted the plan, the employer designated in Part A of the adoption agreement will be considered the employer for purposes of exercising certain powers and administrative duties. In joining the plan, other employers delegate authority to such employer to complete and select options in the adoption agreement and to select permissible investment media under Article 15; to designate the plan administrator and any other fiduciary; to amend or terminate the plan without a separate written instrument from each joining employer, provided that any such amendment or termination must apply equally to all adopting employers; to determine the appropriate basis under which plan administrative expenses will be shared or to redelegate that authority to the plan administrator; and to take, or redelegate authority to the plan administrator to take, such other action as may be necessary for the efficient and proper administration of the plan. Each joining employer will retain the authority to terminate the plan for its own employees. However, any amendment or termination of the plan which does not uniformly apply to all members of a controlled group or affiliated service group or other aggregated group (within the meaning of Sections 19.9, 19.10 and 19.11 hereof) will cause any standardized plan to be considered a non-standarized plan so that the employers may not rely upon the plan's qualification under Code Section 401(a) unless they obtain a determination letter to such effect from the Internal Revenue Service.
ARTICLE 17
AMENDMENT, TERMINATION OR MERGER OF PLAN
17.1 AMENDMENT BY SPONSOR. The sponsor may amend any or all provisions of this prototype plan at any time without obtaining the consent of the employer, and the employer (and each other adopting employer) hereby expressly delegates authority to amend this plan to the sponsor. For purposes of sponsoring organization
amendments, the mass substitute shall be reorganized as the agent of the sponsoring organization. If the sponsoring organization does not adopt the amendments made by the mass submitter, it will no longer be identical to or a minor modifier of the mass submitter plan.
17.2 AMENDMENT BY EMPLOYER. Except for (a) changes of design options selected in the adoption agreement, (b) amendments stated in the adoption agreement which allow the plan to satisfy Section 415 of the Code or to avoid duplication of minimums under Section 415 of the Code because of the required aggregation of multiple plans, and (c) adding certain model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the plan to be treated as individually designed, if the Employer amends the plan or non-elective portions of the adoption agreement, for any other reason, it will no longer participate in this prototype plan, but will be considered to have an individually designed plan. Except as otherwise provided in the Adoption Agreement, the Employer may amend this plan by having a person authorized by its Board of Directors complete a new Adoption Agreement following formal action of the Board of Directors approving the adoption of such amendment. If the employer is not a corporation, the partners or sole proprietor shall be authorized to approve an amendment to this plan by formal action and authorize an individual to complete a new Adoption Agreement incorporating the amendment.
17.3 RESTRICTIONS ON AMENDMENTS. No amendment under Section 17.1 or 17.2 will:
(a) cause or permit any part of the assets of the trust to be diverted to purposes other than the exclusive benefit of participants and their beneficiaries, or cause or permit any portion of such assets to revert to or become the property of the employer;
(b) retroactively deprive any participant of any benefit to which he was entitled hereunder by reason of contributions made by the employer or the participant before the amendment, unless such amendment is necessary to conform the trust or plan to, or satisfy the conditions of any law, governmental regulation or ruling or to permit the plan and trust to meet the requirements of Sections 401(a) and 501(a) of the Code;
(c) decrease a participant's account balance, except to the extent permitted under Section 412(c)(8) of the Code. For purposes of this paragraph, a plan amendment which has the effect of decreasing a participant's account balance or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing an accrued benefit;
(d) if the vesting schedule of a plan is amended, for an employee who is a participant as of the later of the date such amendment is adopted or the date it becomes effective, cause the nonforfeitable percentage (determined as of such date) of such employee's right to his employer-derived accrued benefit to be less than his percentage computed under the plan without regard to such amendment; also, in the event of an amendment affecting the vesting schedule of the employer's plan, any participant with three or more years of service will have his vesting determined under the pre-amendment vesting schedule if this would result in such participant having a greater vested interest than under the amended vesting schedule. For participants who do not have at least 1 hour of service in any plan year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "5 years of service" for "3 years of service" where such language appears;
(e) eliminate an optional form of distribution in violation of Code Section 411; or
(f) increase or otherwise the duties, liabilities or rights of the trustee unless the trustee consents thereto in writing.
17.4 TERMINATION OF PLAN. The employer has established this plan with the bona fide expectation and intention that it will continue to make contributions indefinitely. However, circumstances not now foreseen or beyond the control of the employer may make it impossible or inadvisable for the employer to continue the plan. The employer may, therefore, in its discretion, discontinue contributions or terminate the plan completely or partially at any time with respect to its employees by delivering to the trustee a notice of complete or partial termination specifying the date of termination of the plan and in the case of a partial termination the participants affected by such partial termination. The employer will be deemed to have completely terminated the plan in the case of (a) complete discontinuance of contributions or (b) termination of the employer's legal existence. The employer will incur no liability to any person as a result of any discontinuance of contributions or complete or partial termination of the plan. In the event of a termination or partial termination of the plan, or in the event of complete discontinuance of contributions under a profit-sharing plan, the account balance of each affected employee will be fully vested and nonforfeitable.
17.5 DISPOSITION AND TERMINATION OF TRUST.
(a) Upon complete or partial termination of the plan, the plan administrator will determine subject to the joint and survivor rules of this plan, whether to direct the trustee to continue to hold the accounts of participants affected by the termination or partial termination, to disburse them as immediate benefit payments, to purchase immediate or deferred annuity contracts, or to follow any other procedure he deems advisable. The trustee will follow the directions of the plan administrator.
(b) The trust created hereunder will terminate when all the assets of the trust have been distributed.
17.6 MERGER OF PLANS. A merger of consolidation with, or transfer of assets or liabilities to, any other plan will be permitted only if the benefit each participant would receive if the plan were terminated immediately after the merger, consolidation or transfer is not less than the benefit he would have received if the plan had terminated immediately before the merger, consolidation or transfer.
ARTICLE 18
TRANSFERS FROM OR TO OTHER QUALIFIED PLANS
18.1 TRANSFERS FROM ANOTHER PLAN OF THE EMPLOYER.
(a) Notwithstanding any other provision hereof, the employer may cause to be transferred to the trustee all or any of the assets held (whether by a trustee, custodian, or otherwise) under any other defined contribution plan which satisfies the requirements of Section 401(a) of the Code and which is maintained by the employer for the benefit of any of the participants hereunder. If the trustee is keeping separate accounts for each participant, any such assets so transferred will be accompanied by instructions from the employer or plan administrator naming the participants for whose benefit such assets have been transferred and showing separately the respective contributions by the employer and by the participants and the current value of the assets attributable thereto.
(b) Upon receipt of any assets transferred to it under subsection (a), the trustee may sell any non-cash assets and invest the proceeds and any cash transferred to it. The trustee will make appropriate credits to the proper accounts in accordance with the employer's or plan administrator's instructions.
18.2 TRANSFERS TO OTHER PLANS. Upon the request of the employer, the trustee will transfer an amount designated by the employer to the trustee or custodian of any other qualified plan under which plan participants are covered.
ARTICLE 19
MISCELLANEOUS
19.1 PROHIBITED DIVERSION. Except as provided in Section 19.6, no portion of the corpus or income of the trust will be used or diverted, to purposes other than for the exclusive benefit of participants, former participants and their beneficiaries, and to defray administrative expenses of the plan and trust. However, payment of sales charges, administrative expenses and taxes from the trust assets is expressly permitted.
19.2 FAILURE TO ATTAIN OR RETAIN QUALIFICATION. If the employer's plan fails to attain or retain qualification, such plan will no longer participate in this prototype plan and will be considered an individually designed plan.
19.3 NONALIENATION. No benefit or interest of any participant, former participant or beneficiary hereunder will be subject to assignment or alienation, either voluntary or involuntary. This section applies to the creation, assignment or recognition of a right to any benefit payable with respect to a participant pursuant to domestic relations order unless such order is determined to be a qualified domestic relations order under Section 19.4 below, or any domestic relations order entered before January 1, 1985.
19.4 QUALIFIED DOMESTIC RELATIONS ORDERS
(a) A qualified domestic relations order (QDRO) is a judgment, decree, or order which meets the requirements of Code Section 414(p). An alternate payee is an individual named in the QDRO who is receive some or all of the participant's benefit.
(b) Upon receipt of an order which appears to be a QDRO, the plan administrator will notify the participant involved and each alternate payee under the order (and under any previous QDRO covering the participant' benefits). The plan administrator will determine whether the order is a QDRO and will notify each affected individual of his determination. In general, the plan's claims procedure rules under Section 16.6 apply to this determination and any subsequent determination relating to the order. In applying these rules, an individual who is or may be an alternate payee enjoys the status of a claimant. However, the plan administrator may take any action or delay contemplated in Code Section 414(p) and the regulations under it, whether or not contemplated in the plan's claims procedure rules.
(c) To the maximum extent permitted by law, the plan administrator's determination that an order is or is not a QDRO is final. Any subsequent change in this determination is applied only prospectively, unless the plan administrator rules otherwise.
(d) Certain conflicts between a domestic relations order and the plan's provisions will cause the order to fall to be a QDRO. However, once an order is determined to be a QDRO, the provisions of the QDRO take precedence over any conflicting provisions of the plan.
(e) Except as otherwise provided under the terms of the QDRO, all benefits under a QDRO will be payable in the form of a single sum commencing as soon as practicable after the plan administrator determines that a domestic relations order is a QDRO. For purposes of determining the accounts from which benefits under a QDRO will be distributed, the trustee will distribute a pro rata amount from each of the participant's employer contribution, after-
tax employee contribution, savings contribution, matching contribution, rollover contribution, and all other accounts maintain on behalf of the participant, unless the QDRO otherwise provides. To the extent provided in a QDRO (assuming that the QDRO does not provide for the form of distribution described in the preceding sentence), a former spouse will be treated as the spouse or surviving spouse of a participant for purposes of the spousal protection and any other relevant provisions of the plan.
(f) A domestic relations order entered before January 1, 1985, will be treated as a QDRO if payment of benefits pursuant to the order has commenced as of that date. At the plan administrator's discretion, it may be treated as a QDRO if payment of benefits has not commenced as of that date, even though the order does not satisfy the requirement of Code Section 414(p).
19.5 LIMITATION ON RIGHTS CREATED BY PLAN.
(a) The adoption and maintenance of the plan and trust will not be construed to give a participant the right to continue in the employ of the employer or to interfere with the right of the employer to discharge, lay off or discipline a participant at any time, or give the employer the right to require any participant to remain in its employ or to interfere with the participant's right to terminate his employment.
(b) The adoption and maintenance of the plan and trust, the creation of any account or the payment of any benefit will not be construed as creating any legal or equitable right against the employer or the trust except as this plan specifically provides.
(c) The employer, the trustee, the plan administrator and the sponsor do not guaranty the payment of benefits hereunder and benefits will be paid only to the extent of the assets of the trust. It is a condition of participation in the plan that each participant (and his beneficiary or anyone else claiming through him) will look only to the assets of the trust for the payment of any benefit to which he or his beneficiary or other person is entitled.
19.6 ALLOCATION OF RESPONSIBILITIES. The employer, the trustee and the plan administrator will each have only those duties and responsibilities specifically allocated to each of them under the plan. There will be no joint fiduciary responsibility between or among fiduciaries unless specifically stated otherwise. Any person may serve in more than one fiduciary capacity.
19.7 RETURN OF CONTRIBUTIONS.
(a) If the Commissioner of Internal Revenue determines that the plan is not initially qualified under the Code, any contribution made conditionally subject to such initial qualification will be returned to the employer if demand therefor is made within one year after the date initial qualification is denied, but only if application for a determination concerning the plan's initial qualification was made within the time prescribed by law for filing the employer's tax return for the taxable year in which the plan was adopted or within such longer time as the Secretary of the Treasury may prescribe.
(b) All employer contributions are conditioned upon their deductibility under Code Section 404. A contribution which is made because of a mistake of fact or the deduction of which is disallowed, will be returned to the employer within one year thereafter.
(c) If the trustee is keeping separate accounts for each participant, participants' accounts will be adjusted in accordance with instructions from the plan administrator to the trustee to reflect any returns under this Section 19.6.
19.8 CURRENT ADDRESS OF PAYEE. The plan administrator shall make reasonable efforts in locate any participant, beneficiary, or alternate payee to whom benefits are required to be paid under the terms of the plan or applicable law. If, as a result of the exercise of reasonable efforts to locate any such person, the plan administrator is unable to locate such person, the plan administrator shall dispose of such person's account balance in the manner specified in the adoption agreement. If disposition of any person's account balance under any one or more of the methods described in this section is impracticable or would adversely affect the qualification of the plan, the plan administrator may substitute any other reasonable method, in its sole discretion, which is consistent with the qualification requirements of Subchapter D of the Code. If a benefit is forfeited because the Participant or beneficiary cannot be found, such benefit will be reinstated if a claim is made by the Participant or beneficiary.
19.9 CONTROLLED GROUP. Except as provided in Section 4.1(c), all employees of all corporations which are members of a controlled group of corporations (as defined in Section 414(b) of the Code) and all employees of all trades or businesses, whether or not incorporated, which are under common control (as defined in Section 414(c) of the Code) will be treated as employed by a single employer.
19.10 AFFILIATED SERVICE GROUPS. All employees of all members of an affiliated service group (as defined in Section 414(m) of the Code) will be treated as employed by a single employer.
19.11 OTHER AGGREGATED GROUPS. Employees of employers which are aggregated in accordance with regulations under Code Section 414(o) will be treated as employed by one employer to the extent provided in such regulations.
19.12 LEASED EMPLOYEES. Any leased employee shall be treated as an employee of the recipient employer.
The term "leased employee" means any person (other than an employee of the recipient) who pursuant to an agreement between the recipient and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with section 414(n)(6) of the Code) on a substantially full time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the recipient employer. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer.
A leased employee shall not be considered an employee of the recipient if: (i) such employee is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in section 415(c)(3) of the Code, but including amounts contributed pursuant to a salary reduction agreement which are excludible from the employee's gross income under section 125, section 402(e)(3), section 402(h)(1)(B) or section 403(b) of the Code, (2) immediate participation, and (3) full and immediate vesting; and (ii) leased employees do not constitute more than 20 percent of the recipient's nonhighly compensated workforce.
19.13 CONTROL OF TRADES OR BUSINESSES BY OWNER EMPLOYEE.
(a) If this plan provides contributions or benefits for one or more owner- employees who control both the business for which this plan is established and one or more-other trades or businesses, this plan and the plan established for other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and (d) of the Code for the employees of this and all other trades or businesses.
(b) If the plan provides contributions or benefits for one or more owner- employees who control one or more other trades or businesses, the employees of the other trades or businesses must be included in a plan which satisfies Sections 401(a) and (d) and which provides contributions and benefits not less favorable than those provided for owner-employees under this plan.
(c) If an individual is covered as an owner-employee under the plans of two or more trades or businesses which are not controlled and the individual controls a trade or business, then the contributions or benefits of the employees under the plan of the trades or businesses which are controlled must be as favorable as those provided for him under the most favorable plan of the trade or business which is not controlled.
(d) For purposes of this section an owner-employee, or two or more owner- employees, will be considered to control a trade or business if the owner- employee or two or more owner-employees together:
(i) own the entire interest in an unincorporated trade or business, or
(ii) in the case of a partnership, own more than 50 percent of either the capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an owner-employee or two or more owner- employees shall be treated as owning any interest in a partnership which is owned directly or indirectly by a partnership which such owner-employee, or such two or more owner-employees are considered to control within the meaning of the preceding sentence.
19.14 APPLICATION OF PLAN'S TERMS.
(a) If an employee retired, died or otherwise terminated his service before the effective date of the employer's plan, the employee and his beneficiaries will receive no benefits and will have no rights under the plan.
(b) If an employee retires, dies or otherwise terminates his service on or after the effective date of the employer's plan, the benefits and rights of the employee and his beneficiaries will be determined in accordance with the terms of the plan that are in effect on the date of such termination of service.
(c) The allocations to a participant's account for any year of reference will be determined in accordance with the terms of the plan that are in effect for such year.
19.15 RULES OF CONSTRUCTION.
(a) This plan is intended to qualify as a profit sharing plan or a pension plan under Section 401(a) of the Code to be an eligible individual account plan as defined in Section 407(d)(3) of ERISA, and to comply with all applicable requirements of both statutes. The terms of the plan will be construed to carry out this intent.
(b) A word or phrase defined or explained in any section has the same meaning throughout the plan unless the context indicates otherwise.
(c) Where the context so requires the masculine includes the feminine, the singular includes the plural, and the plural includes the singular.
(d) Unless the context indicates otherwise, the words "herein", "hereof", "hereunder", and words of similar import refer to the plan as a whole and not only to the section in which they appear.
(e) Headings and titles are for convenience only, and the text will control in all matters.
(f) Reference to any section of the Code of ERISA includes reference to a similar provision of a successor statute.
19.16 GOVERNING LAW. To the extent that state law applies, the provisions of the plan will be construed enforced and administered according to the laws of the state where the principal offices of the trustee are located.
19.17 PAYMENT FOR MINOR OR INCOMPETENT. In the event that any amount is payable under the plan to a minor or to any person deemed by the plan administrator or a court of competent jurisdiction to be incompetent, either mentally or physically, such payment shall be made for the benefit of such minor or incompetent person by payment to a person who has been designated by a court of competent jurisdiction to receive such amount.
CADUS PHARMACEUTICAL CORPORATION
777 Old Saw Mill River Road
Tarrytown, New York 10591-6705
December 12, 1995
Dr. Jeremy Levin
2 West 67th Street
New York, New York 10023
Dear Dr. Levin:
This letter sets forth the terms and conditions under which Cadus Pharmaceutical Corporation, a Delaware corporation (the "Employer"), will continue to employ you (the "Executive") as the Chief Executive Officer of the Employer.
1. EMPLOYMENT. Employer hereby agrees to employ Executive, and Executive agrees to serve Employer, as the Chief Executive Officer of Employer, upon the terms and conditions hereinafter set forth.
2. TERM. The employment of Executive by Employer hereunder commenced on December 12, 1995 and will terminate on the second anniversary of such date.
3. DUTIES. Executive shall serve Employer as its Chief Executive Officer and render such managerial, administrative and other services as normally are associated with and incident to such position. Executive shall report directly to the Board of Directors of Employer.
4. COMPENSATION.
(a) Employer shall pay Executive a base salary at the rate of Two Hundred Twenty-Five Thousand Dollars ($225,000) per annum. Employer shall pay Executive's salary in accordance with Employer's standard practices and procedures in effect from time to time, but in no event less often than semi-monthly. Annually, at least thirty (30) days prior to the anniversary of the date hereof, the Compensation Committee of Employer shall review Executive's performance of his duties hereunder and may, in its discretion, increase Executive's base salary.
(b) Annually, on the anniversary of the date hereof, Employer shall pay to Executive a guaranteed bonus in an amount equal to twenty percent (20%) of his annual base salary in effect for the year then ended.
(c) The Compensation Committee of Employer will
Dr. Jeremy Levin
December 12, 1995
review annually, at least thirty (30) days prior to the anniversary of the date hereof, the performance of Executive with a view toward awarding an annual merit bonus. The decision as to whether or not to award a merit bonus and the amount of such merit bonus shall be in the discretion of the Compensation Committee. Any merit bonus awarded hereunder shall be paid within 30 days of the anniversary of the date hereof.
5. PAYMENTS ON TERMINATION.
(a) If Executive's employment terminates for any reason whatsoever,
Employer shall pay to Executive within ten (10) days of such termination (i) the
salary specified in subparagraph 4(a) hereof through the date of termination and
(ii) the bonus specified in subparagraph 4(b) hereof multiplied by a fraction
the numerator of which is the number of days elapsed from the last anniversary
of the date hereof to the date of termination and the denominator of which is
365.
(b)(i) If Executive's employment is terminated by Employer without "cause"
(as hereinafter defined in subparagraph 5(c) hereof), (ii) if Employer fails to
renew this Agreement on terms acceptable to Executive and Executive terminates
his employment with Employer after December 12, 1997, (iii) if Executive
terminates his employment by Employer within 18 months after a "Change of
Control" (as hereinafter defined in subparagraph 5(d) hereof) and after
Executive is assigned any duties or responsibilities that are inconsistent with
his position, duties, responsibilities or status on the date hereof, or his
reporting responsibilities or titles in effect on the date hereof are changed,
or (iv) Employer terminates Executive's employment for any reason whatsoever
within 18 months after a Change of Control, then, in addition to the payments
pursuant to subparagraph 5(a) hereof, Employer shall pay to Executive within ten
(10) days of such termination an amount equal to one hundred percent (100%) of
his annual base salary and guaranteed bonus in effect on the date of termination
and all unvested stock options issued to Executive will immediately vest as of
the date of termination.
(c) For the purposes of this Agreement, "cause" shall mean (i) the
commission of a crime by Executive which constitutes a felony and has a material
adverse effect on Employer; (ii) Executive's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to Employer; or
(iii) the willful refusal by Executive to substantially perform his duties
hereunder and his failure to cure such breach within ten (10) days after notice
thereof from Employer.
Dr. Jeremy Levin
December 12, 1995
(d) For the purposes of this Agreement, a "Change in Control" shall be deemed to have occurred when (i) any "person" (as such term is used in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended) or group, other than Carl C. Icahn and his affiliates, is or becomes the beneficial owner, directly or indirectly, of securities of Employer representing 25% or more of the combined voting power of the then outstanding securities of the Company (assuming the conversion of all outstanding convertible preferred stock of Employer); or (ii) three or more persons are elected to the Board of Directors who were not placed in nomination for that office by the Board of Directors; or (c) Executive is not re-elected to the Board of Directors of Employer at the expiration of his term of office; or (d) Employer combines with another company and the shareholders of Employer hold less than 50% of the total of all voting shares outstanding or to be outstanding as a result of the combination or Employer's directors constitute less than a majority of the board of directors of the combined entity.
6. EMPLOYEE BENEFIT PLANS. During the period of employment hereunder, Executive shall be entitled to participate in any life insurance, medical insurance, dental insurance, retirement, pension, profit-sharing or other benefit plans or arrangements now or hereafter generally made available by Employer to employees of Employer.
7. REIMBURSEMENT OF EXPENSES.
(a) Employer shall reimburse Executive for all expenses incurred by him on behalf of Employer in the performance of his duties hereunder, in accordance with its standard practices and procedures in effect from time to time but in any event within thirty (30) days after Executive submits written vouchers evidencing such expenses and the purposes for which the same were incurred.
(b) Employer will pay or reimburse Executive for all costs and expenses (including court costs and attorney's fees) incurred by Executive as a result of any claim, action or proceeding arising out of, or challenging the validity, or enforceability of, this Agreement or any provision hereof.
8. VACATIONS. In connection with his employment hereunder, Executive shall be entitled to reasonable vacations consistent with the policies of Employer with respect to executive vacations.
Dr. Jeremy Levin
December 12, 1995
9. NOTICES. All notices and other communications hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, to the other party hereto at his or its address as set forth in the beginning of this Agreement. Either party may change the address to which notices and other communications hereunder shall be sent by sending written notice of such change of address to the other party.
10. ASSIGNABILITY AND BINDING EFFECT. This Agreement shall not be assignable by Employer or Executive. This Agreement shall inure to the benefit of and shall be binding upon the heirs, executors, administrators and legal representatives of Executive, and shall inure to the benefit of and be binding upon Employer and its successors.
11. COMPLETE UNDERSTANDING; AMENDMENTS. This Agreement constitutes the complete understanding between the parties with respect to the employment of Executive hereunder, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Agreement shall not be altered, modified or amended except by a written instrument signed by each of the parties hereto.
12. GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York.
13. PARAGRAPH HEADINGS. The paragraph headings of this Agreement are for convenience of reference only and shall not limit or define the text hereof.
Please confirm that the foregoing represents our agreement by signing the enclosed copy of this letter where indicated and returning the same to us, whereupon this letter shall constitute a valid and binding agreement between us.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JAMES S. RIELLY
------------------------------
James S. Rielly, Treasurer
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AGREED AND ACCEPTED:
/S/ JEREMY M. LEVIN
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JEREMY M. LEVIN
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PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF JULY 30, 1993
BY AND BETWEEN
CADUS PHARMACEUTICAL CORPORATION
AND
EACH OF THE PURCHASERS NAMED HEREIN
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Purchase, Sale and Terms Of Shares ............................ 1
1.01. The Preferred Shares ......................................... 1
1.02. The Conversion Shares ........................................ 2
1.03. Purchase Price and Closing ................................... 2
1.04. Use of Proceeds .............................................. 3
1.05. Representations by the Purchasers ............................ 3
(A) Investment Representations .......................... 3
(B) Access to Information ............................... 4
(C) General Access ...................................... 4
(D) Sophistication and Knowledge ........................ 4
(E) Transfer Restrictions Imposed by Securities Laws .... 4
(F) Lack of Liquidity ................................... 5
(G) Suitability and Investment Objectives ............... 5
(H) Accredited Investor Status .......................... 5
1.06. Brokers or Finders ........................................... 5
ARTICLE II - CONDITIONS TO PURCHASERS' OBLIGATIONS ........................ 6
2.01. Representations and Warranties ............................... 6
2.02. Documentation at Closing ..................................... 6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... 9
3.01. Organization and Standing of the Company ..................... 9
3.02. Corporate Action ............................................. 10
3.03. Governmental Approvals ....................................... 10
3.04. Litigation ................................................... 11
3.05. Certain Agreements of Officers and Employees ................. 12
3.06. Compliance with Other Instruments ............................ 12
3.07. Title to Assets, Patents ..................................... 13
3.08. Financial Information ........................................ 15
3.09. Taxes ........................................................ 15
3.10. Erisa ........................................................ 16
3.11. Transactions with Affiliates ................................. 16
3.12. Assumptions or Guaranties of Indebtedness of Other Persons ... 16
3.13. Investments in Other Persons ................................. 17
3.14. Securities Act of 1933 ....................................... 17
3.15. Disclosure ................................................... 17
3.16. Brokers or Finders ........................................... 18
3.17. Capitalization; Status of Capital Stock ...................... 18
3.18. Registration Rights .......................................... 19
3.19. Insurance .................................................... 19
3.20. Books and Records ............................................ 19
3.21. Material Agreements .......................................... 20
3.22. Absence of Certain Developments .............................. 20
3.23. Environmental and Safety Laws ................................ 22
3.24. U.S. Real Property Holding Corporation ....................... 22
3.25. Payments from Individual Investors ........................... 22
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ARTICLE IV - COVENANTS OF THE COMPANY ..................................... 22
4.01. Key Person Insurance ......................................... 22
4.02. Reporting Requirements ....................................... 23
(A) Monthly and Quarterly Reports ....................... 23
(B) Annual Reports ...................................... 24
(C) Budgets and Operating Plan .......................... 24
(D) Notice of Adverse Changes ........................... 24
(E) Certain Reports and Other Information ............... 24
4.03. Loans to Certain Persons ..................................... 24
4.04. Issuance and Sales of Series A Shares ........................ 25
4.05. Limitation on Ownership ...................................... 25
4.06. Limitation on Repurchases .................................... 25
ARTICLE V - REGISTRATION RIGHTS ........................................... 26
5.01. Piggy-back Registrations ..................................... 26
5.02. Demand Registration .......................................... 27
5.03. Registrations on Form S-3 .................................... 29
5.04. Effectiveness ................................................ 30
5.05. Indemnification by the Company ............................... 30
5.06. Indemnification by Holders of Registrable Shares ............. 33
5.07. Exchange Act Registration .................................... 36
5.08. Damages ...................................................... 36
5.09. Further Obligations of the Company ........................... 37
5.10. Expenses ..................................................... 39
5.11. Transferability .............................................. 40
5.12. "Lock-up" Agreement .......................................... 40
5.13. Mergers, Etc ................................................. 41
ARTICLE VI - RIGHT OF FIRST REFUSAL ...................................... 41
6.01. Right of First Refusal ....................................... 41
6.02. Notice of Acceptance ......................................... 42
6.03. Conditions to Acceptances and Purchase ....................... 43
(A) Permitted Sales of Refused Securities ............... 43
(B) Reduction In Amount of Offered Securities ........... 43
(C) Closing ............................................. 44
6.04. Further Sale ................................................. 44
6.05. Termination and Waiver of Right of First Refusal ............. 44
6.06. Exceptions ................................................... 44
Article Vii - Definitions and Accounting Terms ............................ 46
7.01. Certain Defined Terms ........................................ 46
7.02. Accounting Terms ............................................. 51
-ii-
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ARTICLE VIII - MISCELLANEOUS .............................................. 51
8.01. No Waiver; Cumulative Remedies ............................... 51
8.02. Amendments, Waivers and Consents ............................. 51
8.03. Addresses for Notices ........................................ 52
8.04. Costs, Expenses and Taxes .................................... 52
8.05. Effectiveness; Binding Effect; Assignment .................... 52
8.06. Survival of Representations and Warranties ................... 53
8.07. Prior Agreements ............................................. 53
8.08. Severability ................................................. 53
8.09. Confidentiality .............................................. 54
8.10. Governing Law ................................................ 54
8.11. Headings ..................................................... 54
8.12. Counterparts ................................................. 54
8.13. Further Assurances ........................................... 54
EXHIBITS
1.01 Purchasers
1.07 Axion Agreements
2.02(a) Form of Certificate Designating Series of Convertible
Preferred Stock, Series A
2.02(b) Form of Opinion of Special Counsel to Company
2.02(i)A List of Certain Employees
2.02(i)B Form of Discovery and Nondisclosure Agreement
2.02(i)C List of Parties to Restricted Stock Agreements
2.02(i)D Form of Restricted Stock Agreement
2.02(j) Form of Voting Agreement
2.02(o) Form of ImClone Subscription Agreement
2.02(p) Form of Co-sale Agreement
2.02(q) Form of By-law Amendment
3.03 Governmental Approvals
3.04 Litigation
3.05 List of Certain Employee/Consultant Agreements
3.06 Schedule of Indebtedness
3.07 List of Intellectual Property; Claims and Encumbrances
3.08A Financial Statements for 1992
3.08B Financial Statements for Quarter Ended March 31, 1993
3.08C Certain Changes Subsequent to December 31, 1992
3.11 Certain Transactions with Affiliates
3.12 List of Assumptions of Indebtedness Or Guarantees
3.13 Investments in Other Persons
3.17 Owners of Capital Stock
3.18 Registration Rights
3.21 List of Material Agreements
3.22 Changes in Company Since 12/31/92
7.01 Forms of Escrow Agreements
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PREFERRED STOCK PURCHASE AGREEMENT
CADUS PHARMACEUTICAL CORPORATION
180 VARICK STREET
NEW YORK, NEW YORK 10014
as of July 30, 1993
To the Persons listed on EXHIBIT 1.01 hereto
Re: CONVERTIBLE PREFERRED STOCK, SERIES A
Gentlemen:
Cadus Pharmaceutical Corporation, a Delaware corporation (the "Company"), agrees with each of you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01. THE PREFERRED SHARES. The Company has authorized the issuance and sale of up to 17,600,000 shares (the "Series A Shares") of its authorized but unissued shares of Convertible Preferred Stock, Series A, $.001 par value (the "Series A Preferred Stock"), at a purchase price of $.457 per share, payable in cash, except as to 4,376,368 Series A Shares to be acquired by ImClone Systems Incorporated, a Delaware corporation ("ImClone"), upon surrender and cancellation of indebtedness of the Company to ImClone as noted on Exhibit 1.01. The Series A Shares will be sold to the persons (collectively, the "Purchasers" and, individually, a "Purchaser") and in the respective amounts set forth in EXHIBIT 1.01. The designation, rights, preferences and other terms and provisions of the Series A Preferred Stock are set forth in EXHIBIT 2.02(a).
1.02. THE CONVERSION SHARES. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of Common Stock (such capitalized term and all other capitalized terms used herein and not separately defined herein have the respective meanings provided in Article VII hereof) to satisfy the rights of conversion of the holders of the Series A Shares. Any shares of Common Stock issuable upon conversion of the Series A Shares, including, without limitation, Series A Shares issued pursuant to the ImClone Subscription Agreement (and such shares when issued) are herein referred to as the "Conversion Shares". The Series A Shares and Conversion Shares are sometimes collectively referred to as the "Shares".
1.03. PURCHASE PRICE AND CLOSING. The Company agrees to issue, and sell to the Purchasers and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not jointly, agree to purchase, that number of the Series A Shares set forth opposite their respective names in EXHIBIT 1.01. The aggregate purchase price of the Series A Shares being acquired by each Purchaser is set forth opposite such Purchaser's name in EXHIBIT 1.01. The closing of the purchase and sale of the Series A Shares to be acquired by the Purchasers (other than the Individual Purchasers) from the Company under this Agreement shall take place at the offices of ImClone at 180 Varick Street, 7th Floor, New York, New York, at 10:00 a.m., New York City time, on July 29, 1993, or at such time and date thereafter as the Purchasers (other than the Individual Purchasers) and the Company may agree (the "Closing"). At the Closing, the Company will deliver to the Escrow Agent for each Purchaser (other than the Individual Purchasers), certificates for the number of Series A Shares set forth opposite its name under the heading "Number of Series A Shares" in EXHIBIT 1.01, registered in such Purchaser's name (or the name of its nominee), against (1) delivery to the Escrow Agent for such Purchaser (or, in the case of The Global Sciences Health Fund, such other Person as shall be designated by The Global Sciences Health Fund), to be held and delivered pursuant to the Escrow Agreement of a
check or checks payable to the order of the Company, or a wire transfer of immediately available funds to the account of the Company, in an amount equal to the "Aggregate Purchase Price of Series A Shares" set forth opposite each such Purchaser's name on EXHIBIT 1.01, as payment in full of the purchase price of the Series A Shares to be purchased by each such Purchaser (other than ImClone) and (2) the cancellation of indebtedness of the Company to ImClone in the principal amount of $.457 for each Series A Share to be purchased by ImClone at the Closing.
1.04. USE OF PROCEEDS. The Company shall use the cash proceeds from the sale of the Series A Shares for working capital and general corporate purposes and otherwise as described in its Confidential Private Placement Memorandum, dated August 17, 1992, as supplemented, relating to the offering of the Series A Shares (the "Offering Memorandum").
1.05. REPRESENTATIONS BY THE PURCHASERS. Each Purchaser, severally and not jointly, makes the following representations and warranties to the Company:
(a) INVESTMENT REPRESENTATIONS. It is such Purchaser's present intention to acquire the Shares to be acquired by it for its own account (and it will be the sole beneficial owner thereof) and the Shares are being and will be acquired by it for the purpose of investment and not with a view to distribution or resale thereof except pursuant to registration under the Securities Act or exemption therefrom. The acquisition by such Purchaser of the Series A Shares acquired by it shall constitute a confirmation of this representation by such Purchaser. Such Purchaser understands and agrees that, until registered under the Securities Act or transferred pursuant to the provisions of Rule 144 or Rule 144A as promulgated by the Commission, all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws. These securities have been acquired for investment and not with a view to distribution or resale. These securities may not be offered for sale, sold, delivered after sale,
transferred, pledged or hypothecated in the absence of an effective registration statement covering such shares under the Securities Act of 1933 and any applicable state securities laws, or the availability, in the opinion of counsel, of an exemption from registration thereunder. These securities are subject to restrictions contained in a Preferred Stock Purchase Agreement, a Voting Agreement and a Co-Sale Agreement, copies of which are available for inspection from the Company."
(b) ACCESS TO INFORMATION. Such Purchaser or his representative during the course of this transaction, and prior to the purchase of any Series A Shares, has had the opportunity to ask questions of and receive answers from management of the Company concerning the terms and conditions of the offering of the Series A Shares and the additional information, documents, records and books relative to its business, assets, financial condition, results of operations and liabilities (contingent or otherwise) of the Company.
(c) GENERAL ACCESS. Such Purchaser or his representative has received and read or reviewed, and is familiar with, this Agreement and the other agreements executed or delivered herewith, including the terms of the Series A Shares, and confirms that all documents, records and books pertaining to such Purchaser's investment in the Company and requested by such Purchaser or his representative have been made available or delivered to him.
(d) SOPHISTICATION AND KNOWLEDGE. Such Purchaser or his representative has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Series A Shares; and such Purchaser can bear the economic risks of investment in the Series A Shares and can afford a complete loss of his investment.
(e) TRANSFER RESTRICTIONS IMPOSED BY SECURITIES LAWS. Such Purchaser understands that: the Shares have not been registered under the Securities Act and applicable state securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from such
registration is available; such Purchaser is and must be purchasing the Series A Shares for investment for the account of such Purchaser and not for the account or benefit of others, and not with any present view toward resale or other distribution thereof. Such Purchaser shall not resell or otherwise dispose of all or any part of the Shares purchased by such Purchaser, except as permitted by law, including, without limitation, any regulations under the Securities Act and applicable state securities laws; such Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and applicable state securities laws, except as provided in Article V hereof; and such Purchaser understands that Rule 144 or Rule 144A under the Securities Act may not be available as a basis for exemption from registration of the Shares thereunder.
(f) LACK OF LIQUIDITY. Such Purchaser has no present need for liquidity in connection with his purchase of the Series A Shares.
(g) SUITABILITY AND INVESTMENT OBJECTIVES. The purchase of the Series A Shares by such Purchaser is consistent with the general investment objectives of such Purchaser. Such Purchaser understands that the purchase of the Series A Shares involves a high degree of risk in view of the fact that, among other things, the Company is a start-up enterprise, and there is no established market for the Company's capital stock.
(h) ACCREDITED INVESTOR STATUS. Such Purchaser is an "accredited investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act.
1.06. BROKERS OR FINDERS. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by such Purchaser or its respective agents other than amounts the Company has heretofore agreed in writing to pay up to $100,000 to Axiom pursuant to the agreements attached hereto as Exhibit 1.06.
ARTICLE II
CONDITIONS TO PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Series A Shares to be purchased by it at the Closing is subject to the following conditions (all of which shall be deemed satisfied or waived by such Purchaser at or prior to the Closing in the event all of the transactions contemplated to be effected at the Closing with such Purchaser are consummated):
2.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and warranties of the Company set forth in Article III hereof shall be true, accurate and correct on the date of the Closing as if made on the date of the Closing.
2.02. DOCUMENTATION AT CLOSING. The Purchasers shall have received, prior to or at the Closing, all of the following materials, each in form and substance satisfactory to the Purchasers and their counsel, if any, and each of the following events shall have occurred, or each of the following documents shall have been delivered, prior to or simultaneous with the Closing:
(a) Copies of (1) the Certificate of Incorporation of the Company, as amended or restated to date, together with such evidence as may be available of the filing thereof; (2) the resolutions of the Board of Directors providing for the approval of the Certificate Designating Series of Convertible Preferred Stock, Series A and Fixing the Relative Rights and Preferences Thereof of the Company in the form attached as EXHIBIT 2.02(a) (the "Certificate of Designation"), the approval of this Agreement, the issuance of the Series A Shares, and all other agreements or matters contemplated hereby or executed in connection herewith; and (3) the By-laws of the Company, all of which shall have been certified by the Secretary of the Company, as of the date of the Closing, to be true, complete and correct; and certified copies of all documents evidencing other necessary corporate or other action and governmental approvals, if any, required to be obtained at or prior to the Closing with respect to this Agreement and the issuance of the Series A Shares.
(b) The favorable opinion of Brian W. Pusch, special counsel for the Company, dated the date of the Closing, in the form attached as EXHIBIT 2.02(b) and the
favorable opinion of John B. Landes, General Counsel of ImClone, as to the due authorization and execution and legal, valid and binding nature with respect to ImClone of the ImClone Subscription Agreement.
(c) A certificate of the Secretary or an Assistant Secretary of the Company, dated the date of the Closing, which shall certify the names of the officers of the Company authorized to sign this Agreement, the certificates for the Series A Shares and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, the incumbency of such officers, and the true specimen signatures of such officers.
(d) A certificate of the President and the Treasurer of the Company, dated the date of the Closing, stating that the representations and warranties of the Company contained in Article III hereof and otherwise made by the Company in writing in connection with the transactions contemplated hereby are true and correct as of the time of the Closing and that all obligations and covenants in this Agreement required to be performed prior to or at the Closing have been performed as of the time of Closing.
(e) The Company shall have obtained any consents or waivers necessary to be obtained at or prior to the Closing to execute and deliver this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith, to issue the Series A Shares and to carry out the transactions contemplated hereby and thereby, and such consents and waivers shall be in full force and effect at the Closing. All corporate and other action and governmental filings necessary to effectuate the terms of this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith and the issuance of the Series A Shares shall have been made or taken.
(f) The Certificate of Designation shall have been filed with the Secretary of State of the State of Delaware in the form set forth in EXHIBIT 2.02(a) attached hereto.
(g) A Certificate of the Secretary of State of the State of Delaware, dated a recent date, as to the due incorporation and good standing of the Company.
(h) Payment for the taxes and fees identified in Section 8.04.
(i) Each of the persons listed on EXHIBIT 2.02(i)(a) shall have entered into a Discovery and Non-Disclosure Agreement in the form attached as EXHIBIT 2.02(i)B (collectively, the "Nondisclosure Agreements") and each of the stockholders listed on Exhibit 2.02(i)C shall have entered into a Restricted Stock Agreement in the form attached as EXHIBIT 2.02(i)D (collectively, the "Restricted Stock Agreements").
(j) Each of the Purchasers (other than the Individual Purchasers) and the Company and the holders of a majority of the shares of Common Stock outstanding on the date of the Closing shall have entered into a Voting Agreement in the form attached as EXHIBIT 2.02(j) (the "Voting Agreement").
(k) The Board of Directors of the Company (the "Board") immediately following the Closing shall consist of six (6) members, which members shall be determined as provided in Section 1.1 of the Voting Agreement, initially, the following individuals: Carl C. Icahn, Mark H. Rachesky, M.D., Dr. Jeremy Levin, Thomas Shenk, Dr. Samuel D. Waksal and Robert Goldhammer.
(l) The sum of (1) the Aggregate Purchase Price of Series A Shares
as shown in EXHIBIT 1.01 to be purchased by Purchasers who have executed this
Agreement on or before the date of the Closing, plus (2) the Aggregate Purchase
Price of Series A Shares which may be purchased by ImClone pursuant to the
ImClone Subscription Agreement (which amount does not include the indebtedness
of the Company to ImClone to be canceled as provided in Section 2.02(m) below),
plus (3) the Aggregate Purchase Price of Series A Shares as shown in EXHIBIT
1.01 for which the Company has received Subscription Agreements and for which
the purchase price has been deposited in the escrow held by Axiom, shall be at
least equal to $6,000,000 and the Purchasers referred to in the preceding clause
(l) shall have delivered to the respective Escrow Agents the full purchase price
for such Series A Shares.
(m) The Company shall have issued 4,376,368 Series A Shares to ImClone in consideration of the cancellation of $2,000,000 principal amount of indebtedness of the Company to ImClone, and such indebtedness shall have been canceled.
(n) The Company shall have granted to each holder of an option to purchase
shares of Common Stock granted under the Cadus Pharmaceutical Corporation 1993 Stock Option Plan additional options to purchase a number of shares of Common Stock equal to the number thereof previously granted to such holder, such additional options to be exercisable at $.457 per share, subject to adjustment.
(o) The Company and ImClone shall have executed and delivered, one to the other, the Subscription Agreement in the form attached as EXHIBIT 2.02(o) (the "ImClone Subscription Agreement").
(p) The Company and each Purchaser (other than the Individual Purchasers) shall have executed and delivered, one to the other, the Co-Sale Agreement in the form attached hereto as EXHIBIT 2.02(p) (the "Co-Sale Agreement").
(q) The Company shall have amended its By-laws to add the provision attached hereto as EXHIBIT 2.02(q).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the Closing as follows:
3.01. ORGANIZATION AND STANDING OF THE COMPANY. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware and has all requisite corporate power and authority for the ownership and operation of its properties and for the carrying on of its business as now conducted and as now proposed to be conducted and to execute and deliver this Agreement and the Voting Agreement, to issue, sell and deliver the Series A Shares and to issue and deliver the Conversion Shares upon conversion of the Series A Shares and to perform its other obligations pursuant hereto and thereto. The Company is duly licensed or qualified and in good standing as a foreign corporation authorized to do business in all jurisdictions wherein the character of the property owned or leased or the nature of the activities conducted by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a
material adverse effect on the business, operations or financial condition of the Company and except that the Company has submitted for filing an application for authority to conduct business in the State of New York, which application has not yet been accepted for filing.
3.02. CORPORATE ACTION. This Agreement, the Voting Agreement, the Co-Sale Agreement, the Restricted Stock Agreements, and the other agreements executed by the Company in connection herewith have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. To the best of the Company's knowledge, the Voting Agreement has been duly authorized, executed and delivered by the Stockholders (as defined therein) and constitutes the legal, valid and binding obligations of the Stockholders, enforceable against the several Stockholders in accordance with its respective terms. The Series A Shares have been duly authorized. The issuance, sale and delivery of the Series A Shares and the issuance and delivery of the Conversion Shares upon conversion of the Series A Shares have been duly authorized by all required corporate action on the part of the Company; the Series A Shares, when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement, the Voting Agreement and the Co-Sale Agreement; and the Conversion Shares have been duly reserved for issuance upon conversion of the Series A Shares and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement, the Voting Agreement and the Co-Sale Agreement.
3.03. GOVERNMENTAL APPROVALS. Except as set forth on EXHIBIT 3.03 and except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which, if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of or filing or registration with any court
or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution and delivery by the Company of this Agreement, for the offer, issue, sale, execution or delivery of the Series A Shares, or for the performance by the Company of its obligations under this Agreement, the Voting Agreement, or the Shares.
3.04. LITIGATION. Except as disclosed in EXHIBIT 3.04, there is no litigation or governmental proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company affecting any of its properties or assets, or against any officer, Key Employee or the holder of more than ten percent (10%) of the capital stock of the Company relating to the Company or its business, nor, to the best knowledge of the Company, has there occurred any event or does there exist any condition on the basis of which any litigation, proceeding or investigation might properly be instituted. Neither the Company nor, to the best knowledge of the Company, any officer, Key Employee or holder of more than ten percent (10%) of the capital stock of the Company is in default with respect to any order, writ, injunction, decree, ruling or decision of any court, commission, board or other government agency, which such default might have a material adverse effect on the business, assets, liabilities, operations, Intellectual Property Rights, management or financial condition of the Company. There are no actions or proceedings pending or, to the Company's knowledge, threatened (or any basis therefor known to the Company) against the Company which might result, either in any case or in the aggregate, in any material adverse change in the business, operations, Intellectual Property Rights, affairs or financial condition of the Company or in any of its properties or assets, or which might call into question the validity of this Agreement, any of the Series A Shares, or any action taken or to be taken pursuant hereto or thereto. The foregoing sentences include, without limiting their generality, actions pending or, to the Company's knowledge, threatened (or any basis therefor known to the Company) involving the prior employment or engagement of any of the Company's officers, employees or consultants or their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers or to any other Person. Without
limitation to the foregoing representations, a brief summary of the Company's material litigation and the disposition of such matters is set forth on EXHIBIT 3.04.
3.05. CERTAIN AGREEMENTS OF OFFICERS AND EMPLOYEES. (a) No officer, employee or consultant of the Company is, or, to the Company's knowledge, is now anticipated to be, in violation of any material term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, nonsolicitation agreement, confidentiality agreement, or any other similar contract or agreement or any restrictive covenant, including those set forth on EXHIBIT 3.05, relating to the right of any such officer, employee, or consultant to be employed or engaged by the Company because of the nature of the business conducted or to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and to the Company's best knowledge and belief, the continued employment or engagement of the Company's officers, employees or consultants does not subject the Company or any Purchaser to any liability with respect to any of the foregoing matters.
(b) No officer, consultant or Key Employee of the Company whose termination, either individually or in the aggregate, could have a material adverse effect on the Company, has terminated since the date hereof, or to the best knowledge of the Company, has any present intention of terminating, his employment or engagement with the Company, except as set forth on Exhibit 3.05.
3.06. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is in compliance in all respects with the terms and provisions of this Agreement and of its Certificate of Incorporation and By-laws, each as amended and/or restated to date, and in all respects with the material terms and provisions of all mortgages, indentures, leases, agreements and other instruments by which it is bound or to which it or any of its properties or assets are subject. The Company is in compliance in all material respects with all judgments, decrees, governmental orders, laws, statutes, rules or regulations by which it is bound or to which it or any of its properties or assets are subject. Neither the execution and delivery of this Agreement, the Voting Agreement, the Co-Sale Agreement, or the Restricted Stock Agreements
or the issuance of the Series A Shares, nor the consummation of any transaction contemplated hereby or thereby, has constituted or resulted in or will constitute or result in a default or violation of any term or provision of any of the foregoing documents, instruments, judgments, agreements, decrees, orders, statutes, rules and regulations. A schedule of Indebtedness of the Company as of May 31, 1993 (including lease obligations required to be capitalized in accordance with applicable Statements of Financial Accounting Standards) is attached as EXHIBIT 3.06.
3.07. TITLE TO ASSETS, PATENTS. (a) The Company has good and marketable title in fee to such of its fixed assets as are real property, and good and merchantable title to all of its other assets, now carried on its books, which assets consist of those reflected in the most recent balance sheet of the Company which forms EXHIBIT 3.08 attached hereto, or acquired since the date of such balance sheet (except personal property disposed of since said date in the ordinary course of business) free of any mortgages, pledges, charges, liens, security interests or other encumbrances. The Company enjoys peaceful and undisturbed possession under all leases under which it is operating, and all said leases are valid and subsisting and in full force and effect.
(b) The Company owns or has a valid right to use the Intellectual Property Rights being used to conduct its business as now operated and as now proposed by the Company to be operated (a complete list of licenses and registrations of such Intellectual Property Rights is attached hereto as EXHIBIT 3.07); and the conduct of its business as now operated and as now proposed to be operated does not and will not conflict with or infringe upon the intellectual property rights of others. Except as set forth on EXHIBIT 3.07, no claim is pending or threatened against the Company and/or its officers, employees and consultants to the effect that any such Intellectual Property Right owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company. Except pursuant to the terms of any licenses specified on EXHIBIT 3.07, the Company has no obligation to compensate any Person for the use of any such Intellectual Property Rights and the Company has not granted any Person any license or other right to use any of the Intellectual Property
Rights of the Company, whether requiring payment of royalties or not.
(c) The Company has taken all reasonable measures to protect and preserve the security, confidentiality and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All employees and consultants of the Company involved in the design, review, evaluation or development of products or Intellectual Property Rights have executed a nondisclosure and assignment of inventions agreements sufficient, to the extent permitted by law, to protect the confidentiality and value of the Company's Intellectual Property Rights and to vest in the Company exclusive ownership of such Intellectual Property Rights. All trade secrets and other confidential information of the Company are presently valid and protectible and are not part of the public domain or knowledge, nor, to the best knowledge of the Company, have they been used, divulged or appropriated for the benefit of any person other than the Company or otherwise to the detriment of the Company. To the best of the Company's knowledge, no employee or consultant of the Company has used any trade secrets or other confidential information of any other person in the course of their work for the Company. Except as set forth on Exhibit 3.07, the Company is the exclusive owner of all right, title and interest in its Intellectual Property Rights as purported to be owned by the Company, and such Intellectual Property Rights are valid and in full force and effect. Except as set forth on Exhibit 3.07, neither the Company, nor any of its Key Employees or consultants has received notice of, and to the best of the Company's knowledge after reasonable investigation, there are no claims that the Company's Intellectual Property Rights or the use or ownership thereof by the Company infringes, violates or conflicts with any such right of any third party. Except as set forth on Exhibit 3.07, no university, hospital, government agency (whether federal or state) or other organization which sponsored research and development conducted by the Company has any claim of right to or ownership of or other encumbrance upon the Intellectual Property Rights purported to be owned by the Company.
3.08. FINANCIAL INFORMATION. The Company's unaudited Income Statement, Statement of Stockholders' Equity (Deficit) and Statement of Cash Flow for the period from
the date of inception to December 31, 1992 and Balance Sheet as at December 31, 1992, copies of which are attached hereto as EXHIBIT 3.08A, present fairly the financial position of the Company as at the date thereof and have been prepared in accordance with generally accepted accounting principles consistently applied, except for the absence of footnotes prepared in accordance with generally accepted accounting principles. The Company's unaudited Income Statement, Statement of Stockholders' Equity (Deficit) and Statement of Cash Flow for the three months ended March 31, 1993 and Balance Sheet as at March 31, 1993, copies of which are attached hereto as Exhibit 3.08B, present fairly the financial position of the Company as at the date thereof and have been prepared in accordance with generally accepted accounting principals consistently applied, except for the absence of footnotes and subject to year-end adjustments. The financial statements attached as Exhibits 3.08A and 3.08B are referred to herein as the "Financial Statements". The Company does not have, and has no reasonable grounds to know of, any liability, contingent or otherwise, not adequately reflected in or reserved against in the Financial Statements. Except as set forth in EXHIBIT 3.08C, since December 31, 1992, (i) there has been no material adverse change in the business, assets, operations, affairs, prospects or financial condition of the Company; (ii) neither the business, financial condition, operations, prospects or affairs of the Company nor any of its properties or assets, including without limitation, its Intellectual Property Rights, have been materially adversely affected as the result of any legislative or regulatory change, any revocation or change in any franchise, permit, license or right to do business, or any other event or occurrence, whether or not insured against; and (iii) the Company has not entered into any material transaction other than in the ordinary course of business, made any distribution on its capital stock, or redeemed or repurchased any of its capital stock, except as set forth on EXHIBIT 3.08C.
3.09. TAXES. The Company has accurately prepared and timely filed all federal, state and other tax returns required by law to be filed by it, has paid or made provision for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been made and are reflected in the Company's financial statements for all current taxes
and other charges to which the Company is subject and which are not currently due and payable. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company knows of no additional assessments, adjustments or contingent tax liability (whether federal or state) pending or threatened for any period, nor of any basis for any such assessment, adjustment or contingency. Neither the Company nor, to the best of the Company's knowledge, any of its stockholders, has ever filed a consent pertaining to the Company pursuant to section 341(f) of the Code relating to collapsible corporations.
3.10. ERISA. The Company makes no contributions to any employee pension benefit plans for its employees which plans are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
3.11. TRANSACTIONS WITH AFFILIATES. Except as set forth in EXHIBIT 3.11, there are no material loans, leases, royalty agreements or other continuing transactions between (a) the Company or any of its customers or suppliers, and (b) any officer, employee, consultant or director of the Company or any Person owning five percent (5%) or more of the capital stock of the Company or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder.
3.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. The Company has not assumed, guaranteed, endorsed, or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any Indebtedness of any other Person except as set forth in EXHIBIT 3.12.
3.13. INVESTMENTS IN OTHER PERSONS. Except as set forth in EXHIBIT 3.13, the Company has not made any loans or advances to any Person which is outstanding on the date of this Agreement in excess of $10,000 in the aggregate, nor is it committed or obligated to make any
such loan or advance, nor does the Company own any capital stock, assets comprising the business of, obligations of, or any interest in, any Person. The Company does not have, and has not since its incorporation had, any Subsidiaries.
3.14. SECURITIES ACT OF 1933. The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Series A Shares hereunder. Neither the Company nor anyone acting on its behalf has or will sell, offer to sell or solicit offers to buy the Series A Shares or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any Person, so as to bring the issuance and sale of the Series A Shares under the registration provisions of the Securities Act and applicable state securities laws.
3.15. DISCLOSURE. Neither this Agreement, the Financial Statements, nor any other agreement, document, certificate, statement, whether oral or written, furnished to any of the Purchasers or their special counsel by or on behalf of the Company in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which made, not misleading. There is no fact within the knowledge of the Company or any of its executive officers which has not been disclosed herein or in writing by them to the Purchasers and which materially adversely affects, or in the future in their opinion may, insofar as they can now foresee, materially adversely affect the business, operations, properties, Intellectual Property Rights, assets or condition, financial or other, of the Company. Without limiting the foregoing, the Company has no knowledge that there exists, or there is pending or planned, any patent, invention, device, application or principle or any statute, rule, law, regulation, standard or code which would materially adversely affect the business, operations, Intellectual Property Rights, affairs or financial condition of the Company.
3.16. BROKERS OR FINDERS. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the
Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Company or its respective agents except for amounts which the Company has heretofore agreed in writing to pay Axiom pursuant to the agreements attached hereto as Exhibit 1.06.
3.17. CAPITALIZATION; STATUS OF CAPITAL STOCK. As of the Closing, the Company will have a total authorized capitalization consisting of (i) 30,000,000 shares of Common Stock, $.001 par value, and (ii) 23,000,000 shares of Preferred Stock, $.001 par value, of which 17,600,000 shares will be designated as Series A Preferred Stock. As of the Closing, 4,125,000 shares of Common Stock will be issued and outstanding, and, without giving effect to the transactions contemplated hereby, no shares of Series A Preferred Stock will be issued or outstanding, other than such as shall be issued at the Closing. A complete list of the capital stock of the Company which has been previously issued and the names in which such capital stock is registered on the stock transfer book of the Company is set forth in EXHIBIT 3.17 hereto. All the outstanding shares of capital stock of the Company have been duly authorized, and are validly issued, fully paid and non-assessable. The Series A Shares, when issued, delivered and paid for in accordance with the terms hereof, and the Conversion Shares, when issued and delivered upon conversion of the Preferred Shares, will be duly authorized, validly issued, fully-paid and non-assessable. Except for 2,000,000 shares of Common Stock that will be reserved for issuance upon exercise of stock options as further set forth in EXHIBIT 3.17, no options, warrants, subscriptions or purchase rights of any nature to acquire from the Company, or commitments of the Company to issue, shares of capital stock or other securities are authorized, issued or outstanding, nor is the Company obligated in any other manner to issue shares or rights to acquire any of its capital stock or other securities except as contemplated by this Agreement and the ImClone Subscription Agreement. Except as set forth in EXHIBIT 3.17, none of the Company's outstanding securities or authorized capital stock or the Series A Shares is subject to any rights of redemption, repurchase, rights of first refusal, preemptive rights or other similar rights, whether contractual, statutory or otherwise, for the benefit of the Company, any stockholder, or any other Person, except pursuant hereto or the
Voting Agreement or the Co-Sale Agreement. Except as set forth in EXHIBIT 3.17, there are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement. Except as set forth in EXHIBIT 3.17, there are no agreements, understandings, trusts or other collaborative arrangements or understandings concerning the voting or transfer of the capital stock of the Company. The offer and sale of all capital stock and other securities of the Company issued before the Closing complied with or were exempt from all applicable federal and state securities laws and no stockholder has a right of rescission or damages with respect thereto.
3.18. REGISTRATION RIGHTS. Except as set forth on EXHIBIT 3.18, and except for the rights granted to the Purchasers pursuant to Article V hereof, no Person has demand or other rights to cause the Company to file any registration statement under the Securities Act relating to any securities of the Company or any right to participate in any such registration statement.
3.19. INSURANCE. ImClone maintains on behalf of the Company insurance covering the Company's properties and business adequate and customary for the type and scope of the properties, assets and business, and similar to companies of comparable size and condition similarly situated in the same industry in which the Company operates, but in any event in amounts sufficient to prevent the Company from becoming a co-insurer or self-insurer, with provision for reasonable deductibles and following the Closing the Company will use its reasonable best efforts to obtain as promptly as practicable comparable insurance coverage under policies in the Company's own name on commercially reasonable terms.
3.20. BOOKS AND RECORDS. The books of account, ledgers, order books, records and documents of the Company accurately and completely reflect all material information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company.
3.21. MATERIAL AGREEMENTS. Except as set forth in EXHIBIT 3.21, the Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit
to a registration statement on Form S-1 or Form S-18 if the Company were registering securities under the Securities Act, or any other agreement which could adversely affect the business, assets, liabilities, Intellectual Property Rights, financial condition or operations of the Company. The Company, and to the best of the Company's knowledge, each other party thereto have in all material respects performed all the obligations required to be performed by them to date, have received no notice of default and are not in default under any lease, agreement or contract now in effect to which the Company is a party or by which it or its property may be bound, the result of which could cause a material adverse change in the business, assets, liabilities, Intellectual Property Rights, operations or financial condition of the Company. Except as set forth in EXHIBIT 3.21, each of the contracts or agreements listed in EXHIBIT 3.21 is in full force and effect with no default, anticipated or threatened default or failure of performance or observance of any obligations or conditions contained therein, and none of the foregoing parties nor the Company has provided any notice of default or of its intention to terminate these agreements.
3.22. ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided in EXHIBIT 3.22 attached hereto, since December 31, 1992 the Company has not:
(a) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company's business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to
purchase or redeem, any shares of its capital stock;
(e) mortgaged or pledged any of its assets, tangible or intangible, or subjected them to any lien, charge or other encumbrance, except liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;
(g) sold, assigned or transferred any patents, patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any persons except to potential customers, investors or corporate or academic partners or collaborators in the ordinary course of business;
(h) suffered any substantial losses (other than losses from operations for financial reporting purposes) or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;
(i) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;
(j) made capital expenditures or commitments therefor that aggregate in excess of $25,000;
(k) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;
(l) made charitable contributions or pledges in excess of $5,000;
(m) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;
(n) experienced any problems with labor or management in connection with the terms and conditions of their employment; or
(o) effected any two or more events of the foregoing kind which in the aggregate
would be material to the Company.
3.23. ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's knowledge after due investigation, it is not in violation of any applicable statute, law or regulation relating to the environment or occupational safety and health, and to the best of its knowledge after due investigation, no material expenditures will be required in order to comply with any such statute, law or regulation.
3.24. U.S. REAL PROPERTY HOLDING CORPORATION. The Company is not now and has never been a "United States Real Property Holding Corporation" as defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated by the Internal Revenue Service.
3.25 PAYMENTS FROM INDIVIDUAL INVESTORS. At or before the time of Closing, the Company has received $2,000,000 as payment for the Series A Shares to be purchased by the Individual Purchasers and none of such money remains in the escrow account held by Axiom; and such $2,000,000 includes $150,000 received from Samuel D. Waksal.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. KEY PERSON INSURANCE. Without limiting any other covenants and provisions hereof, and except to the extent the following covenant and provisions of this Section 4.01 are waived in any instance by the holders of a majority of the outstanding Series A Shares, the Company covenants and agrees that until the consummation of a Qualified Public Offering, it will at all times maintain key person insurance on the lives of such of the Key Employees of the Company and in such amounts and on such terms as determined from time to time by the Board of Directors. Without in any way limiting the foregoing, within 60 days after the Closing, the Company will obtain policies of key-person insurance on the lives of Dr. Jeremy Levin and James Broach, each policy to be in the amount of $1 million and to name the Company as beneficiary, if such policies are, in the opinion of the Board of Directors, available on commercially reasonable terms, and shall thereafter maintain such policies until the time
of a Qualified Public Offering so long as the same are, in the opinion of the Board of Directors, available on commercially reasonable terms and the employment of such individuals by the Company has not terminated.
4.02. REPORTING REQUIREMENTS. Until the consummation of the Initial Public Offering, the Company will furnish the following to each Person who holds more than 1 million Series A Shares issued pursuant to this Agreement:
(a) MONTHLY AND QUARTERLY REPORTS. As soon as available and in any event within 45 days after the end of each calendar month, consolidated balance sheets of the Company and its Subsidiaries as of the end of such month and consolidated statements of income and stockholders' equity and a summary statement of monthly cash flow of the Company and its Subsidiaries for such month and for the period commencing at the end of the previous fiscal year and ending with the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the monthly budget or business plan and an analysis of the variances from the budget or plan; and, as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal quarter and consolidated statements of income, stockholders' equity and cash flow of the Company and its Subsidiaries for such quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the prior fiscal year, prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the monthly budget or business plan and an analysis of the variances from the budget or plan;
(b) ANNUAL REPORTS. As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the annual audit report for such year for the Company and its Subsidiaries, including therein consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year and consolidated statements of income, retained earnings and of cash flow of the Company and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all such consolidated statements to be duly certified by the chief financial officer of the Company and an independent public accountant of recognized national standing selected by the Board of Directors;
(c) BUDGETS AND OPERATING PLAN. As soon as available and in any event at least 30 days before the beginning of each fiscal year of the Company, a business plan and monthly and quarterly operating budgets for the forthcoming fiscal year; as promptly as practicable, any changes to such budget or business plan; and copies of such business plan and budgets shall be delivered to the Board of Directors contemporaneously with the delivery to such Purchasers.
(d) NOTICE OF ADVERSE CHANGES. Promptly after the occurrence thereof and in any event within five (5) business days after each occurrence, notice of any material adverse change in the business, assets, Intellectual Property Rights, management, operations or financial condition of the Company; and
(e) CERTAIN REPORTS AND OTHER INFORMATION. Promptly after distribution to holders of the Common Stock, $.001 par value, of the Company, provide to each Purchaser copies of all reports, notices, and other information as the Company shall make available generally to the holders of its Common Stock.
4.03. LOANS TO CERTAIN PERSONS. The Company will not lend money to any director or officer of the Company or to any person who is an affiliate (as that term is defined for purposes of the Exchange Act) of the Company except (a) pursuant to the agreement disclosed in Exhibit 3.08C hereof and (b) as approved from time to time by the Board.
4.04. ISSUANCE AND SALES OF SERIES A SHARES. Subsequent to the Closing,
the Company will not issue or sell any shares of Series A Preferred Stock except
(a) to ImClone pursuant to the ImClone Subscription Agreement, (b) to the
Purchasers pursuant to the exercise by the Purchasers of their right of first
refusal pursuant to Article VI hereof in respect of Series A
Shares which may be issued and sold to ImClone pursuant to the ImClone Subscription Agreement, and (c) to Individual Purchasers pursuant to Subscription Agreements accepted by the Company; PROVIDED, HOWEVER that in the case of any such issuance and sale pursuant to this clause (c), the Purchaser thereof shall have executed and delivered to the Company counterparts of this Agreement and the Voting Agreement.
4.05. LIMITATION ON OWNERSHIP. The Company will not issue shares of capital stock of the Company or warrants, options or other rights to purchase shares of capital stock of the Company or securities convertible into capital stock of the Company to employees (including officers) of the Company at any time when the aggregate cumulative amount of capital stock issued by the Company to employees (including officers) of the Company plus the amount thereof which such Persons have the right to acquire upon exercise of warrants, options or other rights or conversion of such convertible securities issued or granted to such Persons by the Company would have voting power equal to more than 12 percent of the voting power of all outstanding capital stock of the Company (after giving effect to the exercise of all such warrants, options or other rights and conversion rights of employees (including officers) of the Company; PROVIDED, HOWEVER, that for purposes of the limitation contained in this Section 4.05, the 2,025,000 shares of Common Stock issued to persons who, as of the date of the Closing, are parties to Restricted Stock Agreements shall not be deemed owned by employees (including officers) of the Company.
4.06. LIMITATION ON REPURCHASES. The Company shall not purchase any outstanding shares of its capital except pursuant to an agreement or transaction which has been approved by the Board of Directors prior to such purchase.
ARTICLE V
REGISTRATION RIGHTS
5.01. PIGGY-BACK REGISTRATIONS. If at any time the Company shall determine to
register for its own account or the account of others under the Securities Act
(including pursuant to the Qualified Public Offering, the Initial Public
Offering or a demand for registration of any stockholder of the Company) any of
its equity securities, other than on Form S-4 or Form S-8 or their then
equivalents relating to shares of Common Stock to be issued solely in connection
with any acquisition of any entity or business or shares of Common Stock
issuable in connection with stock option or other employee benefit plans, it
shall send to each holder of Registrable Shares, including each holder who has
the right to acquire Registrable Shares, who is entitled to registration rights
under this Section 5.01 written notice of such determination and, if within
fifteen (15) days after receipt of such notice, such holder shall so request in
writing, the Company shall use its best efforts to include in such registration
statement all or any part of the Registrable Shares such holder requests to be
registered, except that if, in connection with the Initial Public Offering or
the Qualified Public Offering the managing underwriter shall impose a limitation
on the number of shares of such Common Stock which may be included in the
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such registration statement only such limited portion of the
Registrable Shares with respect to which such holder has requested inclusion
hereunder. Any exclusion of Registrable Shares shall be made pro rata among the
Purchasers (or their assigns who are entitled to and have requested registration
under this Section 5.01) seeking to include Registrable Shares, in proportion to
the number of Registrable Shares sought to be included by such Purchasers (or
their assigns who are entitled to and have requested registration under this
Section 5.01) PROVIDED, HOWEVER, that the Company shall not exclude any
Registrable Shares unless the Company has first excluded all outstanding
securities the holders of which are not entitled by right to inclusion of
securities in such registration statement; and PROVIDED FURTHER, HOWEVER, that
any exclusion of Registrable Shares shall be made pro rata with holders of other
securities having the right to include such securities in the registration
statement. No incidental right under this Section 5.01 shall be construed to
limit any registration required under Section 5.02. The obligations of the
Company to any particular Purchaser under this
Section 5.01 may be waived by such Purchaser at any time and shall expire on the seventh anniversary following the consummation of a Qualified Public Offering or at any time after the Company has effected five registrations for the benefit of the Purchasers under this Section 5.01; PROVIDED, HOWEVER, that any Purchaser (or assign who is entitled to and has requested registration under this Section 5.01) who shall have had any Registrable Shares excluded from any registration statement in accordance with this Section 5.01 shall be entitled to include in an additional registration statement filed by the Company the Registrable Shares so excluded.
5.02. DEMAND REGISTRATION. If at any time after the earlier of (A) the Initial Public Offering or (B) the date that is three years after the date of the Closing, holders of Registrable Shares who are entitled to registration rights under this Section 5.02 shall notify the Company in writing that it or they intend to offer or cause to be offered for public sale Registrable Shares held by such holders which shares (A) constitute at least twenty percent (20%) of the Registrable Shares (or, if all of the shares of capital stock issuable pursuant to the ImClone Subscription Agreement shall have been issued for an aggregate purchase price of $1,200,000, at least eighteen percent (18%) of the Registrable Shares, or (B) have an anticipated aggregate offering price, net of underwriting discounts and commissions, equal to more than $2,500,000, based on the market price of the shares of Common Stock at the time such holders notify the Company, if a public trading market for shares of Common Stock exists at such time, or based on the written advice (a copy of which shall be furnished to the Company) of a securities underwriting firm retained by such holders, if no such public trading market exists at such time, then the Company will so notify all holders of Registrable Shares, including all holders who have a right to acquire Registrable Shares. Upon written request of any holder given within fifteen (15) days after the receipt by such holder from the Company of such notification, the Company will use its best efforts to cause such of the Registrable Shares as may be requested by any holder thereof (including the holder or holders giving the initial notice of intent to offer) to be registered under the Securities Act as expeditiously as possible. The Company shall not be required to file a registration statement with the Commission pursuant
to this Section 5.02 at any time while another registration statement (other than on Form S-3 or S-8) of the Company has been filed with the Commission and is not yet effective or within six months after the effective date of another registration statement (other than on Form S-3 or S-8) filed by the Company with the Commission. The Company shall not be required to effect more than one registration during any twelve (12) month period pursuant to this Section 5.02 and two such registrations in the aggregate. Notwithstanding any other provision of this Agreement, in addition to the two registrations hereinabove provided in this Section 5.02, any Purchaser who shall have purchased for cash or property Series A Shares having an aggregate purchase price as shown in Exhibit 1.01 of $1,000,000 or more shall be entitled to request one registration hereunder for Registrable Shares held by such Purchaser and its affiliates (as defined for purposes of the Exchange Act) and every other Purchaser and its affiliates who would have been entitled to request such registration. If despite such additional registration having become effective such Purchasers of Series A Shares having a purchase price of $1,000,000 and their respective affiliates shall have been unable to dispose of all Registrable Shares held by them, then any such Purchasers who at the time are "affiliates" (as defined in Rule 144 under the Securities Act) of the Company shall be entitled upon request of any such Purchaser to an additional registration hereunder for Registrable Shares held by them and their respective affiliates. Each such additional registration provided for in the two preceding sentences shall otherwise be subject to the terms and provisions of this Agreement, except that notice of a request by a Purchaser for any such registration shall be given only to those Purchasers who would have been entitled to request such registration, and the Company shall include in such registration only Registrable Shares of such Purchasers, and their respective affiliates. In connection with any request by any holder of Registrable Securities for registration thereof pursuant to this Section, the Company shall have the right to defer the filing of a registration statement with the Commission for up to 120 days after such filing would otherwise be required hereunder if the Company shall furnish to the holders requesting such registration a certificate signed by the President of the Company stating that, in the good faith judgment of the Company, it would be detrimental to the interests of the Company for
such registration statement to be filed at such time, and if the Company shall have furnished such certificate then the Company shall have the right to defer the filing of such registration statement for an additional period of up to 120 days if the Company shall furnish to the holders requesting such registration a copy of a resolution of the Board of Directors, certified by the Secretary of the Company, to the effect that, in the good faith judgment of the Board of Directors, it would be detrimental to the interests of the Company for such registration statement to be filed at such time.
5.03. REGISTRATIONS ON FORM S-3. In addition to the rights provided the
holder of Registrable Shares in Sections 5.01 and 5.02, if the registration of
Registrable Shares under the Securities Act can be effected on Form S-3 (or any
similar form promulgated by the Commission), then upon the written request of
one or more holders of Registrable Shares who are entitled to registration
rights under this Section 5.03 for the registration of a number of Registrable
Shares held by such holders which have an anticipated aggregate offering price,
net of underwriting discounts and commissions, of at least $750,000, based on
the market price at the time such request is made, the Company will so notify
each holder of Registrable Shares, including each holder who has a right to
acquire Registrable Shares, and then will, as expeditiously as possible, use its
best efforts to effect qualification and registration under the Securities Act
on Form S-3 of all or such portion of the Registrable Shares as the holder or
holders shall specify in the initial request to the Company or upon written
request of a holder to the Company given within fifteen (15) days after the
receipt by the holder from the Company of such notification; PROVIDED, HOWEVER,
the Company shall not be required to effect a registration pursuant to this
Section 5.03 unless the market value of the Registrable Shares to be sold in any
such offering, less underwriting discounts and commissions, shall be estimated
to be at least $750,000 at the time of filing such registration statement; and
PROVIDED FURTHER, HOWEVER, that the Company shall not be required to effect more
than one (1) registration during any twelve (12) month period pursuant to this
Section 5.03 and three (3) such registrations in the aggregate. Subject to the
foregoing, no registration of Registrable Shares pursuant to this Section 5.03
shall be construed to limit any registration required under
Section 5.01 or 5.02.
5.04. EFFECTIVENESS. The Company will use its best efforts to maintain the effectiveness for up to 90 days (or such shorter period of time as the underwriters need to complete the distribution of the registered offering, or one year in the case of a "shelf" registration statement on Form S-3) of any registration statement pursuant to which any of the Registrable Shares are being offered, and from time to time will amend or supplement such registration statement and the prospectus contained therein to the extent necessary to comply with the Securities Act and any applicable state securities statute or regulation. The Company will also provide each holder of Registrable Shares with as many copies of the prospectus contained in any such registration statement as it may reasonably request.
5.05. INDEMNIFICATION BY THE COMPANY. (a) In the event that the Company registers any of the Registrable Shares under the Securities Act, the Company will indemnify and hold harmless each holder and each underwriter of the Registrable Shares (including their officers, directors, affiliates and partners) so registered (including any broker or dealer through whom such shares may be sold) and each Person, if any, who controls such holder or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, as incurred, and, except as hereinafter provided, will reimburse each such holder, each such underwriter and each such controlling Person, if any, for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, as incurred, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration, UNLESS (i) such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or amended preliminary prospectus or final prospectus in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by any such holder of Registrable Shares (in the case of indemnification of such holder), any such underwriter (in the case of indemnification of such underwriter) or any such controlling Person (in the case of indemnification of such controlling person) expressly for use therein, or UNLESS (ii) in the case of a sale directly by such holder of Registrable Shares (including a sale of such Registrable Shares through any underwriter retained by such holder of Registrable Shares to engage in a distribution solely on behalf of such holder of Registrable Shares), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus copies of which were delivered to such holder of Registrable Shares or such underwriter on a timely basis, and such holder of Registrable Shares failed to deliver a copy of the final or amended prospectus at or prior to the confirmation for the sale of the Registerable Shares to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act.
(b) Promptly after receipt by any holder of Registrable Shares, any underwriter or any controlling Person of notice of the commencement of any action in respect of which indemnity may be sought against the Company, such holder of Registrable Shares, or such underwriter or such controlling person, as the case may be, will notify the Company in writing of the commencement thereof (PROVIDED, that failure by any such person to so notify the Company shall not relieve the Company from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder) and, subject to the provisions hereinafter stated, the Company shall be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to such
holder of Registrable Shares, such underwriter or such controlling Person, as the case may be), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company.
(c) Such holder of Registrable Shares, any such underwriter or any such controlling Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel subsequent to any assumption of the defense by the Company shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized in writing by the Company. The Company shall not be liable to indemnify any Person for any settlement of any such loss, claim, damage, expense, liability or action effected without the Company's written consent. The Company shall not, except with the approval of each party being indemnified under this Section 5.05, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which any holder of
Registrable Shares exercising rights under this Article V, or any controlling
Person of any such holder, makes a claim for indemnification pursuant to this
Section 5.05 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may
not be enforced in such case notwithstanding the fact that this Section 5.05
provides for indemnification in such case, then, the Company and such holder
will contribute to the aggregate losses, claims, damages or liabilities to which
they may be subject (after contribution from others) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the holder of Registrable Shares on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the holder of Registrable Shares on the other
shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the holder of Registrable Shares on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement, net of any underwriting discounts or commissions paid by such holder; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
5.06. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES. (a) In the event that the Company registers any of the Registrable Shares under the Securities Act, each holder of the Registrable Shares so registered will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed or otherwise participated in the preparation of the registration statement, each underwriter of the Registrable Shares so registered (including any broker or dealer through whom such of the shares may be sold) and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling Person for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or in the registration statement or prospectus as from time to time amended
or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such holder of Registrable shares expressly for use therein; PROVIDED, HOWEVER, that such holder's obligations hereunder shall be limited to an amount equal to the aggregate public offering price of the Registrable Shares sold by such holder in such registration, net of any underwriting discounts or commissions paid by such holder.
(b) Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against such holder of Registrable Shares hereunder, the Company will notify such holder of Registrable Shares in writing of the commencement thereof (PROVIDED, that failure by the Company to so notify such holder shall not relieve such holder from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder), and such holder of Registrable Shares shall, subject to the provisions hereinafter stated, be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against such holder of Registrable Shares. The Company and each such director, officer, underwriter or controlling Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel subsequent to any assumption of the defense by such holder of Registrable Shares shall not be at the expense of such holder of Registrable Shares unless employment of such counsel has been specifically authorized in writing by such holder of Registrable Shares. Such holder of Registrable Shares shall not be liable to indemnify any Person for any settlement of any such loss, claim, damage, expense, or liability or action effected without such holder's written consent.
(c) In order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which the Company or another Person entitled
to indemnification pursuant to this Section 5.06 makes a claim for
indemnification pursuant to this Section 5.06, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding that
this Section 5.06 provides for indemnification, in such case, then, the Company
and such holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and of the holder of Registrable Shares on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holder of Registrable Shares on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the holder of
Registrable Shares on the other, and each party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Shares offered by it pursuant to such registration statement,
net of any underwriting discounts or commissions paid by such holder; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.
5.07. EXCHANGE ACT REGISTRATION. If the Company at any time shall list any class of equity securities of the type which may be issued upon the conversion of the Series A Preferred Stock on any national securities exchange or obtain authorization for shares of such class to be quoted on an automated quotation system and shall register such class of equity securities under the Exchange Act, the Company will, at its expense, simultaneously list on such
exchange or qualify for trading on such automated quotation system and maintain
such listing or authorization of, the Conversion Shares of such class. If the
Company becomes subject to the reporting requirements of either Section 13 or
Section 15(d) of the Exchange Act, the Company will use its best efforts to
timely file with the Commission such information as the Commission may require
under either of said Sections; and in such event, the Company shall use its best
efforts to take all action as may be required as a condition to the availability
of Rule 144 or Rule 144A under the Securities Act (or any successor exemptive
rule hereafter in effect) with respect to such Common Stock. The Company shall
furnish to any holder of Registrable Shares forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144, (ii) a copy of the most recent annual or quarterly report of the
Company as filed with the Commission, and (iii) such other reports and documents
as a holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a holder to sell any such Registrable Securities
without registration. After the occurrence of the Initial Public Offering, the
Company agrees to use its best efforts to facilitate and expedite transfers of
the Shares pursuant to Rule 144 under the Securities Act, which efforts shall
include timely notice to its transfer agent to expedite such transfers of
Shares.
5.08. DAMAGES. The Company recognizes and agrees that the holder of Registrable Shares will not have an adequate remedy if the Company fails to comply with this Article V and that damages may not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the holder of Registrable Shares or any other Person entitled to the benefits of this Article V requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Article V.
5.09. FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the preceding Sections of this Article V, the Company is required hereunder to register Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to each selling holder such copies of each preliminary and final
prospectus and such other documents as said holder may reasonably request to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the Registrable Shares covered by said registration statement under the applicable securities or "blue sky" laws of such jurisdictions as any selling holder may reasonably request; PROVIDED, HOWEVER, that the Company shall not be obligated to qualify to do business in any jurisdictions where it is not then so qualified or to take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the registration statement in any jurisdiction where it is not then so subject;
(c) Furnish to each selling holder a signed counterpart, addressed to the selling holders, of
(i) an opinion of counsel for the Company, dated the effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's independent public accountants who have examined and reported on the Company's financial statements included in the registration statement, to the extent permitted by the standards of the American Institute of Certified Public Accountants, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' "comfort" letters) with respect to events subsequent to the date of the financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' "comfort" letters delivered to the underwriters in underwritten public offerings of securities, to the extent that the Company is required to deliver or cause the delivery of such opinion or "comfort" letters to the underwriters in an underwritten public offering of securities;
(d) Permit each selling holder of Registrable Shares or such holders counsel or other representatives to inspect and copy such corporate documents and records as may reasonably be requested by them;
(e) Furnish to each selling holder of Registrable Shares a copy of all documents filed with and all correspondence from or to the Commission in connection with
any such offering of securities;
(f) Use its best efforts to insure the obtaining of all necessary approvals from the NASD;
(g) To cause all Registrable Shares so registered pursuant hereto to be listed on any securities exchange or authorized for quotation in any automated quotation system on or in which outstanding shares of such class are listed or authorized for quotation at the time such registration is declared effective by the Commission;
(h) Designate a transfer agent and registrar for the class or classes of shares which include such Registrable Shares and obtain a CUSIP number for such class or classes of shares, in each case not later than the date such registration is declared effective by the Commission; and
(i) Otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earning statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the registration statement covering the Initial Public Offering, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
Whenever under the preceding Sections of this Article V the holders of Registrable Shares are registering such shares pursuant to any registration statement, each such holder agrees to (i) timely provide to the Company, at its request, such information and materials as it may reasonably request in order to effect the registration of such Registrable Shares and (ii) convert all Series A Shares into the shares of Common Stock included in any registration statement, such conversion to be effective at or before the closing of such offering pursuant to such registration statement.
5.10. EXPENSES. In the case of each registration effected under Section 5.01, 5.02 or 5.03, the Company shall bear all reasonable costs and expenses of each such registration on behalf of the selling holders of Registrable Shares, including, but not limited to, the Company's printing, legal and accounting fees and expenses, Commission and NASD filing fees and "Blue
Sky" fees; PROVIDED, HOWEVER, that the Company shall have no obligation to pay or otherwise bear any portion of the underwriters' commissions or discounts attributable to the Registrable Shares being offered and sold by the holders of the Registrable Shares, or the fees and expenses of counsel for the selling holders of Registrable Shares in connection with the registration of the Registrable Shares. The Company shall pay all expenses of the holders of the Registrable Shares in connection with any registration initiated pursuant to this Article V which is withdrawn or abandoned at the request of the Company, except if such withdrawal or abandonment is caused by the fraud, material misstatement or omission of a material fact by any holder of Registrable Shares to be included in such registration, in which case such expenses shall be paid by the holder or holders who have caused such withdrawal or abandonment. If a registration requested by holders of Registrable Shares pursuant to Section 5.02 shall be withdrawn prior to becoming effective under the Securities Act at the request of the holders of all Registrable Shares included therein, and in connection with such withdrawal such holders agree that, notwithstanding such withdrawal, for purposes of this Agreement such withdrawn registration shall satisfy the Company's obligation for one of the registrations which the Company is required to provide pursuant to Section 5.02, then the Company shall pay the expenses of such registration to the extent provided in the first sentence of this Section 5.10; PROVIDED, HOWEVER, that if such registration statement is withdrawn by reason of the fact that, prior to effectiveness of such registration statement, the registration statement filed or to be filed with the Commission contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and the Company shall have failed, within a reasonable time after receipt of written notice thereof from any such holder to take reasonable measures to correct such deficiency, such holders shall not be responsible for the costs of such registration (other than expenses described in the proviso to the first sentence of this Section 5.10).
5.11. TRANSFERABILITY. (a) For all purposes of Article V of this Agreement, a Purchaser or assignee thereof who becomes a party to this Agreement in accordance with Section 5.11(b)
hereof shall be deemed at any particular time to be the holder of all Registrable Securities of which such Person shall at such time be the "beneficial owner," determined in accordance with Rule 13d-3 under the Exchange Act.
(b) For all purposes of Article V of this Agreement, the holder of
Registrable Shares shall include not only the Purchasers named in EXHIBIT 1.01
hereof but (i) any assignee or transferee of the Registrable Shares who acquires
at least 250,000 Registrable Shares and who is not a competitor of the Company,
or (ii) any assignee or transferee of a Purchaser which is a partnership if such
assignee or transferee is a general or limited partner of such Purchaser;
PROVIDED, HOWEVER, that such assignee or transferee agrees in writing to be
bound by all of the provisions of this Agreement, including, without limitation,
Section 5.12 hereof.
5.12. "LOCK-UP" AGREEMENT. Each holder of Registrable Shares, if so requested by the Company and an underwriter of Common Stock or other securities of the Company, not to sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Company held by it or which it has the right to acquire during the 180-day period following the effective date of a registration statement filed with the Commission in connection with such offering or such shorter period as such underwriter shall have advised the Company in writing is adequate to permit the successful and orderly distribution of such Common Stock or other securities; provided, however, that such "lock-up" agreement shall be in writing and in form and substance satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to the shares subject to the foregoing restrictions until the end of said 180-day period. In connection with the preparation and filing of any such registration statement, the Company shall use its reasonable best efforts (1) to enforce the obligations of its stockholders (and any Person who shall have the right to acquire capital stock of the Company) who have agreed with the Company to enter into "lock-up" or "market stand-off" agreements and (2) to obtain a "lock-up" or "market-stand-off" agreement from all of its other stockholders and all other such Persons.
5.13. MERGERS, ETC. The Company shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under Article V of this Agreement, and for that purpose references hereunder to Registrable Shares shall be deemed to be references to the securities which the Purchasers would be entitled to receive in exchange for Registrable Shares under any such merger, consolidation or reorganization; PROVIDED, HOWEVER, that the provisions of this Section 5.13 shall not apply in the event of any merger, consolidation, or reorganization in which the Company is not the surviving corporation if all stockholders are entitled to receive in exchange for their Registrable Shares consideration consisting solely of (i) cash, (ii) securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act, or (iii) securities of the acquiring corporation which the acquiring corporation has agreed to register within 90 days of completion of the transaction for resale to the public pursuant to the Securities Act.
ARTICLE VI
RIGHT OF FIRST REFUSAL
6.01. RIGHT OF FIRST REFUSAL. Before the Company shall issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange (unless, in the case of an agreement, obligation, reservation or setting aside, the same is expressly subject to the rights of the Purchasers under the provisions of this Article VI), any (i) shares of Common Stock, (ii) any other equity security of the Company, including without limitation, shares of any series of the Company's class of Preferred Stock and any Series A Shares to be sold pursuant to the ImClone Subscription Agreement, (iii) any convertible debt security of the Company, including without limitation, any debt security which by its terms is convertible into or exchangeable for any equity security of the Company, (iv) any security of the Company that is a combination of debt and equity, or (v) any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security or any such debt
security of the Company, the Company shall, in each case, first offer to sell such securities (the "Offered Securities") to those Purchasers then holding Shares as follows: The Company shall offer to sell to each Purchaser (a) that portion of the Offered Securities as the number of Shares then held by a Purchaser bears to the total number of Shares held by all Purchasers (the "Basic Amount"), and (b) such additional portion of the Offered Securities as such Purchaser shall indicate it will purchase should the other Purchasers subscribe for less than their Basic Amounts (the "Undersubscription Amount"), at a price and on such other terms as shall have been specified by the Company in writing delivered to the Purchasers (the "Offer"), which Offer by its terms shall remain open and irrevocable for a period of thirty (30) days from receipt by the Purchaser of the Offer.
6.02. NOTICE OF ACCEPTANCE. Notice of each Purchaser's intention to accept, in whole or in part, any Offer made pursuant to Section 6.01 shall be evidenced by a writing, in form, scope and substance reasonably satisfactory to the Company, signed by such Purchaser and delivered to the Company prior to the end of the 30-day period of such offer, setting forth such of the Purchaser's Basic Amount as such Purchaser elects to purchase and, if such Purchaser shall elect to purchase all of its Basic Amount, such Undersubscription Amount as such Purchaser shall elect to purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for by all Purchasers are less than the total Offered Securities, then each Purchaser who has set forth Undersubscription Amounts in its Notice of Acceptance shall purchase, in addition to the Basic Amounts subscribed for, all Undersubscription Amounts it has subscribed for; PROVIDED, HOWEVER, that should the Undersubscription Amounts subscribed for exceed the difference between the Offered Securities and the Basic Amounts subscribed for (the "Available Undersubscription Amount"), each Purchaser who has subscribed for any Undersubscription Amount shall purchase only that portion of the Available Undersubscription Amount as the Undersubscription Amount subscribed for by such Purchaser bears to the total Undersubscription Amounts subscribed for by all Purchasers, subject to rounding up by the Board of Directors to the extent it reasonably deems necessary.
6.03. CONDITIONS TO ACCEPTANCES AND PURCHASE. (a) PERMITTED SALES OF REFUSED
SECURITIES. In the event that Notices of Acceptance are not given by the Purchasers in respect of all the Offered Securities, the Company shall have ninety (90) days from the end of said 30-day period to sell any such Offered Securities as to which a Notice of Acceptance has not been given by the Purchasers (the "Refused Securities") to the Person or Persons specified in the Offer, but only for an amount and kind (or the cash equivalent thereof)of consideration and otherwise in all respects upon the terms and conditions, including, without limitation, unit price and interest rates, which are no more favorable, in the aggregate, to such other Person or Persons or less favorable to the Company (as determined in good faith by the Board of Directors) than those set forth in the Offer.
(b) REDUCTION IN AMOUNT OF OFFERED SECURITIES. In the event the Company shall propose to sell less than all of the Refused Securities (any such sale to be in the manner and on the terms specified in Section 6.03(a) above), then each Purchaser may reduce the number of shares or other units of the Offered Securities specified in its respective Notices of Acceptance to an amount which shall be not less than the amount of the Offered Securities which the Purchaser elected to purchase pursuant to Section 6.02 multiplied by a fraction, (i) the numerator of which shall be the amount of Offered Securities which the Company actually proposes to sell, and (ii) the denominator of which shall be the amount of all Offered Securities. In the event that any Purchaser so elects to reduce the number or amount of Offered Securities specified in its respective Notices of Acceptance, the Company may not sell or otherwise dispose of more than the reduced amount of the Offered Securities until such securities have again been offered to the Purchasers in accordance with Section 6.01.
(c) CLOSING. At the closing of the sale to such other Person or Persons of all or less than all the Refused Securities, which closing shall include payment in full of the purchase price therefor, the Purchasers shall purchase from the Company, and the Company shall sell to the Purchasers, the number of Offered Securities specified in the Notices of Acceptance, as reduced pursuant to Section 6.03(b) if the Purchasers have so elected, upon the terms and conditions specified in the Offer, including, without limitation, payment in full for such Offered Securities. The purchase by the Purchasers of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and the Purchasers of a purchase agreement relating to such Offered Securities in form and substance as offered to the purchasers or proposed purchasers of the Offered Securities who are not Purchasers.
6.04. FURTHER SALE. In each case, any Offered Securities not purchased by the Purchasers or other Person or Persons in accordance with Section 6.03 may not be sold or otherwise disposed of until they are again offered to the Purchasers under the procedures specified in Section 6.01, 6.02 and 6.03.
6.05. TERMINATION AND WAIVER OF RIGHT OF FIRST REFUSAL. The rights of a Purchaser under this Article VI may be waived only by Purchasers owning at least 85% of the Shares and shall terminate immediately prior to the effectiveness of the registration statement with respect to the Qualified Public Offering, but expressly conditioned on the consummation of the Qualified Public Offering.
6.06. EXCEPTIONS. The rights of the Purchasers under this Article VI shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common Stock or upon any subdivision or combination of shares of Common Stock;
(b) Preferred Stock issued as a dividend to holders of Preferred Stock upon any subdivision or combination of shares of Preferred Stock;
(c) The Conversion Shares;
(d) Up to 2,000,000 shares of Common Stock, or options exercisable therefor, issued on or after the date hereof to directors, officers, employees or consultants of the Company and any Subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, employee stock ownership plan, employee benefit plan, stock purchase agreement, stock plan, stock restriction agreement, or consulting agreement or such other options, arrangements, agreements or plans approved by the compensation or similar committee of the Board of Directors or, if no such committee exists, by the Board of Directors of the Company;
(e) Up to 500,000 shares of Common Stock which at the date of this Agreement are shares of treasury stock of the Company or are subject to Restricted Stock
Agreements and hereafter become treasury stock by reason of exercise of the Company's rights pursuant to Section 1 of any Restricted Stock Agreement, which treasury stock is sold by the Company from time to time to ImClone at a price of $.457 per share, on or prior to July 31, 1997, in an amount not in excess of the number (and in no event in excess of 500,000 shares) of shares of Common Stock which ImClone sells to any person who, at the date of this Agreement, is a party to a Restricted Stock Agreement; or
(f) securities described in clause (i) through (v) of Section 6.01 which are to be issued as all or part of the consideration in a business combination involving the acquisition by the Company of all or part of the stock (or other equity interest), business or assets of another Person.
Each of the foregoing numbers shall be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event and, in the case of stock options and related shares referred to in section 6.06(d), as provided in the Cadus Pharmaceutical Corporation 1993 Stock Option Plan.
Notwithstanding any provision of this Agreement, the terms for exercise of the rights granted under this Article VI with respect to securities issuable under the ImClone Subscription Agreement shall be modified by the terms and conditions of the ImClone Subscription Agreement relating to exercise of such rights.
ARTICLE VII
DEFINITIONS AND ACCOUNTING TERMS
7.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Accredited Investor" shall have the meaning assigned to that term in Rule 501 under the Securities Act.
"Agreement" means this Preferred Stock Purchase Agreement as from time to time amended and in effect between the parties, including all Exhibits hereto.
"Available Undersubscription Amount" shall have the meaning assigned to that term in Section 6.02.
"Axiom" means Axiom Partners, Inc., a Delaware corporation, and the placement agent retained by the Company in connection with the offer and sale of Series A Shares to the Individual Investors.
"Basic Amount" shall have the meaning assigned to that term in Section 6.01.
"Board of Directors" or "Board" means the board of directors of the Company as constituted from time to time.
"Certificate of Designation" shall have the meaning assigned to that term in Section 2.02(a).
"Closing" shall have the meaning assigned to that term in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.
"Common Stock" includes (a) the Company's Common Stock, $.001 par value, as authorized on the date of this Agreement, (b) any other capital stock of any class or classes (however designated) of the Company authorized on or after the date hereof, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to a preference, and the holders of which shall ordinarily, in the absence of contingencies or in the absence of any provision to the contrary in the Company's Certificate of Incorporation, be entitled to vote for the election of a majority of directors of the Company (even though the right so to vote has been suspended by the happening of such a contingency or provision), and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means Cadus Pharmaceutical Corporation, a Delaware corporation, and its successors and assigns.
"Consolidated" and "consolidating" when used with reference to any term defined herein mean that term as applied to the accounts of the Company and its Subsidiaries consolidated in accordance with generally accepted accounting principles consistently applied throughout reporting periods.
"Conversion Shares" shall have the meaning assigned to that term in
Section 1.02.
"Co-Sale Agreement" shall have the meaning assigned to that term in
Section 2.02(p).
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Escrow Agent" shall mean with respect to any particular Purchaser Brian W. Pusch, Esq. or any other Person acting as escrow agent pursuant to the Escrow Agreement to which such Purchaser is a party.
"Escrow Agreement" shall mean with respect to any particular Purchaser the Escrow Agreement in the form attached hereto as Exhibit 7.01 to which such Purchaser is a party.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission (or of any other Federal agency then administering the Exchange Act) thereunder, all as the same shall be in effect at the time.
"Financial Statements" shall have the meaning provided in Section 3.08.
"ImClone" shall have the meaning assigned to that term in Section 1.01.
"ImClone Subscription Agreement" shall have the meaning assigned to that term in Section 2.02(o).
"Indebtedness" means (i) any liability for borrowed money or evidenced
by a note or similar obligation given in connection with the acquisition of any
property or other assets (other than trade accounts payable incurred in the
ordinary course of business); (ii) all guaranties, endorsements and other
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business, and
(iii) the present value of any lease payments due under leases required to be
capitalized in accordance with applicable
Statements of Financial Accounting Standards, determined by discounting all such payments at the interest rate determined in accordance with applicable Statements of Financial Accounting Standards.
"Individual Purchasers" means the Persons who execute and deliver this Agreement as "Individual Purchasers".
"Initial Public Offering" means the first underwritten public offering of Common Stock of the Company for the account of the Company and offered on a "firm commitment" or "best efforts" basis pursuant to an offering registered under the Securities Act with the Commission on Form S-1, Form S-18 or their then equivalents.
"Intellectual Property Rights" means any and all, whether domestic or foreign, patents, patent applications, patent right, trade secrets, confidential business information, formula, processes, laboratory notebooks, algorithms, copyrights, mask works, claims of infringement against third parties, licenses, permits, license rights, contract rights with employees, consultants and third parties, trademarks, trademark rights, inventions and discoveries, and other such rights generally classified as intangible, intellectual property assets in accordance with generally accepted accounting principles.
"Key Employee" means and includes the Chairman, President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, or any other individual so designated by the Board of Directors of the Company.
"Market Standoff Agreements" shall have the meaning provided in Section 2.02 (l).
"NASD" means the National Association of Securities Dealers, Inc.
"Nondisclosure Agreement" shall have the meaning assigned to that term in Section 2.02(i).
"Notice of Acceptance" shall have the meaning assigned to that term in
Section 6.02.
"Offer" shall have the meaning assigned to that term in Section 6.01.
"Offered Securities" shall have the meaning assigned to that term in
Section 6.01.
"Offering Memorandum" shall have the meaning assigned to that term in
Section 1.04.
"Person" means an individual, corporation, partnership, joint venture, trust,
university, or unincorporated organization, or a government, or any agency or political subdivision thereof.
"Prospective Purchase Questionnaire" shall mean the Prospective Purchaser Questionnaire completed and signed by an Individual Purchaser in connection with the offer of Series A Shares to such Individual Purchaser.
"Purchaser" and "Purchasers" shall have the meaning assigned to that term in Section 1.01 of this Agreement and shall include the original Purchasers and also any other holder of any of the Shares.
"Qualified Public Offering" means a fully underwritten, firm commitment public offering pursuant to an effective registration under the Securities Act covering the offer and sale by the Company of its Common Stock in which the aggregate gross proceeds to the Company exceed $7,500,000 and in which the price per share of such Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock split, stock dividend, combination, reorganization, reclassification or other similar event).
"Refused Securities" shall have the meaning assigned to that term in
Section 6.03.
"Registrable Shares" shall mean and include (i) the Conversion Shares; and (ii) the shares of Common Stock of the Company acquired by the Purchasers pursuant to Article VI hereof or any shares of Common Stock issuable on the conversion of other securities acquired by the Purchasers pursuant to Article VI hereof or otherwise; PROVIDED, HOWEVER, that shares of Common Stock which are Registrable Shares shall cease to be Registrable Shares upon the consummation of any sale pursuant to a registration statement, Section 4(1) of the Securities Act or Rule 144 under the Securities Act. Wherever reference is made in this Agreement to a request or consent of holders of a certain percentage of Registrable Shares, the determination of such percentage shall include the Conversion Shares even if such conversion has not yet been effected.
"Restricted Stock Agreement" shall have the meaning assigned to that term in Section 2.02(i).
"Securities Act" means the Securities Act of 1933, as amended, or any similar federal
statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Securities Act) thereunder, all as the same shall be in effect at the time.
"Series A Preferred Stock" means the Convertible Preferred Stock, Series A, $.001 par value, of the Company having the rights, powers, privileges and preferences set forth in EXHIBIT 2.02 (A).
"Series A Shares" shall have the meaning assigned to that term in
Section 1.01 of this Agreement.
"Shares" means, collectively, the Series A Shares and the Conversion Shares.
"Subscription Agreement" means a Subscription Agreement executed by an Individual Purchaser in connection with the offer of Series A Shares to such Individual Purchaser.
"Subsidiary" or "Subsidiaries" means any Person of which the Company and/or any of its other Subsidiaries (as herein defined) directly or indirectly owns at the time at least fifty percent (50%) of the outstanding voting shares of every class of such corporation or trust other than directors' qualifying shares.
"Undersubscription Amount" shall have the meaning assigned to that term in Section 6.01.
"Voting Agreement" shall have the meaning assigned to that term in
Section 2.02(j).
7.02. ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE VIII
MISCELLANEOUS
8.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
8.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in the Agreement to the contrary notwithstanding, and except as hereinafter provided, changes in, termination or amendments of or additions to this Agreement may be made, and compliance with any covenant or provision set forth herein may be omitted or waived, if the Company (i) shall obtain consent thereto in writing from the holder or holders of at least a majority in interest of the Series A Shares and Conversion Shares issued upon conversion thereof and (ii) shall deliver copies of such consent in writing to any holders who did not execute such consent; PROVIDED that no consents shall be effective to reduce the percentage in interest of the Shares the consent of the holders of which is required under this Section 8.02. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.03. ADDRESSES FOR NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing (including telegraphic communication) and mailed, telegraphed or delivered to each applicable party at the address set forth in EXHIBIT 1.01 hereto or at such other address as to which such party may inform the other parties in writing in compliance with the terms of this Section.
If to any other holder of the Shares: at such holder's address for notice as set forth in the register maintained by the Company, or, as to each of the foregoing, at the addresses set forth in EXHIBIT 1.01 hereto or at such other address as shall be designated by such Person in a written notice to the other parties complying as to delivery with the terms of this Section.
If to the Company: at the address set forth on the first page hereof, or at such other address as shall be designated by the Company in a written notice to the other parties complying as to delivery with the terms of this Section.
All such notices, requests, demands and other communications shall, when mailed (which mailing must be accomplished by first class mail, postage prepaid; electronic facsimile transmission; express overnight courier service; or registered or certified mail, return receipt
requested) or telegraphed, and shall be considered to be delivered three (3) days after dispatch.
8.04. COSTS, EXPENSES AND TAXES. In addition, the Company shall pay the reasonable fees and out-of-pocket expenses of legal counsel, independent public accountants, consultants and other outside experts retained by the Purchasers in connection with any amendment or waiver to this Agreement initiated by the Company or, in the event of a material breach of this Agreement by the Company, the successful enforcement of this Agreement by the Purchasers. The Company shall pay any and all stamp, or other similar taxes payable or determined to be payable in connection with the execution and delivery of this Agreement, the issuance of the Series A Shares and the other instruments and documents to be delivered hereunder or thereunder, and agrees to save the Purchasers harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes.
8.05. EFFECTIVENESS; BINDING EFFECT; ASSIGNMENT. (a) This Agreement shall become binding between the Company and any Purchaser when counterparts hereof shall have been executed and delivered, one to the other, by the Company and such Purchaser. Subsequent to the Closing any Person may become a party hereto as a Purchaser, subject to and upon compliance with Section 4.04, by execution and delivery to the Company of a counterpart of this Agreement.
(b) Except as provided in Section 5.11, this Agreement shall be binding upon and inure to the benefit of the Company and the Purchasers and their respective heirs, successors and assigns, except that the Company shall not have the right to delegate its obligations hereunder or to assign its rights hereunder or any interest herein without the prior written consent of the holders of at least 85 percent in interest of the Shares.
8.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made in this Agreement, the Shares, or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof.
8.07. PRIOR AGREEMENTS. This Agreement, the terms of the Series A Preferred Stock, and the other agreements executed and delivered in connection herewith, including, without
limitation, in the case of the Individual Purchasers any Subscription Agreement and Prospective Purchaser Questionnaire, constitute the entire agreement between the parties and supersede any prior understandings or agreements concerning the subject matter hereof.
8.08. SEVERABILITY. The provisions of this Agreement, the Voting Agreement, the Co-Sale Agreement, the Restricted Stock Agreements and the terms of the Series A Preferred Stock are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of a provision contained in this Agreement, the Voting Agreement, the Co-Sale Agreement, the Restricted Stock Agreements or the terms of the Series A Preferred Stock shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, the Voting Agreement, the Co-Sale Agreement, the Restricted Stock Agreements or the terms of the Series A Preferred Stock; but this Agreement, the Voting Agreement, the Co-Sale Agreement, the Restricted Stock Agreements and the terms of the Series A Preferred Stock shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provisions or part reformed so that it would be valid, legal and enforceable to the maximum extent possible.
8.09. CONFIDENTIALITY. Each Purchaser agrees that it will keep confidential and will not disclose or divulge any confidential, proprietary or secret information which such Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to such Purchaser pursuant to this Agreement, or pursuant to visitation or inspection rights granted hereunder, unless such information is known, or until such information becomes known, to the public; PROVIDED, HOWEVER, that a Purchaser may disclose such information (i) on a confidential basis to its attorneys, accountants, consultants and other professionals to the extent necessary to obtain their services in connection with its investment in the Company, (ii) to any prospective purchaser of any Series A Shares or Conversion Shares from such Purchaser as long as such prospective purchaser agrees in writing to be bound by the provisions of this Section 8.09, (iii) to any
affiliate or partner of such Purchaser and (iv) as required by applicable law.
8.10. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, and without giving effect to choice of laws provisions.
8.11. HEADINGS. Article, section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
8.12. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart.
8.13. FURTHER ASSURANCES. From and after the date of this Agreement, upon the request of any Purchaser or the Company, the Company and the Purchasers shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By /s/JEREMY LEVIN
------------------------------
President
NAME OF PURCHASER: THE GLOBAL HEALTH SCIENCES FUND
By /S/BARRY KUROKAWA
---------------------------
Title: Vice President
IMCLONE SYSTEMS INCORPORATED
By /s/SAMUEL WAKSAL
---------------------------
Title: President
ICAHN HOLDING CORPORATION
By /s/MARK H. RACHESKY, M.D.
---------------------------
Title: Managing Director
/s/M. ELLIOTT SCHNALL
-----------------------------
M. Elliott Schnall
/s/MARK H. RACHESKY, M.D.
-----------------------------
Mark H. Rachesky, M.D.
|
NAMES OF INDIVIDUAL PURCHASERS:
BAYVIEW VENTURE INVESTORS
By /s/DAVID L. GOLDSMITH
---------------------------
Title: Managing Director of
Robertson, Stephens
& Company, L.P., its
General Partner
|
/s/REGINALD D. STEER --------------------------- Reginald D. Steer |
/s/CLIFFORD J. STEER --------------------------- Clifford J. Steer |
/s/RANDOLPH C. STEER --------------------------- Randolph C. Steer |
/s/BART M. PASTERNAK --------------------------- Bart M. Pasternak |
/s/BART M. PASTERNAK --------------------------- Bart M. Pasternak Bart M. Pasternak, I.R.A. Delaware Charter, Custodian P.O. Box 8963 Wilmington, DE 19899 |
/s/ROBERT C. COOPER --------------------------- Robert C. Cooper |
/s/DENNIS MENSCH --------------------------- Dennis Mensch |
/s/PETER WISH --------------------------- Peter Wish Peter Wish, I.R.A. First Trust Corp., Trustee P.O. Box 173301 Denver, CO 80217-3301 |
/s/PETER WISH --------------------------- Peter Wish |
and
/s/LESLIE-BETH WISH --------------------------- Leslie-Beth Wish |
as joint tenants and not as tenants in common
NORTH FORK ASSOCIATES L.P.
By /s/PETER SCHAPIRO --------------------------- Title: President |
/s/CHARLOTTE BEERS --------------------------- Charlotte Beers |
/s/JANICE FUELLHART --------------------------- Janice Fuellhart |
/s/PETER GRAF --------------------------- Peter Graf |
/s/ELI KAUFMAN --------------------------- Eli Kaufman |
/s/MARGARET KAUFMAN --------------------------- Margaret Kaufman |
/s/TOM MARRON
---------------------------
Tom Marron
Tom Marron I.R.A.
Bear Stearns Sec. Corp., Custodian
245 Park Avenue
New York, NY 10167
|
/s/JOSEPH ABRAMS --------------------------- Joseph Abrams |
/s/MARTHA STEWART --------------------------- Martha Stewart |
/s/STEVEN RICHMAN --------------------------- Steven Richman |
/s/CHARLES ANTELL --------------------------- Charles Antell |
/s/IRVIN S. TAYLOR --------------------------- Irvin S. Taylor |
/s/SAM WAKSAL --------------------------- Sam Waksal |
ALTSCHUL INVESTMENT GROUP
By /s/A.G. ALTSCHUL, ATTY
---------------------------
Title: Arthur G. Altschul Jr.
General Partner
|
/s/A.G. ALTSCHUL, ATTY --------------------------- Arthur G. Altschul, Jr. |
/s/SIRI VON REIS --------------------------- Siri von Reis |
/s/DOUG ABRAMS --------------------------- Doug Abrams |
/s/HARRY J. BROWN --------------------------- Harry J. Brown |
FIRST AMENDMENT
TO
AMENDMENT, dated as of July 26, 1994, to the Preferred Stock Purchase Agreement (the "Agreement"), dated as of July 30, 1993, by and between Cadus Pharmaceutical Corporation (the "Company") and each purchaser of Series A Preferred Stock of the Company (the "Series A Stockholders").
WHEREAS, the Company and the Series A Stockholders wish to amend the Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto hereby agree as follows:
1. The number 12 in Section 4.05 of the Agreement is hereby amended to read as "13.5".
2. The second sentence of Section 5.01 of the Agreement is hereby amended to read as follows:
"Any such exclusion of Common Stock shall be made pro rata among the Persons (who are entitled to and have requested registration) seeking to include shares of Common Stock, in proportion to the number of shares of Common Stock sought to be included by them, provided, however, that the Company shall not exclude any Registrable Shares unless the Company has first excluded all outstanding securities the holders of which are not entitled by right to inclusion of securities in such registration statement."
3. The clause of the first sentence of Section 6.01 of the Agreement which commences after the colon is hereby amended to read as follows:
"The Company shall offer to sell to each Purchaser (a) that portion of the Offered Securities as the number of Conversion Shares then held by such Purchaser bears to the total number of shares of Common Stock issuable upon conversion of all the convertible preferred stock of the Company then outstanding (the "Basic Amount"), and (b) such additional portion of the Offered Securities as such Purchaser shall indicate it will purchase should the other Persons first offered the right to purchase Offered Securities subscribe for less than their Basic Amounts (the Undersubscription Amount"), at a price and on such other terms as shall have been specified by the Company in writing
delivered to the Purchasers (the "Offer"), which Offer by its terms shall remain open and irrevocable for a period of thirty (30) days from receipt by such Purchaser of the Offer."
4. The first clause of the second sentence of Section 6.02 of the Agreement is hereby amended to read as follows:
"If the Basic Amounts subscribed for by all Persons first offered the right to purchase Offered Securities (collectively, the "Offerees") are less that the total Offered Securities . . . ."
5. The first two clauses of the first sentence of Section 6.03(a) of the Agreement are hereby amended to read as follows:
"In the event that Notices of Acceptance are not given by the Offerees in respect of all the Offered Securities, the Company shall have ninety (90) days from the end of said 30-day period to sell any such Offered Securities as to which a Notice of Acceptance has not been given by the Offerees (the "Refused Securities") to the Person or Persons specified in the Offer . . . ."
6. The first clause of the first sentence of Section 6.06(d) of the Agreement is hereby amended to read as follows:
"Up to 3,500,000 shares of Common Stock (with respect to which the Purchasers have not waived their rights under this Article VI) . . . ."
7. Section 6.06(f) of the Agreement is hereby amended to read in its entirety as follows:
"(f) Securities described in any of clauses (i) through (v) of Section 6.01 which are to be issued as all or part of the consideration in the acquisition by the Company of all or part of the stock (or other equity interest), business, assets, technology, or know how of another Person; or"
8. A Section 6.06(g) shall be added to the Agreement, which shall read as follows:
"Securities described in any of clauses (i) through (v) of Section 6.01 which are to be sold at $3.50 per share or more to any Person in connection with a transaction in which such Person will provide funding to the Company (other than through the purchase of securities of the Company) to pay for research to be conducted by the Company."
9. Except as amended hereby, the terms and conditions of the Agreement are confirmed. The Agreement, as so amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Series A Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY M. LEVIN ------------------- Jeremy M. Levin, President |
IMCLONE SYSTEMS INCORPORATED
By:/s/ SAMUEL D. WAKSAL ---------------------------- Name: Samuel D. Waksal Title: President |
ICAHN HOLDING CORPORATION
By:/s/ CARL ICAHN ---------------------------- Name: Title: /s/ M. ELLIOT SCHNALL ------------------------------- M. Elliot Schnall /s/ MARK H. RACHESKY, M.D. ------------------------------- Mark H. Rachesky, M.D. |
THE GLOBAL HEALTH SCIENCES FUND
By:/s/ BARRY KUROKAWA ---------------------------- Name: Barry Kurokawa Title: Vice President |
/s/ JOSEPH ABRAMS ------------------------------- Joseph Abrams |
/s/ DOUGLAS ABRAMS ------------------------------- Douglas Abrams |
ALTSCHUL INVESTMENT GROUP, L.P.
By: /s/ A. G. ALTSCHUL, ATTY
------------------------------
Name: Arthur G. Altschul, Jr.
Title: General Partner
|
/s/ A. G. ALTSCHUL, ATTY ------------------------------- Arthur G. Altschul, Jr. |
/s/ CHARLES ANTELL ------------------------------- Charles Antell |
BAYVIEW VENTURE INVESTORS, LTD.
By: /s/ DAVID L. GOLDSMITH
-------------------------------
Name:
Title: Managing Director of
Robertson, Stephens
& Company L.P, the
General Partner of
Bayview Investors,
Ltd.
|
/s/ CHARLOTTE BEERS ------------------------------- Charlotte Beers |
/s/ HARRY J. BROWN ------------------------------- Harry J. Brown |
/s/ RAUSCHER PIERCE REFSNES ------------------------------- Rauscher Pierce Refsnes CUSTODIAN FOR S. WYATT CARR, JR. |
/s/ ROBERT R. COOPER ------------------------------- Robert R. Cooper |
/s/ FRED FEIFER ------------------------------- Fred Feifer |
/s/ JANICE FUELLHART ------------------------------- Janice Fuellhart |
/s/ PETER GRAF ------------------------------- Peter Graf |
/s/ LYLE ISAACS ------------------------------- Lyle Issacs |
/s/ ELI KAUFMAN ------------------------------- Eli Kaufman |
/s/ MARGARET KAUFMAN ------------------------------- Margaret Kaufman |
/s/ TOM MARRON ------------------------------- Tom Marron Tom Marron I.R.A. Bear Stearns Sec. Corp., Custodian 245 Park Avenue New York, New York 10167 |
/s/ DENNIS MENSCH ------------------------------- Dennis Mensch |
NORTH FORK ASSOCIATES, L.P.
By: /s/ PETER SCHAPIRO
-------------------------------
Name:
Title: President
|
/s/ STEVEN RICHMAN ------------------------------- Steven Richman |
/s/ B. PASTERNAK ------------------------------- Bart M. Pasternak |
/s/ B. PASTERNAK ------------------------------- Bart M. Pasternak Bart M. Pasternak, I.R.A. Delaware Charter, Custodian P.O. Box 8963 Wilmington, DE 19899 |
P.A.W. INVESTMENT LIMITED
PARTNERSHIP
By: /s/ PETER A. WISH, G.P.
-------------------------------
|
/s/ ARNOLD POPPER ------------------------------- Arnold Popper |
SEYMOUR BABES TRUST
By: /s/ SEYMOUR BABES, TRUSTEE
-------------------------------
Name:
Title:
|
/s/ HAROLD L. SIEBERT ------------------------------- Harold L. Siebert |
/s/ CLIFFORD J. STEER ------------------------------- Clifford J. Steer |
/s/ RANDOLPH C. STEER ------------------------------- Randolph C. Steer |
/s/ REGINALD D. STEER ------------------------------- Reginald D. Steer |
/s/ MARTHA STEWART ------------------------------- Martha Stewart |
/s/ RAY STRAIN ------------------------------- Ray Strain |
/s/ IRVIN S. TAYLOR ------------------------------- Irvin S. Taylor |
/s/ SIRI VON REIS ------------------------------- Siri Von Reis |
/s/ ALIZA WAKSAL ------------------------------- Aliza Waksal |
/s/ ELANA WAKSAL ------------------------------- Elana Waksal |
/s/ DR. PETER A. WISH ------------------------------- Dr. Peter A. Wish Dr. Peter A. Wish, I.R.A. Donaldson, Lufkin, Jenrette Securities Corp., as Custodian 140 Broadway Street New York, NY 10005 |
SECOND AMENDMENT
TO
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
AMENDMENT, dated as of October 31, 1995, to the Preferred Stock Purchase Agreement (the "Agreement"), dated as of July 30, 1993, as amended, by and between Cadus Pharmaceutical Corporation (the "Company") and each holder of Series A Preferred Stock of the Company (the "Series A Stockholders").
WHEREAS, the Company and the Series A Stockholders wish to amend the Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto hereby agree as follows:
1. Section 6.06(c) of the Agreement is hereby amended to read in its entirety as follows:
"(c) Any shares of Common Stock issued upon conversion of Series A Shares or other convertible securities; or any equity security or debt security of the Company issued upon the exercise of any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security or debt security.
2. Section 6.06(e) of the Agreement is hereby amended to read in its entirety as follows:
"(e) Up to 500,000 shares of Common Stock, or options exercisable therefor, issued after the date hereof to James R. Broach; or"
3. Except as amended hereby, the terms and conditions of the Agreement are confirmed. The Agreement, as so amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Series A Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY M. LEVIN
-------------------------------
Jeremy M. Levin, President
/s/ CARL ICAHN
-------------------------------
Carl C. Icahn
|
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.,
General Partner
By: /s/ EDWARD MATTNER
-------------------------------
Name: Edward Mattner
Title:
/s/ MARK RACHESKY, M.D.
-------------------------------
Mark H. Rachesky, M.D.
|
THE GLOBAL HEALTH SCIENCES FUND
By:/s/ BARRY KUROKAWA ------------------------------- Name: Barry Kurokawa Title: Vice-President |
/s/ M. ELLIOT SCHNALL ------------------------------- M. Elliot Schnall |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ JOSEPH ABRAMS ------------------------------- Joseph Abrams |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ DOUGLAS ABRAMS ------------------------------- Douglas Abrams |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
ALTSCHUL INVESTMENT GROUP, L.P.
By: /s/ A. G. ALTSCHUL, ATTY
-------------------------------
Name:
Title:
|
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ A. G. ALTSCHUL, ATTY ------------------------------- Arthur G. Altschul, Jr. |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
BAYVIEW VENTURE INVESTORS, LTD.
By: /s/ DAVID L. GOLDSMITH
-------------------------------
Name:
Title: Managing Director of
Robertson, Stephens
& Company L.P, its
General Partner
|
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ ROBERT R. COOPER ------------------------------- Robert R. Cooper |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ PETER GRAF ------------------------------- Peter Graf |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ ELI KAUFMAN ------------------------------- Eli Kaufman |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ MARGARET KAUFMAN ------------------------------- Margaret Kaufman |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ THOMAS J. MARRON ------------------------------- Thomas J. Marron I.R.A. Bear Stearns Sec. Corp., Custodian |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ DENNIS MENSCH ------------------------------- Dennis Mensch |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
NORTH FORK ASSOCIATES, L.P.
By: /s/ PETER SCHAPIRO
------------------------------
Name:
Title:
|
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ STEVEN RICHMAN ------------------------------- Steven Richman |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ REGINALD D. STEER ------------------------------- Reginald D. Steer |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ CLIFFORD J. STEER ------------------------------- Clifford J. Steer |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ MARTHA STEWART ------------------------------- Martha Stewart |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ IRVIN S. TAYLOR ------------------------------- Irvin S. Taylor |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ SIRI VON REIS ------------------------------- Siri Von Reis |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
P.A.W. INVESTMENT LIMITED
PARTNERSHIP
By: /s/ PETER A. WISH
-------------------------------
Name: Dr. Peter A. Wish
Title: General Partner
|
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ PETER A. WISH, TRUSTEE ------------------------------- Peter A. Wish Peter A. Wish, I.R.A. First Trust Corp., Trustee P.O. Box 173301 Denver, CO 80217-3301 |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ HARRY J. BROWN ------------------------------- Harry J. Brown |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ FRED FEIFER ------------------------------- Fred Feifer |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ RAY STRAIN ------------------------------- Ray Strain |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ B. PASTERNAK ------------------------------- Bart M. Pasternak |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ B. PASTERNAK ------------------------------- Bart M. Pasternak Bart M. Pasternak, I.R.A. Delaware Charter, Custodian P.O. Box 8963 Wilmington, DE 19899 |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
/s/ ELANA WAKSAL ------------------------------- Elana Waksal |
(Signature page to Second Amendment to Series A Preferred Stock Purchase Agreement)
PREFERRED STOCK PURCHASE AGREEMENT
dated as of July 26, 1994
by and between
CADUS PHARMACEUTICAL CORPORATION
and
BRISTOL-MYERS SQUIBB COMPANY
TABLE OF CONTENTS
Page
====
ARTICLE I - PURCHASE, SALE AND TERMS OF SHARES 1
1.01. The Series B Preferred Stock 1
1.02. The Conversion Shares 1
1.03. Purchase of Series B Shares 1
1.04. Purchase of Additional Series B Preferred Stock 2
1.05. Purchase of Common Stock at Initial
Public Offering 2
1.06. Use of Proceeds 3
1.07. Representations by the Purchaser 3
(a)Investment Representations 3
(b)Access to Information 3
(c)General Access 4
(d)Sophistication and Knowledge 4
(e)Transfer Restrictions Imposed
by Securities Laws 4
(f)Lack of Liquidity 4
(g)Suitability and Investment Objectives 4
(h)Accredited Investor Status 4
1.08. Brokers or Finders 5
ARTICLE II - CONDITIONS TO PURCHASER'S OBLIGATIONS 5
2.01. Representations and Warranties 5
2.02. Documentation at Closing 5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.01. Organization and Standing of the Company 7
3.02. Corporate Action 7
3.03. Governmental Approvals 8
3.04. Litigation 8
3.05 Certain Agreements of Officers
and Employees 9
3.06. Compliance with Other Instruments 9
3.07. Title to Assets, Patents 10
3.08. Financial Information 11
3.09. Taxes 11
3.10. ERISA 12
3.11. Transactions with Affiliates 12
3.12. Assumptions or Guaranties of Indebtedness
of Other Persons 12
3.13. Investments in Other Persons 12
3.14. Securities Act of 1933 12
3.15. Disclosure 13
3.16. Brokers or Finders 13
3.17. Capitalization; Status of Capital Stock 13
3.18. Registration Rights 14
3.19. Insurance 14
|
Page
----
3.20. Books and Records 14
3.21. Material Agreements 15
3.22. Absence of Certain Developments 15
3.23. Environmental and Safety Laws 16
3.24. U.S. Real Property Holding Corporation 17
ARTICLE IV - COVENANTS OF THE COMPANY 17
4.01. Reporting Requirements 17
(a)Monthly and Quarterly Reports 17
(b)Annual Reports 17
(c)Budgets and Operating Plan 18
(d)Notice of Adverse Changes 18
(e)Certain Reports and Other Information 18
4.02. Loans to Certain Persons 18
4.03. Limitation on Repurchases 18
ARTICLE V - REGISTRATION RIGHTS 18
5.01. Piggy-Back Registrations 18
5.02. Demand Registration 19
5.03. Registrations on Form S-3 20
5.04. Effectiveness 20
5.05. Indemnification by the Company 21
5.06. Indemnification by the Purchaser 23
5.07. Exchange Act Registration 25
5.08. Damages 25
5.09. Further Obligations of the Company 26
5.10. Expenses 27
5.11. Transferability 28
5.12. "Lock-Up" Agreement 28
5.13. Mergers, Etc. 29
ARTICLE VI - RIGHT OF FIRST REFUSAL 29
6.01. Right of First Refusal 29
6.02. Notice of Acceptance 30
6.03. Conditions to Acceptances and Purchase 30
(a) Permitted Sales of Refused Securities 30
(b) Reduction in Amount of Offered Securities 30
(c) Closing 31
6.04. Further Sale 31
6.05. Termination and Waiver of Right of First Refusal 31
6.06. Exceptions 31
ii
|
Page
----
ARTICLE VII - DEFINITIONS AND ACCOUNTING TERMS 32
7.01. Certain Defined Terms 32
7.02. Accounting Terms 36
ARTICLE VIII - MISCELLANEOUS 36
8.01. No Waiver; Cumulative Remedies 36
8.02. Amendments, Waivers and Consents 36
8.03. Notices 37
8.04. Binding Effect; Assignment 37
8.05. Survival of Representations and Warranties 38
8.06. Entire Agreement 38
8.07. Severability 38
8.08. Confidentiality 38
8.09. Governing Law 38
8.10. Headings 39
8.11. Further Assurances 39
EXHIBITS
- --------
1.04 Scientific Milestones
2.02(a) Form of Certificate of Amendment to Certificate of
Incorporation of the Company
2.02(b) Form of Opinion of Counsel to Company
2.02(h) Form of First Amendment to Voting Agreement
2.02(j) Form of By-Law Amendment
2.02(k) Form of Sponsored Research Agreement
2.02(l) Form of First Amendment to Series A Preferred Stock
Purchase Agreement
3.03 Governmental Approvals
3.04 Litigation
3.06 Schedule of Indebtedness
3.07 List of Intellectual Property; Claims and Encumbrances
3.08A Financial Statements for 1993
3.08B Certain Changes Subsequent to December 31, 1993
3.11 Certain Transactions with Affiliates
3.13 Investments in Other Persons
3.17 Owners of Capital Stock
3.17A Guidelines for Stock Option Grants
3.18 Registration Rights
3.21 List of Material Agreements
3.22 Changes in Company Since 12/31/93
|
PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT dated as of July 26, 1994, between CADUS PHARMACEUTICAL CORPORATION (the "Company"), a Delaware corporation, and BRISTOL-MYERS SQUIBB COMPANY (the "Purchaser"), a Delaware corporation.
WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser wishes to purchase from the Company, 3,571,429 shares of the Company's authorized but unissued shares of Series B Convertible Preferred Stock, $.001 par value per share (the "Series B Preferred Stock"), upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01. The Series B Preferred Stock. The Company has authorized the issuance and sale of 3,571,429 shares of its authorized but unissued shares of Series B Preferred Stock (the "Series B Shares"), at a purchase price of $3.50 per share, payable in cash. The designation, rights, preferences and other terms and provisions of the Series B Preferred Stock are set forth in Exhibit 2.02(a).
1.02. The Conversion Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of Common Stock (such capitalized term and all other capitalized terms used herein and not separately defined herein have the respective meanings provided in Article VII hereof) to satisfy the rights of conversion of the holders of the Series B Shares. Any shares of Common Stock issuable upon conversion of the Series B Shares are herein referred to as the "Conversion Shares". The Series B Shares and Conversion Shares are sometimes collectively referred to as the "Shares".
1.03. Purchase of Series B Shares. The Company agrees to issue and sell to the Purchaser and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchaser, agrees to purchase, 3,571,429 Series B Shares. The aggregate purchase price of the Series B Shares being acquired by the Purchaser is
$12,500,001.50. The closing of the purchase and sale of the Series B Shares to be acquired by the Purchaser from the Company under this Agreement shall take place at the offices of the Company's counsel, Morrison Cohen Singer & Weinstein, 750 Lexington Avenue, New York, New York, at 10:00 a.m., New York City time, on July 26, 1994, or at such time and date thereafter as the Purchaser and the Company may agree (the "Closing"). At the Closing, the Company will deliver to the Purchaser a certificate or certificates for 3,571,429 Series B Shares registered in the Purchaser's name (or the name of its nominee), against delivery to the Company of a check or checks payable to the order of the Company, or a wire transfer of immediately available funds to the account of the Company, in an amount equal to $12,500,001.50 as payment in full of the purchase price of Series B Shares being purchased by the Purchaser.
1.04 Purchase of Additional Series B Preferred Stock.
(a) If the Company achieves the scientific milestones set forth in Exhibit 1.04 on or prior to the first anniversary of the Closing, the Purchaser shall purchase from the Company, and the Company shall sell to the Purchaser, 1,250,000 Series B Shares (less any Series B Shares purchased by the Purchaser pursuant to Section 1.04(b) hereof) at $4.00 per share. The closing of the purchase of such additional Series B Shares shall take place within thirty (30) days after the Company has so achieved such scientific milestones.
(b) If the Company has not previously consummated the sale to the Purchaser of Series B Shares pursuant to Section 1.04(a) hereof and it consummates a private placement of its equity securities in which the aggregate gross proceeds to the Company exceed $3,500,000, after December 31, 1994 but on or prior to December 31, 1996, the Purchaser, at the Company's election, shall purchase from the Company, at $4.00 per share, such number of Series B Shares, up to a maximum of 1,250,000 shares, as shall equal 12.5% of the aggregate dollars paid by investors for the Company's equity securities in such private placement. The closing of the purchase of such additional Series B Shares shall take place within thirty (30) days after the Purchaser has received written notice from the Company of the Company's election to have the Purchaser purchase such Series B Shares.
1.05 Purchase of Common Stock at Initial Public Offering. If the Company has an Initial Public Offering during the term of the Sponsored Research Agreement, the Purchaser shall, at the Company's election, purchase ten percent (10%) of the Common Stock being offered in such Initial Public Offering. Notwithstanding the foregoing, the Purchaser shall not be obligated to (i) purchase more than $5,000,000 worth of Common Stock in such Initial Public Offering or (ii) purchase Common Stock in such Initial Public Offering to the extent that the Purchaser would own more than 19.9% of the Company's Common Stock (assuming conversion of all
convertible securities and the exercise of all outstanding stock options) after the consummation of such Initial Public Offering. The Company shall make reasonable efforts not to pay an underwriter's commission on the Common Stock purchased by the Purchaser in such Initial Public Offering.
1.06. Use of Proceeds. The Company shall use the cash proceeds from the sale of the Series B Shares for working capital and general corporate purposes.
1.07. Representations by the Purchaser. The Purchaser makes the following representations and warranties to the Company:
(a) Investment Representations. It is the Purchaser's present intention to acquire the Shares to be acquired by it for its own account (and it will be the sole beneficial owner thereof) and the Shares are being and will be acquired by it for the purpose of investment and not with a view to distribution or resale thereof except pursuant to registration under the Securities Act or exemption therefrom. The acquisition by the Purchaser of the Series B Shares shall constitute a confirmation of this representation by the Purchaser. The Purchaser understands and agrees that, until registered under the Securities Act or transferred pursuant to the provisions of Rule 144 or Rule 144A as promulgated by the Commission, all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws. These securities have been acquired for investment and not with a view to distribution or resale. These securities may not be offered for sale, sold, delivered after sale, transferred, pledged or hypothecated in the absence of an effective registration statement covering such shares under the Securities Act of 1933 and any applicable state securities laws, or the availability, in the opinion of counsel, of an exemption from registration thereunder. These securities are subject to restrictions contained in a Preferred Stock Purchase Agreement and a Voting Agreement, copies of which are available for inspection from the Company."
(b) Access to Information. The Purchaser during the course of this transaction, and prior to the purchase of any Series B Shares, has had the opportunity to ask questions of and receive answers from management of the Company concerning the terms and conditions of the sale to it of the Series B Shares and the information, documents, records and books relative to the business, assets, financial condition, results of operations and liabilities
(contingent or otherwise) of the Company provided to the Purchaser.
(c) General Access. The Purchaser has received and read or reviewed, and is familiar with, this Agreement and the other agreements executed or delivered herewith, including the terms of the Series B Shares, and confirms that all documents, records and books pertaining to the Purchaser's investment in the Company and requested by the Purchaser have been made available or delivered to it.
(d) Sophistication and Knowledge. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Series B Shares; and the Purchaser can bear the economic risks of investment in the Series B Shares and can afford a complete loss of its investment.
(e) Transfer Restrictions Imposed by Securities Laws. The Purchaser understands that: the Shares have not been registered under the Securities Act and applicable state securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from such registration is available; such Purchaser is and must be purchasing the Series B Shares for investment for its and not for the account or benefit of others, and not with any present view toward resale or other distribution thereof. The Purchaser shall not resell or otherwise dispose of all or any part of the Shares purchased by it, except as permitted by law, including, without limitation, any regulations under the Securities Act and applicable state securities laws; the Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and applicable state securities laws, except as provided in Article V hereof; and the Purchaser understands that Rule 144 or Rule 144A under the Securities Act may not be available as a basis for exemption from registration of the Shares thereunder.
(f) Lack of Liquidity. The Purchaser has no present need for liquidity in connection with its purchase of the Series B Shares.
(g) Suitability and Investment Objectives. The purchase of the Series B Shares by the Purchaser is consistent with the general investment objectives of the Purchaser. The Purchaser understands that the purchase of the Series B Shares involves a high degree of risk in view of the fact that, among other things, the Company is a start-up enterprise, and there is no established market for the Company's capital stock.
(h) Accredited Investor Status. The Purchaser is an "accredited investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act.
1.08. Brokers or Finders. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Purchaser or its respective agents.
ARTICLE II
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to purchase and pay for the Series B Shares to be purchased by it at the Closing is subject to the following conditions (all of which shall be deemed satisfied or waived by the Purchaser at or prior to the Closing in the event all of the transactions contemplated to be effected at the Closing with the Purchaser are consummated):
2.01. Representations and Warranties. Each of the representations and warranties of the Company set forth in Article III hereof shall be true, accurate and correct on the date of the Closing as if made on the date of the Closing.
2.02. Documentation at Closing. The Purchaser shall have received, prior to or at the Closing, all of the following materials, each in form and substance satisfactory to the Purchaser and its counsel, if any, and each of the following events shall have occurred, or each of the following documents shall have been delivered, prior to or simultaneous with the Closing:
(a) Copies of (1) the Certificate of Incorporation of the Company
(including the Certificate of Amendment to the Certificate of Incorporation in
the form set forth in Exhibit 2.02(a) attached hereto), as amended or restated
to date, together with such evidence as may be available of the filing thereof;
(2) the resolutions of the Board of Directors providing for the approval of this
Agreement, the issuance of the Series B Shares, the amendment of Section 2.6 of
the Company's By-Laws to read as set forth in Exhibit 2.02(j) attached hereto,
the increase in the number of directors of the Company to seven (7), the
election of William A. Scott as a director of the Company, the adoption of the
"Guidelines for Stock Option Grants" and the approval of all other agreements or
matters contemplated hereby or executed in connection herewith; and (3) the
By-laws of the Company, as amended to date, all of which shall have been
certified by the Secretary of the Company, as of the date of the Closing, to be
true, complete and correct; and certified copies of all documents evidencing
other necessary corporate or other action and governmental approvals, if any,
required to be obtained at or prior to the Closing with respect to this
Agreement and the issuance of the Series B Shares.
(b) The opinion of Morrison Cohen Singer & Weinstein, counsel for the Company, dated the date of the Closing, in the form attached as Exhibit 2.02(b).
(c) A certificate of the Secretary or an Assistant Secretary of the Company, dated the date of the Closing, which shall certify the names of the officers of the Company authorized to sign this Agreement, the certificates for the Series B Shares and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, the incumbency of such officers, and the true specimen signatures of such officers.
(d) A certificate of the President and the Treasurer of the Company, dated the date of the Closing, stating that the representations and warranties of the Company contained in Article III hereof and otherwise made by the Company in writing in connection with the transactions contemplated hereby are true and correct as of the time of the Closing and that all obligations and covenants in this Agreement required to be performed prior to or at the Closing have been performed as of the time of Closing.
(e) The Company shall have obtained any consents or waivers necessary to be obtained at or prior to the Closing to execute and deliver this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith, to issue the Series B Shares and to carry out the transactions contemplated hereby and thereby, and such consents and waivers shall be in full force and effect at the Closing. All corporate and other action and governmental filings necessary to effectuate the terms of this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith and the issuance of the Series B Shares shall have been made or taken.
(f) A Certificate of Amendment to the Certificate of Incorporation of the Company shall have been filed with the Secretary of State of the State of Delaware in the form set forth in Exhibit 2.02(a) attached hereto.
(g) A Certificate of the Secretary of State of the State of Delaware, dated a recent date, as to the due incorporation and good standing of the Company.
(h) The Purchaser, the holders at least eighty-five percent (85%) of the Series A Convertible Preferred Stock, $.001 par value per share, of the Company (the "Series A Preferred Stock"), and the Company shall have entered into a First Amendment to Voting Agreement in the form attached as Exhibit 2.02(h).
(i) The Board of Directors of the Company (the "Board") immediately following the Closing shall consist of seven (7) members, which members shall be determined as provided in Section 1.1 of the Voting Agreement, initially, the following individuals: Carl C. Icahn, Mark H. Rachesky, M.D., Dr. Jeremy Levin, Thomas Shenk, Dr. Samuel D. Waksal, Robert Goldhammer, and William A.
Scott.
(j) The Company shall have amended Section 2.6 of its By-laws to read as set forth in Exhibit 2.02(j) attached hereto.
(k) The Company and the Purchaser shall have entered into a Sponsored Research Agreement in the form attached as Exhibit 2.02(k) (the "Sponsored Research Agreement").
(l) The Company and the holders of at least eighty-five percent (85%) of the Series A Preferred Stock shall have entered into the First Amendment of the Preferred Stock Purchase Agreement among them in the form attached as Exhibit 2.02(l) (the "First Amendment to Series A Preferred Stock Purchase Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the Closing as follows:
3.01. Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware and has all requisite corporate power and authority for the ownership and operation of its properties and for the carrying on of its business as now conducted and as now proposed to be conducted and to execute and deliver this Agreement and the Voting Agreement, to issue, sell and deliver the Series B Shares and to issue and deliver the Conversion Shares upon conversion of the Series B Shares and to perform its other obligations pursuant hereto and thereto. The Company is duly licensed or qualified and in good standing as a foreign corporation authorized to do business in all jurisdictions wherein the character of the property owned or leased or the nature of the activities conducted by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a material adverse effect on the business, operations or financial condition of the Company.
3.02. Corporate Action. This Agreement and the First Amendment to Voting Agreement and the other agreements executed by the Company in connection herewith have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. The Series B Shares have been duly authorized. The issuance, sale and delivery of the Series B Shares and the issuance and delivery of the Conversion Shares upon conversion of the Series B Shares have been duly authorized by all required corporate action on the part of the Company; the Series B Shares, when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and nonassessable, with no personal liability attaching to the
ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement and the Voting Agreement; and the Conversion Shares have been duly reserved for issuance upon conversion of the Series B Shares and, when so issued, will be duly authorized, validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement and the Voting Agreement.
3.03. Governmental Approvals. Except as set forth on Exhibit 3.03 and except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which, if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution and delivery by the Company of this Agreement, for the offer, issue, sale, execution or delivery of the Series B Shares, or for the performance by the Company of its obligations under this Agreement, the Voting Agreement, or the Shares.
3.04. Litigation. Except as disclosed in Exhibit 3.04, there is no litigation or governmental proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company affecting any of its properties or assets, or against any officer or the holder of more than ten percent (10%) of the capital stock of the Company relating to the Company or its business, nor, to the best knowledge of the Company, has there occurred any event or does there exist any condition on the basis of which any litigation, proceeding or investigation might properly be instituted. Neither the Company nor, to the best knowledge of the Company, any officer of the Company is in default with respect to any order, writ, injunction, decree, ruling or decision of any court, commission, board or other government agency, which default might have a material adverse effect on the business, assets, liabilities, operations, Intellectual Property Rights, management or financial condition of the Company. There are no actions or proceedings pending or, to the Company's knowledge, threatened (or any basis therefor known to the Company) against the Company which might result, either in any case or in the aggregate, in any material adverse change in the business, operations, Intellectual Property Rights, affairs or financial condition of the Company or in any of its properties or assets, or which might call into question the validity of this Agreement, any of the Series B Shares, or any action taken or to be taken pursuant hereto or thereto. The foregoing sentences include, without limiting their generality, actions pending or, to the Company's knowledge,
threatened (or any basis therefor known to the Company) involving the prior employment or engagement of any of the Company's officers, employees or consultants or their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers or to any other Person. Without limitation to the foregoing representations, a brief summary of the Company's material litigation and the disposition of such matters is set forth on Exhibit 3.04.
3.05. Certain Agreements of Officers and Employees. (a) No officer, employee or consultant of the Company is, or, to the Company's knowledge, is now anticipated to be, in violation of any material term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, nonsolicitation agreement, confidentiality agreement, or any other similar contract or agreement or any restrictive covenant, relating to the right of any such officer, employee, or consultant to be employed or engaged by the Company because of the nature of the business conducted or to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and to the Company's best knowledge and belief, the continued employment or engagement of the Company's officers, employees or consultants does not subject the Company or the Purchaser to any liability with respect to any of the foregoing matters.
(b) No officer or consultant of the Company whose termination, either individually or in the aggregate, could have a material adverse effect on the Company, has terminated since the date hereof, or to the best knowledge of the Company, has any present intention of terminating, his employment or engagement with the Company.
3.06. Compliance with Other Instruments. The Company is in compliance in all respects with the terms and provisions of this Agreement and of its Certificate of Incorporation and By-laws, each as amended and/or restated to date, and in all respects with the material terms and provisions of all mortgages, indentures, leases, agreements and other instruments by which it is bound or to which it or any of its properties or assets are subject. The Company is in compliance in all material respects with all judgments, decrees, governmental orders, laws, statutes, rules or regulations by which it is bound or to which it or any of its properties or assets are subject. Neither the execution and delivery of this Agreement or the Voting Agreement or the issuance of the Series B Shares, nor the consummation of any transaction contemplated hereby or thereby, has constituted or resulted in or will constitute or result in a default or violation of any term or provision of any of the foregoing documents, instruments, judgments, agreements, decrees, orders, statutes, rules and regulations. A schedule of Indebtedness of the Company as of May 31, 1994 (including lease obligations required to be capitalized in accordance with
applicable Statements of Financial Accounting Standards) is attached as Exhibit 3.06.
3.07. Title to Assets, Patents. (a) The Company has good and marketable title in fee to such of its fixed assets as are real property, and good and merchantable title to all of its other assets, now carried on its books, which assets consist of those reflected in the most recent balance sheet of the Company which forms Exhibit 3.08 attached hereto, or acquired since the date of such balance sheet (except personal property disposed of since said date in the ordinary course of business) free of any mortgages, pledges, charges, liens, security interests or other encumbrances, except as set forth in Exhibit 3.07 attached hereto. The Company enjoys peaceful and undisturbed possession under all leases under which it is operating, and all said leases are valid and subsisting and in full force and effect.
(b) The Company owns or has a valid right to use the Intellectual Property Rights being used to conduct its business as now operated and as now proposed by the Company to be operated (a complete list of licenses and registrations of such Intellectual Property Rights is attached hereto as Exhibit 3.07); and the conduct of its business as now operated and as now proposed to be operated does not and will not conflict with or infringe upon the intellectual property rights of others. Except as set forth on Exhibit 3.07, no claim is pending or threatened against the Company and/or its officers, employees and consultants to the effect that any such Intellectual Property Right owned or licensed by the Company, or which the Company otherwise has the right to use, is invalid or unenforceable by the Company. Except pursuant to the terms of any licenses specified on Exhibit 3.07, the Company has no obligation to compensate any Person for the use of any such Intellectual Property Rights and the Company has not granted any Person any license or other right to use any of the Intellectual Property Rights of the Company, whether requiring payment of royalties or not.
(c) The Company has taken all reasonable measures to protect and preserve the security, confidentiality and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All employees and consultants of the Company involved in the design, review, evaluation or development of products or Intellectual Property Rights have executed nondisclosure and assignment of inventions agreements sufficient, to the extent permitted by law, to protect the confidentiality and value of the Company's Intellectual Property Rights and to vest in the Company exclusive ownership of such Intellectual Property Rights. All trade secrets and other confidential information of the Company are presently valid and protectible and are not part of the public domain or knowledge, nor, to the best knowledge of the Company, have they been used, divulged or appropriated for the benefit of any person other than the Company or otherwise to the
detriment of the Company. To the best of the Company's knowledge, no employee or consultant of the Company has used any trade secrets or other confidential information of any other person in the course of his work for the Company. Except as set forth on Exhibit 3.07, the Company is the exclusive owner of all right, title and interest in its Intellectual Property Rights as purported to be owned by the Company, and such Intellectual Property Rights are valid and in full force and effect. Except as set forth on Exhibit 3.07, neither the Company, nor any of its officers or consultants has received notice of, and to the best of the Company's knowledge after reasonable investigation there are no, claims that the Company's Intellectual Property Rights or the use or ownership thereof by the Company infringes, violates or conflicts with any such right of any third party. Except as set forth on Exhibit 3.07, no university, hospital, government agency (whether federal or state) or other organization which sponsored research and development conducted by the Company has any claim or right to or ownership of or other encumbrance upon the Intellectual Property Rights purported to be owned by the Company.
3.08. Financial Information. The Company's audited balance sheets as of December 31, 1992 and 1993, and the related statements of operations, stockholders' equity (deficiency) and cash flows for the year ended December 31, 1993, the period from January 23, 1992 (date of inception) to December 31, 1992 and the period from January 23, 1992 to December 31, 1993, copies of which are attached hereto as Exhibit 3.08A, present fairly the financial position and results of operations of the Company as at the dates thereof and have been prepared in accordance with generally accepted accounting principles consistently applied. The financial statements attached as Exhibit 3.08A are referred to herein as the "Financial Statements". The Company does not have, and has no reasonable grounds to know of, any liability, contingent or otherwise, not adequately reflected in or reserved against in the Financial Statements. Except as set forth in Exhibit 3.08B, since December 31, 1993, (i) there has been no material adverse change in the business, assets, operations, affairs, prospects or financial condition of the Company; (ii) neither the business, financial condition, operations, prospects or affairs of the Company nor any of its properties or assets, including without limitation, its Intellectual Property Rights, have been materially adversely affected as the result of any legislative or regulatory change, any revocation or change in any franchise, permit, license or right to do business, or any other event or occurrence, whether or not insured against; and (iii) the Company has not entered into any material transaction other than in the ordinary course of business, made any distribution on its capital stock, or redeemed or repurchased any of its capital stock.
3.09. Taxes. The Company has accurately prepared and timely filed all federal, state and other tax returns required by law to be filed by it, has paid or made provision for the payment of all
taxes shown to be due and all additional assessments, and adequate provisions have been made and are reflected in the Company's financial statements for all current taxes and other charges to which the Company is subject and which are not currently due and payable. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company knows of no additional assessments, adjustments or contingent tax liability (whether federal or state) pending or threatened for any period, nor of any basis for any such assessment, adjustment or contingency. Neither the Company nor, to the best of the Company's knowledge, any of its stockholders, has ever filed a consent pertaining to the Company pursuant to Section 341(f) of the Code relating to collapsible corporations.
3.10. ERISA. The Company makes no contributions to any employee pension benefit plans for its employees which plans are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
3.11. Transactions with Affiliates. Except as set forth in Exhibit 3.11,
there are no material loans, leases, royalty agreements or other continuing
transactions between (a) the Company or any of its customers or suppliers, and
(b) any officer, employee, consultant or director of the Company or any Person
owning five percent (5%) or more of the capital stock of the Company or any
member of the immediate family of such officer, employee, consultant, director
or stockholder or any corporation or other entity controlled by such officer,
employee, consultant, director or stockholder, or a member of the immediate
family of such officer, employee, consultant, director or stockholder.
3.12. Assumptions or Guaranties of Indebtedness of Other Persons. The Company has not assumed, guaranteed, endorsed, or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any Indebtedness of any other Person.
3.13. Investments in Other Persons. Except as set forth in Exhibit 3.13, the Company has not made any loans or advances to any Person which is outstanding on the date of this Agreement in excess of $10,000 in the aggregate, nor is it committed or obligated to make any such loan or advance, nor does the Company own any capital stock, assets comprising the business of, obligations of, or any interest in, any Person. The Company does not have, and has not since its incorporation had, any Subsidiaries.
3.14. Securities Act of 1933. The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Series B Shares hereunder. Neither the Company nor anyone acting on its
behalf has or will sell, offer to sell or solicit offers to buy the Series B Shares or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any Person, so as to bring the issuance and sale of the Series B Shares under the registration provisions of the Securities Act and applicable state securities laws.
3.15. Disclosure. Neither this Agreement, the Financial Statements, nor any other agreement, document, certificate, statement, whether oral or written, furnished to the Purchaser by or on behalf of the Company in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which made, not misleading. There is no fact within the knowledge of the Company or any of its executive officers which has not been disclosed herein or in writing by them to the Purchaser and which materially adversely affects, or in the future in their opinion may, insofar as they can now foresee, materially adversely affect the business, operations, properties, Intellectual Property Rights, assets or condition, financial or other, of the Company. Without limiting the foregoing, the Company has no knowledge that there exists, or there is pending or planned, any patent, invention, device, application or principle or any statute, rule, law, regulation, standard or code which would materially adversely affect the business, operations, Intellectual Property Rights, affairs or financial condition of the Company.
3.16. Brokers or Finders. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Company or its respective agents.
3.17. Capitalization; Status of Capital Stock. As of the Closing, the Company will have a total authorized capitalization consisting of (i) 30,000,000 shares of Common Stock, $.001 par value, and (ii) 19,701,080 shares of Preferred Stock, $.001 par value, of which 14,879,651 shares are designated as Series A Preferred Stock and 4,821,429 shares will be designated as Series B Preferred Stock. As of the Closing, 4,130,000 shares of Common Stock and 14,879,651 shares of Series A Preferred Stock will be issued and outstanding, and, without giving effect to the transactions contemplated hereby, no shares of Series B Preferred Stock will be issued or outstanding, other than such as shall be issued at the Closing. A complete list of the capital stock of the Company which has been previously issued and the names in which such capital stock is registered on the stock transfer book of the Company is set forth in Exhibit 3.17 hereto. All the outstanding shares of capital stock of the Company have been duly authorized, and are validly issued, fully paid and non-assessable. The Series
B Shares, when issued, delivered and paid for in accordance with the terms hereof, and the Conversion Shares, when issued and delivered upon conversion of the Series B Shares, will be duly authorized, validly issued, fully-paid and non-assessable. Except for 1,645,209 shares of Common Stock that have been reserved for issuance upon exercise of stock options as further set forth in Exhibit 3.17, no options, warrants, subscriptions or purchase rights of any nature to acquire from the Company, or commitments of the Company to issue, shares of capital stock or other securities are authorized, issued or outstanding, nor is the Company obligated in any other manner to issue shares or rights to acquire any of its capital stock or other securities except as contemplated by this Agreement. On June 28, 1994, the Board of Directors of the Company adopted "Guidelines for Stock Option Grants", a copy of which is annexed hereto as Exhibit 3.17A. Except as set forth in Exhibit 3.17, none of the Company's outstanding securities or authorized capital stock or the Series B Shares is subject to any rights of redemption, repurchase, rights of first refusal, preemptive rights or other similar rights, whether contractual, statutory or otherwise, for the benefit of the Company, any stockholder, or any other Person, except pursuant hereto and the Series A Preferred Stock Purchase Agreement. Except as set forth in Exhibit 3.17, there are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement and the Co-Sale Agreement. Except as set forth in Exhibit 3.17, there are no agreements, understandings, trusts or other collaborative arrangements or understandings concerning the voting or transfer of the capital stock of the Company other than the Voting Agreement and the Co-Sale Agreement. The offer and sale of all capital stock and other securities of the Company issued before the Closing complied with or were exempt from all applicable federal and state securities laws and no stockholder has a right of rescission or damages with respect thereto.
3.18. Registration Rights. Except as set forth on Exhibit 3.18, and except for the rights granted to the Purchaser pursuant to Article V hereof, no Person has demand or other rights to cause the Company to file any registration statement under the Securities Act relating to any securities of the Company or any right to participate in any such registration statement.
3.19. Insurance. The Company maintains insurance covering the Company's properties and business adequate and customary for the type and scope of its properties, assets and business, and similar to companies of comparable size and condition similarly situated in the same industry in which the Company operates, but in any event in amounts sufficient to prevent the Company from becoming a co-insurer or self-insurer, with provision for reasonable deductibles.
3.20. Books and Records. The books of account, ledgers,
order books, records and documents of the Company accurately and completely reflect all material information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company.
3.21. Material Agreements. Except as set forth in Exhibit 3.21, the Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 or Form S-18 if the Company were registering securities under the Securities Act, or any other agreement which could adversely affect the business, assets, liabilities, Intellectual Property Rights, financial condition or operations of the Company. The Company, and to the best of the Company's knowledge, each other party thereto have in all material respects performed all the obligations required to be performed by them to date, have received no notice of default and are not in default under any lease, agreement or contract now in effect to which the Company is a party or by which it or its property may be bound, the result of which could cause a material adverse change in the business, assets, liabilities, Intellectual Property Rights, operations or financial condition of the Company. Except as set forth in Exhibit 3.21, each of the contracts or agreements listed in Exhibit 3.21 is in full force and effect with no default, anticipated or threatened default or failure of performance or observance of any obligations or conditions contained therein, and none of the foregoing parties nor the Company has provided any notice of default or of its intention to terminate these agreements.
3.22. Absence of Certain Developments. Except as provided in Exhibit 3.22 attached hereto, since December 31, 1993 the Company has not:
(a) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company's business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or
purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;
(e) mortgaged or pledged any of its assets, tangible or intangible, or subjected them to any lien, charge or other encumbrance, except liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;
(g) sold, assigned or transferred any patents, patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any persons except to potential customers, investors, merger candidates, or corporate or academic partners or collaborators in the ordinary course of business;
(h) suffered any substantial losses (other than losses from operations for financial reporting purposes) or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;
(i) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;
(j) made capital expenditures or commitments therefor that aggregate in excess of $100,000;
(k) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;
(l) made charitable contributions or pledges in excess of $5,000;
(m) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;
(n) experienced any problems with labor or management in connection with the terms and conditions of their employment; or
(o) effected any two or more events of the foregoing kind which in the aggregate would be material to the Company.
3.23. Environmental and Safety Laws. To the best of the Company's knowledge after due investigation, it is not in violation of any applicable statute, law or regulation relating to the environment or occupational safety and health, and to the best of
its knowledge after due investigation, no material expenditures will be required in order to comply with any such statute, law or regulation.
3.24. U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States Real Property Holding Corporation" as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. Reporting Requirements. Until the consummation of the Initial Public Offering, the Company will furnish the following to the Purchaser so long as the Purchaser owns at least one million Series B Shares:
(a) Monthly and Quarterly Reports. As soon as available and in any event within 45 days after the end of each calendar month, consolidated balance sheets of the Company and its Subsidiaries as of the end of such month and consolidated statements of income and stockholders' equity and a summary statement of monthly cash flow of the Company and its Subsidiaries for such month and for the period commencing at the end of the previous fiscal year and ending with the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the monthly budget or business plan and an analysis of the variances from the budget or plan; and, as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal quarter and consolidated statements of income, stockholders' equity and cash flow of the Company and its Subsidiaries for such quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the prior fiscal year, prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the quarterly budget or business plan and an analysis of the variances from the budget or plan;
(b) Annual Reports. As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the annual audit report for such year for the Company and its Subsidiaries, including therein consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year and consolidated statements of income, retained earnings and of cash flow of the Company and its Subsidiaries for
such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all such consolidated statements to be duly certified by the chief financial officer of the Company and an independent public accountant of recognized national standing selected by the Board of Directors;
(c) Budgets and Operating Plan. As soon as available and in any event at least 30 days before the beginning of each fiscal year of the Company, a business plan and monthly and quarterly operating budgets for the forthcoming fiscal year; as promptly as practicable, any changes to such budget or business plan; and copies of such business plan and budgets shall be delivered to the Board of Directors contemporaneously with the delivery to the Purchaser.
(d) Notice of Adverse Changes. Promptly after the occurrence thereof and in any event within five (5) business days after each occurrence, notice of any material adverse change in the business, assets, Intellectual Property Rights, management, operations or financial condition of the Company; and
(e) Certain Reports and Other Information. Promptly after distribution to holders of the Common Stock, $.001 par value, of the Company, provide to the Purchaser copies of all reports, notices, and other information as the Company shall make available generally to the holders of its Common Stock.
4.02. Loans to Certain Persons. The Company will not lend money to any director or officer of the Company or to any person who is an affiliate (as that term is defined for purposes of the Exchange Act) of the Company except (a) pursuant to the agreement disclosed in Exhibit 3.08B hereof and (b) as approved from time to time by the Board.
4.03. Limitation on Repurchases. The Company shall not purchase any outstanding shares of its capital stock except pursuant to an agreement or transaction which has been approved by the Board of Directors prior to such purchase.
ARTICLE V
REGISTRATION RIGHTS
5.01. Piggy-Back Registrations. If at any time the Company shall determine to register for its own account or the account of others under the Securities Act (including pursuant to the Qualified Public Offering, the Initial Public Offering or a demand for registration of any stockholder of the Company) any of its equity securities, other than on Form S-4 or Form S-8 or their then equivalents relating to shares of Common Stock to be issued solely in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or
other employee benefit plans, it shall send to the Purchaser written notice of such determination and, if within fifteen (15) days after receipt of such notice, the Purchaser shall so request in writing, the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Shares such holder requests to be registered, except that if, in connection with the Initial Public Offering or the Qualified Public Offering the managing underwriter shall impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because, in its judgment, such limitation is necessary to effect an orderly public distribution, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Shares with respect to which such holder has requested inclusion hereunder. Any such exclusion of Common Stock shall be made pro rata among the Persons (who are entitled to and have requested registration) seeking to include shares of Common Stock, in proportion to the number of shares of Common Stock sought to be included by them, provided, however, that the Company shall not exclude any Registrable Shares unless the Company has first excluded all outstanding securities the holders of which are not entitled by right to inclusion of securities in such registration statement. No incidental right under this Section 5.01 shall be construed to limit any registration required under Section 5.02. The obligations of the Company to the Purchaser under this Section 5.01 may be waived by the Purchaser at any time and shall expire on the seventh anniversary following the consummation of a Qualified Public Offering or at any time after the Company has effected five registrations for the benefit of the Purchaser under this Section 5.01; provided, however, that if the Purchaser shall have any Registrable Shares excluded from any registration statement in accordance with this Section 5.01, it shall be entitled to include in an additional registration statement filed by the Company the Registrable Shares so excluded.
5.02. Demand Registration. If at any time after the Initial Public Offering, the Purchaser shall notify the Company in writing that it intends to offer or cause to be offered for public sale Registrable Shares held by it which shares have an anticipated aggregate offering price, net of underwriting discounts and commissions, equal to more than $2,500,000, based on the market price of the shares of Common Stock at the time the Purchaser so notifies the Company, then the Company will use its best efforts to cause such of the shares of Common Stock as were requested to be registered by the Purchaser to be registered under the Securities Act as expeditiously as possible. The Company shall not be required to file a registration statement with the Commission pursuant to this Section 5.02 at any time while another registration statement (other than on Form S-3 or S-8) of the Company has been filed with the Commission and is not yet effective or within six months after the effective date of another registration statement (other than on Form S-3 or S-8) filed by the
Company with the Commission. The Company shall not be required to effect more
than one registration during any twelve (12) month period pursuant to this
Section 5.02 and two such registrations in the aggregate. In connection with any
request by the Purchaser for registration of Registrable Shares pursuant to this
Section 5.02, the Company shall have the right to defer the filing of a
registration statement with the Commission for up to 120 days after such filing
would otherwise be required hereunder if the Company shall furnish to the
Purchaser a certificate signed by the President of the Company stating that, in
the good faith judgment of the Company, it would be detrimental to the interests
of the Company for such registration statement to be filed at such time, and if
the Company shall have furnished such certificate then the Company shall have
the right to defer the filing of such registration statement for an additional
period of up to 120 days if the Company shall furnish to the Purchaser a copy of
a resolution of the Board of Directors, certified by the Secretary of the
Company, to the effect that, in the good faith judgment of the Board of
Directors, it would be detrimental to the interests of the Company for such
registration statement to be filed at such time.
5.03. Registrations on Form S-3. In addition to the rights provided the
Purchaser in Sections 5.01 and 5.02, if the registration of Registrable Shares
under the Securities Act can be effected on Form S-3 (or any similar form
promulgated by the Commission), then upon the written request of the Purchaser
for the registration of a number of Registrable Shares held by the Purchaser
which have an anticipated aggregate offering price, net of underwriting
discounts and commissions, of at least $2,500,000, based on the market price of
the shares of Common Stock at the time such request is made, the Company will so
notify all persons entitled to similar registration rights, and then will, as
expeditiously as possible, use its best efforts to effect qualification and
registration under the Securities Act on Form S-3 of all or such portion of the
shares of Common Stock as the Purchaser shall specify in the initial request to
the Company or upon written request of a stockholder to the Company given within
fifteen (15) days after the receipt by such stockholder from the Company of such
notification; provided, however, the Company shall not be required to effect a
registration pursuant to this Section 5.03 unless the market value of the shares
of Common Stock to be sold in any such offering, less underwriting discounts and
commissions, shall be estimated to be at least $2,500,000 at the time of filing
such registration statement; and provided further, however, that the Company
shall not be required to effect more than one (1) registration during any twelve
(12) month period pursuant to this Section 5.03 and three (3) such registrations
in the aggregate. Subject to the foregoing, no registration of Registrable
Shares pursuant to this Section 5.03 shall be construed to limit any
registration required under Section 5.01 or 5.02.
5.04. Effectiveness. The Company will use its best efforts
to maintain the effectiveness for up to 90 days (or such shorter period of time as the underwriters need to complete the distribution of the registered offering, or one year in the case of a "shelf" registration statement on Form S-3) of any registration statement pursuant to which any of the Registrable Shares are being offered, and from time to time will amend or supplement such registration statement and the prospectus contained therein to the extent necessary to comply with the Securities Act and any applicable state securities statute or regulation. The Company will also provide the Purchaser with as many copies of the prospectus contained in any such registration statement as it may reasonably request.
5.05. Indemnification by the Company. (a) In the event that the Company registers any of the Registrable Shares under the Securities Act, the Company will indemnify and hold harmless the Purchaser and each underwriter of the Registrable Shares (including their officers, directors, affiliates and partners) so registered (including any broker or dealer through whom such shares may be sold) and each Person, if any, who controls the Purchaser or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, as incurred, and, except as hereinafter provided, will reimburse the Purchaser, each such underwriter and each such controlling Person, if any, for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, as incurred, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration, unless (i) such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or amended preliminary prospectus or final prospectus in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Purchaser (in the case of indemnification of the Purchaser), any such underwriter (in the case of indemnification of such underwriter) or any such controlling Person (in the case of indemnification of such controlling person) expressly for use
therein, or unless (ii) in the case of a sale directly by the Purchaser (including a sale of Registrable Shares through any underwriter retained by the Purchaser to engage in a distribution solely on behalf of the Purchaser), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus copies of which were delivered to the Purchaser or such underwriter on a timely basis, and the Purchaser failed to deliver a copy of the final or amended prospectus at or prior to the confirmation for the sale of the Registerable Shares to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act.
(b) Promptly after receipt by the Purchaser, any underwriter or any controlling Person of notice of the commencement of any action in respect of which indemnity may be sought against the Company, the Purchaser, or such underwriter or such controlling person, as the case may be, will notify the Company in writing of the commencement thereof (provided, that failure by any such person to so notify the Company shall not relieve the Company from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder) and, subject to the provisions hereinafter stated, the Company shall be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Purchaser, such underwriter or such controlling Person, as the case may be), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company.
(c) The Purchaser any such underwriter or any such controlling Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel subsequent to any assumption of the defense by the Company shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized in writing by the Company. The Company shall not be liable to indemnify any Person for any settlement of any such loss, claim, damage, expense, liability or action effected without the Company's written consent. The Company shall not, except with the approval of each party being indemnified under this Section 5.05, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which the Purchaser, or any controlling Person of the Purchaser, makes a claim for indemnification pursuant to this Section 5.05 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5.05 provides for indemnification in such case, then, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Purchaser on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement, net of any underwriting discounts or commissions paid by it; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
5.06. Indemnification by the Purchaser. (a) In the event that the Company registers any of the Purchaser's Registrable Shares under the Securities Act, the Purchaser will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed or otherwise participated in the preparation of the registration statement, each underwriter of the Registrable Shares so registered (including any broker or dealer through whom such of the shares may be sold) and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them may become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling Person for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or in the registration statement or prospectus as from time to time amended or
supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Purchaser expressly for use therein; provided, however, that the Purchaser's obligations hereunder shall be limited to an amount equal to the aggregate public offering price of the Registrable Shares sold by it in such registration, net of any underwriting discounts or commissions paid by it.
(b) Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against the Purchaser hereunder, the Company will notify the Purchaser in writing of the commencement thereof (provided, that failure by the Company to so notify the Purchaser shall not relieve the Purchaser from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder), and the Purchaser shall, subject to the provisions hereinafter stated, be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against the Purchaser. The Company and each such director, officer, underwriter or controlling Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel subsequent to any assumption of the defense by the Purchaser shall not be at the expense of the Purchaser unless employment of such counsel has been specifically authorized in writing by the Purchaser. The Purchaser shall not be liable to indemnify any Person for any settlement of any such loss, claim, damage, expense, or liability or action effected without the Purchaser's written consent.
(c) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which the Company or another Person entitled to indemnification pursuant to this Section 5.06 makes a claim for indemnification pursuant to this Section 5.06, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding that this Section 5.06 provides for indemnification, in such case, then, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Purchaser on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement, net of any underwriting discounts or commissions paid by it; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
5.07. Exchange Act Registration. If the Company at any time shall list any class of equity securities of the type which may be issued upon the conversion of the Series B Preferred Stock on any national securities exchange or obtain authorization for shares of such class to be quoted on an automated quotation system and shall register such class of equity securities under the Exchange Act, the Company will, at its expense, simultaneously list on such exchange or qualify for trading on such automated quotation system and maintain such listing or authorization of the Conversion Shares of such class. If the Company becomes subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act, the Company will use its best efforts to timely file with the Commission such information as the Commission may require under either of said Sections; and in such event, the Company shall use its best efforts to take all action as may be required as a condition to the availability of Rule 144 or Rule 144A under the Securities Act (or any successor exemptive rule hereafter in effect) with respect to such Common Stock. The Company shall furnish to the Purchaser forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company as filed with the Commission, and (iii) such other reports and documents as the Purchaser may reasonably request in availing itself of any rule or regulation of the Commission allowing the Purchaser to sell any such Registrable Shares without registration. After the occurrence of the Initial Public Offering, the Company agrees to use its best efforts to facilitate and expedite transfers of the Shares pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Shares.
5.08. Damages. The Company recognizes and agrees that the Purchaser will not have an adequate remedy if the Company fails to comply with this Article V and that damages may not be readily
ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the Purchaser or any other Person entitled to the benefits of this Article V requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Article V.
5.09. Further Obligations of the Company. Whenever under the preceding Sections of this Article V, the Company is required hereunder to register Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to the Purchaser such copies of each preliminary and final prospectus and such other documents as the Purchaser may reasonably request to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the Registrable Shares covered by said registration statement under the applicable securities or "blue sky" laws of such jurisdictions as the Purchaser may reasonably request; provided, however, that the Company shall not be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the registration statement in any jurisdiction where it is not then so subject;
(c) Furnish to the Purchaser a signed counterpart, addressed to the Purchaser and any other selling holders, of (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) "comfort" letters signed by the Company's independent public accountants who have examined and reported on the Company's financial statements included in the registration statement, to the extent permitted by the standards of the American Institute of Certified Public Accountants, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' "comfort" letters) with respect to events subsequent to the date of the financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' "comfort" letters delivered to the underwriters in underwritten public offerings of securities, to the extent that the Company is required to deliver or cause the delivery of such opinion or "comfort" letters to the underwriters in an underwritten public offering of securities;
(d) Permit the Purchaser or its counsel or other representatives to inspect and copy such corporate documents and records as may reasonably be requested by them;
(e) Furnish to the Purchaser a copy of all documents
filed with and all correspondence from or to the Commission in connection with any such offering of securities;
(f) Use its best efforts to insure the obtaining of all necessary approvals from the NASD;
(g) Cause all Registrable Shares so registered pursuant hereto to be listed on any securities exchange or authorized for quotation in any automated quotation system on or in which outstanding shares of such class are listed or authorized for quotation at the time such registration is declared effective by the Commission;
(h) Designate a transfer agent and registrar for the class or classes of shares which include such Registrable Shares and obtain a CUSIP number for such class or classes of shares, in each case not later than the date such registration is declared effective by the Commission; and
(i) Otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earning statement covering the period of
at least twelve months, but not more than eighteen months, beginning with the
first month after the effective date of the registration statement covering the
Initial Public Offering, which earning statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
Whenever under the preceding Sections of this Article V the Purchaser is registering Registrable Shares pursuant to any registration statement, the Purchaser agrees to (i) timely provide to the Company, at its request, such information and materials as it may reasonably request in order to effect the registration of such Registrable Shares and (ii) convert all Series B Shares into the shares of Common Stock included in any registration statement, such conversion to be effective at or before the closing of such offering pursuant to such registration statement.
5.10. Expenses. In the case of each registration effected under Section 5.01, 5.02 or 5.03, the Company shall bear all reasonable costs and expenses of each such registration on behalf of the Purchaser, including, but not limited to, the Company's printing, legal and accounting fees and expenses, Commission and NASD filing fees and "Blue Sky" fees; provided, however, that the Company shall have no obligation to pay or otherwise bear any portion of the underwriters' commissions or discounts attributable to the Registrable Shares being offered and sold by the Purchaser, or the fees and expenses of counsel for the Purchaser in connection with the registration of the Registrable Shares. The Company shall pay all expenses of the Purchaser in connection with any registration initiated pursuant to this Article V which is
withdrawn or abandoned at the request of the Company, except if such withdrawal or abandonment is caused by the fraud, material misstatement or omission of a material fact by any holder of Registrable Shares to be included in such registration, in which case such expenses shall be paid by the holder or holders who have caused such withdrawal or abandonment. If a registration requested by the Purchaser pursuant to Section 5.02 shall be withdrawn prior to becoming effective under the Securities Act at the request of the Purchaser, and in connection with such withdrawal the Purchaser agrees that, notwithstanding such withdrawal, for purposes of this Agreement such withdrawn registration shall satisfy the Company's obligation for one of the registrations which the Company is required to provide pursuant to Section 5.02, then the Company shall pay the expenses of such registration to the extent provided in the first sentence of this Section 5.10; provided, however, that if such registration statement is withdrawn by reason of the fact that, prior to effectiveness of such registration statement, the registration statement filed or to be filed with the Commission contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and the Company shall have failed, within a reasonable time after receipt of written notice thereof from the Purchaser to take reasonable measures to correct such deficiency, the Purchaser shall not be responsible for the costs of such registration (other than expenses described in the proviso to the first sentence of this Section 5.10).
5.11. Transferability. For all purposes of Article V of this Agreement, if
the Purchaser transfers all the Registrable Shares then owned by it to one
Person, the term "Purchaser" shall mean such transferee of all the Registrable
Shares then owned by the Purchaser; provided that such transferee (i) is not a
Competitor of the Company (as hereinafter defined in this Section 5.11) and (ii)
agrees in writing to be bound by all of the provisions of this Agreement,
including, without limitation, Section 5.12 hereof. For the purposes of this
Section 5.11, "Competitor of the Company" shall mean a Person who (i) poses a
significant competitive threat to a substantial portion of the Company's
business or to a significant product of the Company or (ii) is involved in an
ongoing dispute with the Company.
5.12. "Lock-Up" Agreement. The Purchaser, if so requested by the Company and an underwriter of Common Stock or other securities of the Company, shall not sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Company held by it or which it has the right to acquire during the 180-day period following the effective date of a registration statement of the Company filed with the Commission in connection with such offering or such shorter period as such underwriter shall have advised the Company
in writing is adequate to permit the successful and orderly distribution of such
Common Stock or other securities; provided, however, that such "lock-up"
agreement shall be in writing and in form and substance satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares subject to the foregoing restrictions until the end
of said 180-day period. In connection with the preparation and filing of any
such registration statement, the Company shall use its reasonable best efforts
(1) to enforce the obligations of its stockholders (and any Person who shall
have the right to acquire capital stock of the Company) who have agreed with the
Company to enter into "lockup" or "market stand-off" agreements and (2) to
obtain a "lock-up" or "market-stand-off" agreement from all of its other
stockholders and all other such Persons.
5.13. Mergers, Etc. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under Article V of this Agreement, and for that purpose references hereunder to Registrable Shares shall be deemed to be references to the securities which the Purchaser would be entitled to receive in exchange for Registrable Shares under any such merger, consolidation or reorganization; provided, however, that the provisions of this Section 5.13 shall not apply in the event of any merger, consolidation, or reorganization in which the Company is not the surviving corporation if all stockholders are entitled to receive in exchange for their Registrable Shares consideration consisting solely of (i) cash, (ii) securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act, or (iii) securities of the acquiring corporation which the acquiring corporation has agreed to register within 90 days of completion of the transaction for resale to the public pursuant to the Securities Act.
ARTICLE VI
RIGHT OF FIRST REFUSAL
6.01. Right of First Refusal. Before the Company shall issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange (unless, in the case of an agreement, obligation, reservation or setting aside, the same is expressly subject to the rights of the Purchaser under the provisions of this Article VI), (i) any shares of Common Stock, (ii) any other equity security of the Company, including without limitation, shares of any series of the Company's class of Preferred Stock, (iii) any convertible debt security of the Company, including without limitation, any debt security which by its terms is convertible into or exchangeable for any equity security of the Company, (iv) any security of the Company that is
a combination of debt and equity, or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security or any
such debt security of the Company, the Company shall, in each case, first offer
to sell such securities (the "Offered Securities") to the Purchaser as follows:
the Company shall offer to sell to the Purchaser that portion of the Offered
Securities as the number of Conversion Shares then held by the Purchaser bears
to the total number of shares of Common Stock issuable upon conversion of the
Preferred Stock of the Company then outstanding, at a price and on such other
terms as shall have been specified by the Company in writing delivered to the
Purchaser (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of thirty (30) days from receipt by the Purchaser of
the Offer.
6.02. Notice of Acceptance. Notice of the Purchaser's intention to accept, in whole or in part, any Offer made pursuant to Section 6.01 shall be evidenced by a writing, in form, scope and substance reasonably satisfactory to the Company, signed by the Purchaser and delivered to the Company prior to the end of the 30-day period of such offer, setting forth such of the Offered Securities offered to the Purchaser as the Purchaser elects to purchase ("Notice of Acceptance").
6.03. Conditions to Acceptances and Purchase. (a) Permitted Sales of Refused Securities. In the event that a Notice of Acceptance is not given by the Purchaser in respect of all the Offered Securities offered to it, the Company shall have ninety (90) days from the end of said 30-day period to sell any Offered Securities offered to the Purchaser as to which a Notice of Acceptance has not been given by the Purchaser (the "Refused Securities") to the Person or Persons specified in the Offer, subject to the rights of first refusal of the holders of Series A Preferred Stock and only for an amount and kind (or the cash equivalent thereof) of consideration and otherwise in all respects upon the terms and conditions, including, without limitation, unit price and interest rates, which are no more favorable, in the aggregate, to such other Person or Persons or less favorable to the Company (as determined in good faith by the Board of Directors) than those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the Company shall propose to sell less than all of the Refused Securities (any such sale to be in the manner and on the terms specified in Section 6.03(a) above), then the Purchaser may reduce the number of shares or other units of the Offered Securities specified in its Notice of Acceptance to an amount which shall be not less than the amount of the Offered Securities which the Purchaser elected to purchase pursuant to Section 6.02 multiplied by a fraction, (i) the numerator of which shall be the amount of Offered Securities which the Company actually proposes to sell, and (ii) the denominator of which shall be the amount of all
Offered Securities. In the event that the Purchaser so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may not sell or otherwise dispose of more than the reduced amount of the Offered Securities until such securities have again been offered to the Purchaser in accordance with Section 6.01.
(c) Closing. At the closing of the sale to such other Person or Persons of all or less than all the Refused Securities, which closing shall include payment in full of the purchase price therefor, the Purchaser shall purchase from the Company, and the Company shall sell to the Purchaser, the number of Offered Securities specified in the Notice of Acceptance, as reduced pursuant to Section 6.03(b) if the Purchaser has so elected, upon the terms and conditions specified in the Offer, including, without limitation, payment in full for such Offered Securities. The purchase by the Purchaser of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Purchaser of a purchase agreement relating to such Offered Securities in form and substance as offered to the purchasers or proposed purchasers of the Offered Securities who are not the Purchaser.
6.04. Further Sale. In each case, any Offered Securities not purchased by the Purchaser or other Person or Persons in accordance with Section 6.03 may not be sold or otherwise disposed of until they are again offered to the Purchaser under the procedures specified in Sections 6.01, 6.02 and 6.03.
6.05. Termination and Waiver of Right of First Refusal. The rights of the Purchaser under this Article VI may be waived by the Purchaser and shall terminate immediately prior to the effectiveness of the registration statement with respect to the Initial Public Offering, but expressly conditioned on the consummation of the Initial Public Offering.
6.06. Exceptions. The rights of the Purchaser under this Article VI shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common Stock or upon any subdivision or combination of shares of Common Stock;
(b) Preferred Stock issued as a dividend to holders of Preferred Stock upon any subdivision or combination of shares of Preferred Stock;
(c) Any shares of Common Stock issued upon conversion of Series A Shares or Series B Shares;
(d) Up to 1,854,791 shares of Common Stock, or options exercisable therefor, issued on or after the date hereof to
directors, officers, employees or consultants of the Company and any Subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, employee stock ownership plan, employee benefit plan, stock purchase agreement, stock plan, stock restriction agreement, or consulting agreement or such other options, arrangements, agreements or plans approved by the compensation or similar committee of the Board of Directors or, if no such committee exists, by the Board of Directors of the Company;
(e) Up to 500,000 shares of Common Stock which at the date of this Agreement are shares of treasury stock of the Company or are subject to Restricted Stock Agreements and hereafter become treasury stock, which treasury stock is sold by the Company from time to time to ImClone Systems Incorporated ("ImClone") at a price of $.457 per share, on or prior to July 31, 1997, in an amount not in excess of the number (and in no event in excess of 500,000 shares) of shares of Common Stock which ImClone sells to any person who, at the date of this Agreement, is a party to a Restricted Stock Agreement;
(f) Securities described in any of clauses (i) through (v) of Section 6.01 which are to be issued as all or part of the consideration in the acquisition by the Company of all or part of the stock (or other equity interest), business, assets, technology, or know how of another Person; or
(g) Securities described in any of clauses (i) through (v) of Section 6.01 which are to be issued to any Person in connection with a transaction in which such Person will provide funding to the Company (other than through the purchase of securities of the Company) to pay for research to be conducted by the Company.
Each of the foregoing numbers shall be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event and, in the case of stock options and related shares referred to in Section 6.06(d), as provided in the Cadus Pharmaceutical Corporation 1993 Stock Option Plan and subsequent stock option plans of the Company.
ARTICLE VII
DEFINITIONS AND ACCOUNTING TERMS
7.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Preferred Stock Purchase Agreement as from time to time amended and in effect between the parties, including all Exhibits hereto.
"Board of Directors" or "Board" means the board of directors of the Company as constituted from time to time.
"Closing" shall have the meaning assigned to that term in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.
"Common Stock" includes (a) the Company's Common Stock, $.001 par value, as authorized on the date of this Agreement, (b) any other capital stock of any class or classes (however designated) of the Company authorized on or after the date hereof, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to a preference, and the holders of which shall ordinarily, in the absence of contingencies or in the absence of any provision to the contrary in the Company's Certificate of Incorporation, be entitled to vote for the election of a majority of directors of the Company (even though the right so to vote has been suspended by the happening of such a contingency or provision), and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means Cadus Pharmaceutical Corporation, a Delaware corporation, and its successors and assigns.
"Consolidated" and "consolidating" when used with reference to any term defined herein mean that term as applied to the accounts of the Company and its Subsidiaries consolidated in accordance with generally accepted accounting principles consistently applied throughout reporting periods.
"Conversion Shares" shall have the meaning assigned to that term in Section 1.02.
"Co-Sale Agreement" means the Co-Sale Agreement, dated as of July 30, 1993, among the Company, Imclone, Icahn Holdings Corporation, M. Elliott Schnall, Mark H. Rachesky, and The Global Health Sciences Fund.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and
regulations of the Commission (or of any other Federal agency then administering the Exchange Act) thereunder, all as the same shall be in effect at the time.
"Financial Statements" shall have the meaning provided in Section 3.08.
"ImClone" means ImClone Systems Incorporated, a Delaware corporation, and its successors and assigns.
"Indebtedness" means (i) any liability for borrowed money or evidenced by a
note or similar obligation given in connection with the acquisition of any
property or other assets (other than trade accounts payable incurred in the
ordinary course of business); (ii) all guaranties, endorsements and other
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business, and
(iii) the present value of any lease payments due under leases required to be
capitalized in accordance with applicable Statements of Financial Accounting
Standards, determined by discounting all such payments at the interest rate
determined in accordance with applicable Statements of Financial Accounting
Standards.
"Initial Public Offering" means the first underwritten public offering of Common Stock of the Company for the account of the Company and offered on a "firm commitment" or "best efforts" basis pursuant to an offering registered under the Securities Act with the Commission on Form S-1, Form S-18 or their then equivalents.
"Intellectual Property Rights" means any and all, whether domestic or foreign, patents, patent applications, patent right, trade secrets, confidential business information, formulae, processes, laboratory notebooks, algorithms, copyrights, mask works, claims of infringement against third parties, licenses, permits, license rights, contract rights with employees, consultants and third parties, trademarks, trademark rights, inventions and discoveries, and other such rights generally classified as intangible, intellectual property assets in accordance with generally accepted accounting principles.
"NASD" means the National Association of Securities Dealers, Inc.
"Notice of Acceptance" shall have the meaning assigned to that term in
Section 6.02.
"Offer" shall have the meaning assigned to that term in Section 6.01.
"Offered Securities" shall have the meaning assigned to that term in
Section 6.01.
"Person" means an individual, corporation, partnership, joint venture, trust, university, or unincorporated organization, or a government, or any agency or political subdivision thereof.
"Preferred Stock" means the Series A Preferred Stock and the Series B Preferred Stock.
"Purchaser" shall mean Bristol-Myers Squibb Company and its successors and permitted assigns.
"Qualified Public Offering" means a fully underwritten, firm commitment public offering pursuant to an effective registration under the Securities Act covering the offer and sale by the Company of its Common Stock in which the aggregate gross proceeds to the Company exceed $7,500,000 and in which the price per share of such Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock split, stock dividend, combination, reorganization, reclassification or other similar event).
"Refused Securities" shall have the meaning assigned to that term in
Section 6.03.
"Registrable Shares" shall mean and include (i) the Conversion Shares; and
(ii) the shares of Common Stock of the Company acquired by the Purchaser
pursuant to Article VI hereof or any shares of Common Stock issuable on the
conversion of other securities acquired by the Purchaser pursuant to Article VI
hereof or otherwise; provided, however, that shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares upon the consummation of
any sale pursuant to a registration statement, Section 4(l) of the Securities
Act or Rule 144 under the Securities Act.
"Restricted Stock Agreements" shall mean the Restricted Stock Agreements between the Company and each of James R. Broach, Thomas Shenk, Susan Shenk, Dana Fowlkes and Jeffrey Stock.
"Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission (or of any other federal agency then administering the Securities Act) thereunder, all as the same shall be in effect at the time.
"Series A Preferred Stock" means the Series A Convertible Preferred Stock, $.001 par value, of the Company having the rights, powers, privileges and preferences set forth in Exhibit 2.02(a).
"Series A Preferred Stock Agreement" shall mean the Preferred
Stock Purchase Agreement, dated as of July 30, 1993, by and between the Company and certain of its stockholders.
"Series B Preferred Stock" means the Series B Convertible Preferred Stock, $.001 par value, of the Company having the rights, powers, privileges and preferences set forth in Exhibit 2.02 (a).
"Series B Shares" shall have the meaning assigned to that term in Section 1.01 of this Agreement.
"Shares" means, collectively, the Series B Shares and the Conversion Shares.
"Sponsored Research Agreement" shall mean the Sponsored Research Agreement, dated as of the date hereof, between the Company and the Purchaser annexed hereto as Exhibit 2.02(k).
"Subsidiary" or "Subsidiaries" means any Person of which the Company and/or any of its other Subsidiaries (as herein defined) directly or indirectly owns at the time at least fifty percent (50%) of the outstanding voting shares of every class of such corporation or trust other than directors' qualifying shares.
"Voting Agreement" shall mean the Voting Agreement, dated as of July 30, 1993, among the Company and certain stockholders of the Company, as amended by the First Amendment to Voting Agreement referred to in Section 2.02(h) hereof.
7.02. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE VIII
MISCELLANEOUS
8.01. No Waiver; Cumulative Remedies. No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
8.02. Amendments, Waivers and Consents. No alteration, amendment or modification of any of the terms and provisions hereof shall be valid unless made pursuant to a written instrument signed by the parties hereto. The provisions of this Agreement may not be waived except by a written instrument signed by the party to be charged. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.03. Notices. All notices or other communications required or permitted hereunder shall be sufficiently given if in writing and personally delivered, sent by electronic facsimile transmission with a copy by first class mail, sent by express overnight courier service, or sent by United States first class registered or certified mail, return receipt requested, postage prepaid addressed as follows or to such other address as a party may hereafter designate by notice given pursuant hereto:
In the case of the Company:
Cadus Pharmaceutical Corporation 180 Varick Street New York, New York 10014 Attn: Dr. Jeremy M. Levin Fax No.: (212) 229-1948
With a copy to:
Morrison Cohen Singer & Weinstein 750 Lexington Avenue New York, New York 10022 Attn: Salomon R. Sassoon, Esq.
Fax No.: (212) 735-8708
In the case of the Purchaser:
Bristol-Myers Squibb Company
P.O. Box 4000
Route 206 and Province Line Road
Princeton, New Jersey 08543-4000
Attn: Vice President and Senior Counsel,
Pharmaceutical Research Institute
and Worldwide Strategic Business Development
Fax No.: (609) 252-4232
8.04. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and the Purchaser and their respective successors and permitted assigns. Neither the Company nor the Purchaser shall have the right to delegate its obligations or to assign its rights hereunder or any interest herein without the prior written consent of the other party hereto and any attempted assignment without such consent shall be void and without effect. Notwithstanding the foregoing, if the Purchaser transfers all the Shares then owned by it to one Person, the Purchaser shall have the right to assign its rights hereunder to such Person, without the consent of the Company.
8.05. Survival of Representations and Warranties. All representations and warranties made in this Agreement, the Shares, or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof.
8.06. Entire Agreement. This Agreement, the terms of the Series B Preferred Stock, and the other agreements executed and delivered in connection herewith constitute the entire agreement between the parties and supersede any prior understandings or agreements concerning the subject matter hereof.
8.07. Severability. The provisions of this Agreement, the Voting Agreement, the Sponsored Research Agreement and the terms of the Series B Preferred Stock are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of a provision contained in this Agreement, the Voting Agreement, the Sponsored Research Agreement or the terms of the Series B Preferred Stock shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, the Voting Agreement, the Sponsored Research Agreement or the terms of the Series B Preferred Stock; but this Agreement, the Voting Agreement, the Sponsored Research Agreement and the terms of the Series B Preferred Stock shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provisions or part reformed so that it would be valid, legal and enforceable to the maximum extent possible.
8.08. Confidentiality. The Purchaser agrees that it will keep confidential and will not disclose or divulge any confidential, proprietary or secret information which the Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to the Purchaser pursuant to this Agreement, or pursuant to visitation or inspection rights granted hereunder, unless such information (i) is in the public domain at the time of disclosure, (ii) is properly in the Purchaser's possession prior to the time of disclosure, (iii) after disclosure, enters the public domain through no act or omission of the Purchaser, (iv) after disclosure, is received by the Purchaser from a third party unless the Purchaser knows the third party is not entitled to receive and transfer the information, or (v) is independently developed by persons in the Purchaser's employ or otherwise who have had no access to information received from the Company.
8.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to choice of laws provisions.
8.10. Headings. Article, section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
8.11. Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
------------------------------
Jeremy M. Levin, President
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BRISTOL-MYERS SQUIBB COMPANY
By /s/ LEON E. ROSENBERG
------------------------------
Name: Leon E. Rosenberg
Title: President, PRI
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FIRST AMENDMENT
TO
AMENDMENT, dated as of October 31, 1995, to the Preferred Stock Purchase Agreement (the "Agreement"), dated as of July 26, 1994, by and between Cadus Pharmaceutical Corporation (the "Company") and Bristol-Myers Squibb Company ("BMS").
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties hereto hereby agree as follows:
1. Section 6.06(c) of the Agreement is hereby amended to read in its entirety as follows:
"(c) Any Shares of Common Stock issued upon conversion of Series A Shares, Series B Shares or other convertible securities; or any equity security or debt security of the Company issued upon the exercise of any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security or debt security;"
2. Section 6.06(e) of the Agreement is hereby amended to read in its entirety as follows:
"(e) Up to 500,000 shares of Common Stock, or options exercisable therefor, issued after the date hereof to James R. Broach; or"
3. Except as amended hereby, the terms and conditions of the Agreement are confirmed. The Agreement, as so amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Series B Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
-----------------------------
Jeremy M. Levin, President
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BRISTOL-MYERS SQUIBB COMPANY
By: /s/ CHARLES LINZNER
-----------------------------
Name: Charles Linzner
Title: Vice President and Senior Counsel
|
[Note: Certain portions of this document have been marked "[c.i.]" to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
PREFERRED STOCK PURCHASE AGREEMENT
dated as of November 1, 1995
by and between
CADUS PHARMACEUTICAL CORPORATION
and
PHYSICA B.V.
TABLE OF CONTENTS
Page
====
ARTICLE I - PURCHASE, SALE AND TERMS OF SHARES 1
1.01. The Series B Preferred Stock 1
1.02. The Conversion Shares 1
1.03. Purchase of Series B Shares 1
1.04. Purchase of Common Stock at Initial
Public Offering 2
1.05. Use of Proceeds 2
1.06. Representations by the Purchaser 2
(a)Investment Representations 3
(b)Access to Information 3
(c)General Access 3
(d)Sophistication and Knowledge 3
(e)Transfer Restrictions Imposed
by Securities Laws 4
(f)Lack of Liquidity 4
(g)High Degree of Risk 4
(h)Accredited Investor Status 4
1.07. Brokers or Finders 4
ARTICLE II - CONDITIONS TO PURCHASER'S OBLIGATIONS 4
2.01. Representations and Warranties 5
2.02. Documentation at Closing 5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.01. Organization and Standing of the Company 7
3.02. Corporate Action 7
3.03. Governmental Approvals 8
3.04. Litigation 8
3.05 Certain Agreements of Officers
and Employees 8
3.06. Compliance with Laws and Other Instruments; Indebtedness 9
3.07. Title to Assets, Intellectual Property Rights 10
3.08. Financial Information 11
3.09. Taxes 12
3.10. ERISA 12
3.11. Transactions with Affiliates 12
3.12. Assumptions or Guaranties of Indebtedness
of Other Persons 13
3.13. Investments in Other Persons 13
3.14. Securities Act of 1933 13
3.15. Disclosure 13
3.16. Brokers or Finders 14
3.17. Capitalization; Status of Capital Stock 14
3.18. Registration Rights 15
3.19. Insurance 16
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Page
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3.20. Books and Records 15
3.21. Material Agreements 16
3.22. Absence of Certain Developments 16
3.23. Environmental and Safety Laws 18
3.24. U.S. Real Property Holding Corporation 17
ARTICLE IV - COVENANTS OF THE COMPANY 18
4.01. Reporting Requirements 18
(a)Monthly and Quarterly Reports 18
(b)Annual Reports 18
(c)Budgets and Operating Plan 19
(d)Notice of Adverse Changes 19
(e)Certain Reports and Other Information 19
(f)Filings with the Commission 19
4.02. Loans to Certain Persons 20
4.03. Limitation on Repurchases 20
ARTICLE V - REGISTRATION RIGHTS 20
5.01. Piggy-Back Registrations 20
5.02. Demand Registration 20
5.03. Registrations on Form S-3 22
5.04. Effectiveness 22
5.05. Indemnification by the Company 22
5.06. Indemnification by the Purchaser 24
5.07. Exchange Act Registration 26
5.08. Damages 27
5.09. Further Obligations of the Company 28
5.10. Expenses 29
5.11. Transferability 30
5.12. "Lock-Up" Agreement 30
5.13. Mergers, Etc 30
ARTICLE VI - RIGHT OF FIRST REFUSAL 31
6.01. Right of First Refusal 31
6.02. Notice of Acceptance 31
6.03. Conditions to Acceptances and Purchase 32
(a) Permitted Sales of Refused Securities 32
(b) Reduction in Amount of Offered Securities 32
(c) Closing 32
6.04. Further Sale 33
6.05. Termination and Waiver of Right of First Refusal 33
6.06. Exceptions 33
ii
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Page
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ARTICLE VII - DEFINITIONS AND ACCOUNTING TERMS 35
7.01. Certain Defined Terms 35
7.02. Accounting Terms 39
ARTICLE VIII - MISCELLANEOUS 39
8.01. No Waiver; Cumulative Remedies 39
8.02. Amendments, Waivers and Consents 39
8.03. Notices 39
8.04. Binding Effect; Assignment 40
8.05. Survival of Representations and Warranties 40
8.06. Entire Agreement 40
8.07. Severability 41
8.08. Confidentiality 41
8.09. Governing Law 41
8.10. Headings 42
8.11. Further Assurances 42
EXHIBITS
- --------
2.02(b) Form of Opinion of Counsel to Company
2.02(f) Form of Certificate of Amendment to Certificate of
Incorporation of the Company
2.02(i) Form of First Amendment to Voting Agreement
2.02(l) Form of Software License Agreement
3.03 Governmental Approvals
3.04 Litigation
3.06 Schedule of Indebtedness
3.07A Claims and Encumbrances
3.07B Intellectual Property Rights
3.07C Other Patents
3.08A Financial Statements
3.08B Certain Changes Subsequent to June 30, 1995
3.11 Certain Transactions with Affiliates
3.13 Investments in Other Persons
3.17A Owners of Capital Stock
3.17B Guidelines for Stock Option Grants
3.18 Registration Rights
3.21 List of Material Agreements
3.22 Changes in Company Since December 31, 1994
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PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT dated as of November 1, 1995 between CADUS PHARMACEUTICAL CORPORATION (the "Company"), a Delaware corporation, and PHYSICA B.V. (the "Purchaser"), a Dutch corporation.
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 The Series B Preferred Stock. The Company has authorized the issuance and sale of 2,500,000 shares of its authorized but unissued shares of Series B Preferred Stock (the "Series B Shares"), at a purchase price of $4.00 per share, payable in cash. The designation, rights, preferences and other terms and provisions of the Series B Preferred Stock are set forth in the Certificate of Incorporation, as amended (the "Certificate of Incorporation"), of the Company.
1.02. The Conversion Shares. The Company has authorized and has reserved and covenants to continue to reserve, free from preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of Common Stock (such capitalized term and all other capitalized terms used herein and not separately defined herein have the respective meanings provided in Article VII hereof) to satisfy the rights of conversion of the holders of the Series B Shares. Any shares of Common Stock issuable upon conversion of the Series B Shares are herein referred to as the "Conversion Shares". The Series B Shares and Conversion Shares are sometimes collectively referred to as the "Shares".
1.03. Purchase of Series B Shares. The Company agrees to issue and sell to the Purchaser and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchaser, agrees to purchase, 2,500,000 Series B Shares. The aggregate purchase price
of the Series B Shares being acquired by the Purchaser is $10,000,000. The closing of the purchase and sale of the Series B Shares to be acquired by the Purchaser from the Company under this Agreement shall take place at the offices of the Purchaser, C. J. van Houtenlaan 36, 1381 CP Weesp, The Netherlands, at 3:00 p.m., local time, on the date hereof or at such time and date thereafter as the Purchaser and the Company may agree (the "Closing"). At the Closing, the Company will deliver to the Purchaser a certificate or certificates for 2,500,000 Series B Shares registered in the Purchaser's name (or the name of its nominee), against a wire transfer of immediately available funds to the account of the Company, in an amount equal to $10,000,000 as payment in full of the purchase price of Series B Shares being purchased by the Purchaser.
1.04 Purchase of Common Stock at Initial Public Offering. If, during the
term of the Research Agreement, the Company effects the Initial Public Offering
or merges into a corporation with publicly traded shares, the Purchaser shall
purchase such number of shares of Common Stock in such Initial Public Offering
or simultaneous with such merger as shall be specified by the Company in its
sole and absolute discretion, at a price per share equal to the price per share
to the public in such Initial Public Offering or the price at which a share of
Common Stock is valued for purposes of such merger, as the case may be, up to
$5,000,000 worth of Common Stock; provided, however, that (i) the Purchaser
shall not be obligated to purchase shares of Common Stock in the Initial Public
Offering if any stockholder of the Company (other than the Purchaser or its
affiliates) who owns ten percent (10%) or more of the outstanding capital stock
of the Company on a fully diluted basis is a selling stockholder in the Initial
Public Offering, and (ii) the Purchaser shall not be obligated to purchase
shares of Common Stock simultaneous with such merger unless (A) Persons who were
stockholders of the Company immediately prior to such merger own more than fifty
percent (50%) of the capital stock of the surviving corporation immediately
after such merger, (B) the corporation into which the Company is merged does not
pose a significant competitive threat to a substantial portion of the business
of Solvay Duphar B.V., Solvay Pharmaceuticals, Inc., Solvay Pharma Deutschland
GmbH or any successors thereto and (C) the corporation into which the Company is
merged is not engaged in an ongoing litigation with Solvay Duphar B.V., Solvay
Pharmaceuticals, Inc., Solvay Pharma Deutschland GmbH, or any successors
thereto. Notwithstanding the foregoing, if the Purchaser has delivered to the
Company a proper notice of breach or termination pursuant to Section 3.13 or
Section 13.2 of the Research Agreement, the Purchaser will not be obligated to
purchase shares of Common Stock pursuant to this Section 1.04, except in the
case of a notice of breach if and when such breach is cured.
1.05. Use of Proceeds. The Company shall use the cash proceeds from the sale of the Series B Shares for working capital
and general corporate purposes and not for the payment of dividends on any shares of capital stock of the Company.
1.06. Representations by the Purchaser. The Purchaser makes the following representations and warranties to the Company:
(a) Investment Representations. It is the Purchaser's present intention to acquire the Shares to be acquired by it for its own account (and it will be the sole beneficial owner thereof) and the Shares are being and will be acquired by it for the purpose of investment and not with a view to distribution or resale thereof except pursuant to registration under the Securities Act or exemption therefrom. The acquisition by the Purchaser of the Series B Shares shall constitute a confirmation of this representation by the Purchaser. The Purchaser understands and agrees that, until registered under the Securities Act or transferred pursuant to the provisions of Rule 144 or Rule 144A as promulgated by the Commission, all certificates evidencing any of the Shares, whether upon initial issuance or upon any transfer thereof, shall bear a legend, prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws. These securities have been acquired for investment and not with a view to distribution or resale. These securities may not be offered for sale, sold, delivered after sale, transferred, pledged or hypothecated in the absence of an effective registration statement covering such shares under the Securities Act of 1933 and any applicable state securities laws, or the availability, in the opinion of counsel, of an exemption from registration thereunder. These securities are subject to restrictions contained in a Preferred Stock Purchase Agreement and a Voting Agreement, copies of which are available for inspection from the Company."
(b) Access to Information. The Purchaser during the course of this transaction, and prior to the purchase of any Series B Shares, has had the opportunity to ask questions of and receive answers from management of the Company concerning the terms and conditions of the sale to it of the Series B Shares and the information, documents, records and books relative to the business, assets, financial condition, results of operations and liabilities (contingent or otherwise) of the Company provided to the Purchaser.
(c) General Access. The Purchaser has received and read or reviewed, and is familiar with, this Agreement and the other agreements executed or delivered herewith, including the terms of the Series B Shares, and confirms that all documents, records and books pertaining to the Purchaser's investment in the Company and
requested by the Purchaser have been made available or delivered to it.
(d) Sophistication and Knowledge. The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Series B Shares; and the Purchaser can bear the economic risk of investment in the Series B Shares and can afford a complete loss of its investment.
(e) Transfer Restrictions Imposed by Securities Laws. The Purchaser understands that: the Shares have not been registered under the Securities Act and applicable state securities laws, and, therefore, cannot be resold unless they are subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from such registration is available; the Purchaser is and must be purchasing the Series B Shares for investment for its own account and not for the account or benefit of others, and not with any present view toward resale or other distribution thereof. The Purchaser shall not resell or otherwise dispose of all or any part of the Shares purchased by it, except as permitted by law, including, without limitation, any regulations under the Securities Act and applicable state securities laws; the Purchaser understands that the Company does not have any present intention and is under no obligation to register the Shares under the Securities Act and applicable state securities laws, except as provided in Article V hereof; and the Purchaser understands that Rule 144 or Rule 144A under the Securities Act may not be available as a basis for exemption from registration of the Shares thereunder.
(f) Lack of Liquidity. The Purchaser has no present need for liquidity in connection with its purchase of the Series B Shares.
(g) High Degree of Risk. The Purchaser understands that the purchase of the Series B Shares involves a high degree of risk in view of the fact that, among other things, the Company has sustained a net loss since its inception and there is no established market for the Company's capital stock.
(h) Accredited Investor Status. The Purchaser is an "accredited investor" as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act.
1.07. Brokers or Finders. No Person has or will have, as a result of the transactions contemplated by this Agreement, any right, interest or valid claim against or upon the Company for any commission, fee or other compensation as a finder or broker because of any act or omission by the Purchaser or its agents.
ARTICLE II
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of the Purchaser to purchase and pay for the Series B Shares to be purchased by it at the Closing is subject to the following conditions (all of which shall be deemed satisfied or waived by the Purchaser at or prior to the Closing in the event all of the transactions contemplated to be effected at the Closing with the Purchaser are consummated):
2.01 Representations and Warranties. Each of the representations and warranties of the Company set forth in Article III hereof shall be true, accurate and correct on the date of the Closing as if made on the date of the Closing.
2.02. Documentation at Closing. The Purchaser shall have received, prior to or at the Closing, all of the following materials, each in form and substance satisfactory to the Purchaser and its counsel, and each of the following events shall have occurred, or each of the following documents shall have been delivered, prior to or simultaneous with the Closing:
(a) Copies of (1) the Certificate of Incorporation of the Company, as amended to date; (2) the resolutions of the Board of Directors providing for the approval of this Agreement, the issuance of the Series B Shares and upon conversion, the Conversion Shares, the increase in the number of directors of the Company to nine (9), the election of Mr. Bart Kwist as a director of the Company, and the approval of all other agreements or matters contemplated hereby or executed in connection herewith; (3) the resolutions of the holders of at least 66-2/3% of the outstanding shares of Preferred Stock, voting as a separate class, and of at least 66-2/3% of the outstanding shares of Series B Preferred Stock, voting as a separate class, authorizing an amendment to the Certificate of Incorporation increasing the authorized number of shares of Series B Preferred Stock to 7,321,429 and the issuance and sale of 2,500,000 shares of Series B Preferred Stock to the Purchaser; and (4) the By-laws of the Company, as amended to date, all of which shall have been certified by the Secretary of the Company, as of the date of the Closing, to be true, complete and correct; and certified copies of all documents evidencing other necessary corporate or other action and governmental approvals, if any, required to be obtained at or prior to the Closing with respect to this Agreement and the issuance of the Series B Shares.
(b) The opinion of Morrison Cohen Singer & Weinstein, LLP, counsel for the Company, dated the date of the Closing, in the form attached as Exhibit 2.02(b).
(c) A certificate of the Secretary or an Assistant Secretary of the Company, dated the date of the Closing, which
shall certify the names of the officers of the Company authorized to sign this Agreement, the certificates for the Series B Shares, the Research Agreement and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, the incumbency of such officers, and the true specimen signatures of such officers.
(d) A certificate of the President and the Treasurer of the Company, dated the date of the Closing, stating that the representations and warranties of the Company contained in Article III hereof and otherwise made by the Company in writing in connection with the transactions contemplated hereby are true and correct as of the time of the Closing and that all obligations and covenants in this Agreement required to be performed prior to or at the Closing have been performed as of the time of Closing.
(e) The Company shall have obtained any consents or waivers necessary to be obtained at or prior to the Closing to execute and deliver this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith, to issue the Series B Shares and to carry out the transactions contemplated hereby and thereby, and such consents and waivers shall be in full force and effect at the Closing. All corporate and other action and governmental filings necessary to effectuate the terms of this Agreement and the other agreements and instruments executed and delivered by the Company in connection herewith and the issuance of the Series B Shares shall have been made or taken.
(f) A copy of the Certificate of Incorporation of the Company certified by the Secretary of State of the State of Delaware, including the Certificate of Amendment thereto in the form set forth in Exhibit 2.02(f) attached hereto.
(g) A (long-form) Certificate of the Secretary of State of the State of Delaware, dated no more than the (10) days prior to the date hereof, as to the due incorporation and good standing of the Company.
(h) A Certificate of the Secretary of State of Colorado, dated no more than ten (10) days prior to the date hereof, as to the qualification and good standing of the Company in such state.
(i) The Purchaser and the parties to the Voting Agreement shall have entered into a First Amendment to Voting Agreement in the form attached as Exhibit 2.02(i).
(j) Mr. Bart Kwist shall have been elected to the Board of Directors of the Company (the "Board").
(k) The Company and Solvay Duphar B.V. shall have entered into the Research Agreement.
(l) The Company and Solvay Duphar B.V. shall have entered into a Software License Agreement in the form attached as Exhibit 2.02(l).
(m) Such other documents, certificates, instruments or agreements as shall be reasonably requested by the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
3.01. Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware and has all requisite corporate power and authority for the ownership and operation of its properties and for the carrying on of its business as now conducted and as now proposed to be conducted and to execute and deliver this Agreement, the First Amendment to Voting Agreement, the Research Agreement, and the other agreements and documents contemplated hereby, to issue, sell and deliver the Series B Shares and to issue and deliver the Conversion Shares upon conversion of the Series B Shares and to perform its other obligations pursuant hereto and thereto. The Company is duly licensed or qualified and in good standing as a foreign corporation authorized to do business in the state of Colorado and is seeking to become qualified as a foreign corporation authorized to do business in the state of New York, which are the only jurisdictions wherein the character of the property owned or leased or the nature of the activities conducted by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect. The Company's failure to date to be qualified as a foreign corporation authorized to do business in the state of New York will not have a Material Adverse Effect.
3.02. Corporate Action. This Agreement, the First Amendment to Voting Agreement, the Research Agreement, and the other agreements executed by the Company in connection herewith have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. The Series B Shares have been duly authorized. The issuance, sale and delivery of the Series B Shares and the issuance and delivery of the Conversion Shares upon conversion of the Series B Shares have been duly authorized by all required corporate action on the part of the Company; the Series B Shares, when issued and paid for in accordance with this Agreement, will be validly issued, fully paid and non-assessable, with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement and the
Voting Agreement; and the Conversion Shares have been duly authorized and reserved for issuance upon conversion of the Series B Shares and, when so issued, will be duly authorized, validly issued, fully paid and non-assessable with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Company except as set forth in this Agreement and the Voting Agreement.
3.03. Governmental Approvals. Except as set forth on Exhibit 3.03 and except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which, if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution and delivery by the Company of this Agreement, for the offer, issuance, sale, execution or delivery of the Series B Shares or, upon conversion thereof, the Conversion Shares, or for the performance by the Company of its obligations under this Agreement, the Voting Agreement, the Research Agreement, or the Shares or the other agreements and documents contemplated hereby or thereby.
3.04. Litigation. Except as disclosed in Exhibit 3.04, there is no litigation or governmental proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company or affecting any of its properties or assets, nor, to the best knowledge of the Company, has there occurred any event or does there exist any factual basis on which any such litigation, proceeding or investigation might properly be instituted. Neither the Company nor, to the best knowledge of the Company, any officer of the Company is in default with respect to any order, writ, injunction, decree, ruling or decision of any court, commission, board or other government agency, which default might have a Material Adverse Effect. There are no actions or proceedings pending or, to the Company's best knowledge, threatened (or any basis therefor known to the Company) against the Company which might result, either in any case or in the aggregate, in a Material Adverse Effect. The foregoing sentences include, without limiting their generality, actions pending or, to the Company's best knowledge, threatened (or any basis therefor known to the Company) involving the prior employment or engagement of any of the Company's officers, employees or consultants or their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers or to any other Person. Without limitation to the foregoing representations, a brief summary of the Company's material litigation and the disposition of such matters is set forth on Exhibit 3.04.
3.05. Certain Agreements of Officers and Employees. (a) To the Company's best knowledge, no officer, employee or consultant of the Company is, or, is now anticipated to be, in violation of any material term of any employment contract, patent disclosure agreement, proprietary information agreement, noncompetition agreement, nonsolicitation agreement, confidentiality agreement, or any other similar contract or agreement or any restrictive covenant, relating to the right of any such officer, employee, or consultant to be employed or engaged by the Company because of the nature of the business conducted or to be conducted by the Company or relating to the use of trade secrets or proprietary information of others, and to the Company's best knowledge and belief, the continued employment or engagement of the Company's officers, employees or consultants does not and will not subject the Company or the Purchaser to any liability with respect to any of the foregoing matters.
(b) No officer, employee or consultant of the Company whose termination, either individually or collectively, could have a Material Adverse Effect, has terminated his employment or engagement since June 30, 1995, or to the best knowledge of the Company, has any present intention of terminating, his employment or engagement with the Company.
3.06. Compliance with Laws and Other Instruments; Indebtedness. (a) The Company is in compliance in all respects with the terms and provisions of this Agreement and of its Certificate of Incorporation and By-laws, each as amended and/or restated to date. The Company is in compliance in all respects with all mortgages, indentures, leases, agreements (including, without limitation, the BMS Preferred Stock Agreement and all agreements contemplated therein) and other instruments by which it is bound or to which it or any of its properties or assets are subject; except to the extent that any noncompliance, individually or in the aggregate, could not have a Material Adverse Effect. The Company is in compliance in all respects with all judgments, decrees, governmental orders, laws, statutes, rules and regulations by which it is bound or to which it or any of its properties or assets are subject; except to the extent that any noncompliance, individually or in the aggregate, could not have a Material Adverse Effect. Neither the execution, delivery or performance of this Agreement, the First Amendment to Voting Agreement, the Research Agreement, or the issuance of the Series B Shares or the Conversion Shares, nor the consummation of any transaction contemplated hereby or thereby, has constituted or resulted in or will constitute or result in a default or violation of any term or provision of any of the foregoing documents, instruments, judgments, agreements, decrees, orders, laws, statutes, rules and regulations.
(b) A schedule of Indebtedness of the Company as of June 30, 1995 is attached as Exhibit 3.06. Except as set forth in Exhibit 3.06, the Company has no material liabilities of any kind,
either direct or indirect, matured or unmatured, absolute or contingent, or otherwise, except:
(i) those liabilities set forth in the Financial Statements and not heretofore paid or discharged;
(ii) those liabilities arising in the ordinary course of business under any agreement, contract, lease or plan specifically disclosed on any other Exhibit hereto or required to be disclosed hereunder; and
(iii) those liabilities incurred, consistently with past business practices, in or as a result of the normal and ordinary course of business since June 30, 1995.
For purposes of this Section 3.06(b), the term "liabilities" shall include, without limitation, any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, expense, obligation and responsibility, fixed or unfixed, known or unknown, asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured or unsecured.
3.07. Title to Assets, Intellectual Property Rights. (a) The Company has good and marketable title in fee to such of its fixed assets as are real property, and good and merchantable title to all of its other assets, now carried on its books, which assets consist of those reflected in the most recent balance sheet of the Company included in Exhibit 3.08A attached hereto, or acquired since the date of such balance sheet (except personal property disposed of since said date in the ordinary course of business) free of any mortgages, pledges, charges, liens, security interests or other encumbrances, except as set forth in Exhibit 3.07A attached hereto. The Company enjoys peaceful and undisturbed possession under all leases under which it is operating, and all said leases are valid and subsisting and in full force and effect.
(b) The Company owns or has a valid right to use the Intellectual Property
Rights being used to conduct its business as now operated and as now proposed by
the Company to be operated (a complete list of licenses or other contracts
relating to the Company's Intellectual Property Rights and of registrations of
patents, trademarks, service marks and copyrights including any applications
therefor constituting such Intellectual Property Rights is attached hereto as
Exhibit 3.07B). To the best of its knowledge, the conduct of the Company's
business as now operated and as now proposed to be operated does not and will
not conflict with or infringe upon the Intellectual Property Rights of others,
[c.i.]
[c.i.] Except as set forth on Exhibit 3.07B, (i) no claim is pending or threatened against the Company and/or its officers, employees or consultants to the effect that the Company has misappropriated or misused any Intellectual Property Rights of any Person or that any such Intellectual Property Rights owned, licensed or used by the Company in connection with its present or proposed business has infringed or infringes upon any Intellectual Property Rights of any Person, (ii) the Company has not asserted any claim of infringement, misappropriation or misuse by any Person of any Intellectual Property Rights owned by the Company or to which it has exclusive use, and (iii) no employee, officer or consultant of the Company has any proprietary, financial or other interest in any Intellectual Property Rights owned or used by the Company in its business. Except pursuant to the terms of any licenses specified on Exhibit 3.07B, the Company has no obligation to compensate any Person for the use of any such Intellectual Property Rights and the Company has not granted any Person any license or other right to use any of the Intellectual Property Rights of the Company, whether requiring payment of royalties or not.
(c) The Company has taken all reasonable measures to protect and preserve the security, confidentiality and value of its Intellectual Property Rights, including its trade secrets and other confidential information. All officers, employees and consultants of the Company involved in the design, review, evaluation, development or marketing of products or Intellectual Property Rights have executed nondisclosure and assignment of inventions agreements sufficient, to the extent permitted by law, to protect the confidentiality and value of the Company's Intellectual Property Rights and to vest in the Company exclusive ownership of such Intellectual Property Rights. All trade secrets and other confidential information of the Company are presently valid and protectible and are not part of the public domain or knowledge, nor, to the best knowledge of the Company, have they been used, divulged or appropriated for the benefit of any Person other than the Company or otherwise to the detriment of the Company. To the best of the Company's knowledge, no employee or consultant of the Company has used any trade secrets or other confidential information of any other Person in the course of his work for the Company. Except as set forth on Exhibit 3.07B, the Company is the exclusive owner of all right, title and interest in its Intellectual Property Rights as purported to be owned by the Company, and such Intellectual Property Rights are valid and in full force and effect. Except as set forth on Exhibit 3.07B, neither the Company, nor any of its officers or consultants has received notice of, and to the best of the Company's knowledge after reasonable investigation there are no, claims that the Company's Intellectual Property Rights or the use or ownership thereof by the Company infringes, violates or conflicts with any such right of any third party. Except as set forth on Exhibit
3.07B, no university, hospital, government agency (whether federal or state) or other organization or Person which sponsored research and development conducted by the Company has any claim or right to or ownership of or other encumbrance upon the Intellectual Property Rights purported to be owned by the Company.
3.08. Financial Information. (a) The Company's audited balance sheets as of December 31, 1993 and 1994, and the related statements of operations, stockholders' equity (deficiency) and cash flows for the years ended December 31, 1993 and December 31, 1994, copies of which are attached hereto as Exhibit 3.08A, present fairly the financial position and results of operations of the Company as at the dates thereof and have been prepared in accordance with generally accepted accounting principles consistently applied.
(b) The Company's unaudited balance sheets as of June 30, 1995 and June 30, 1994, and the related statements of operations, stockholders' equity (deficiency) and cash flows for the six-month periods then ended, copies of which are attached hereto as Exhibit 3.08A, present fairly the financial position and results of operations of the Company as at the dates thereof and have been prepared in accordance with generally accepted accounting principles consistently applied.
(c) The financial statements attached as Exhibit 3.08A are referred to herein as the "Financial Statements". The Company does not have, and has no reasonable grounds to know of, any liability, contingent or otherwise, not adequately reflected in or reserved against in the Financial Statements. Except as set forth in Exhibit 3.08B, since June 30, 1995, (i) there has been no change in the business, assets, operations, affairs, prospects or financial condition of the Company, which has had or could have a Material Adverse Effect; (ii) there has been no Material Adverse Effect as the result of any legislative or regulatory change, any revocation or change in any franchise, permit, license or right to do business, or any other event or occurrence, whether or not insured against; and (iii) the Company has not entered into any material transaction other than in the ordinary course of business, made any distribution on its capital stock, or redeemed or repurchased any of its capital stock.
3.09. Taxes. The Company has accurately prepared and timely filed all federal, state and other tax returns required by law to be filed by it, has paid or made provision for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been made and are reflected in the Financial Statements for all current taxes and other charges to which the Company is subject and which are not currently due and payable. None of the federal income tax returns of the Company have been audited by the Internal Revenue Service. The Company knows of no additional assessments, adjustments or contingent tax liability
(whether federal or state) pending or threatened for any period, nor of any basis for any such assessment, adjustment or contingency. Neither the Company nor, to the best of the Company's knowledge, any of its stockholders, has ever filed a consent pertaining to the Company pursuant to Section 341(f) of the Code relating to collapsible corporations.
3.10. ERISA. The Company does not maintain and has not, at any time since its inception, maintained an employee pension benefit plan for its employees which is subject to ERISA.
3.11. Transactions with Affiliates. Except as set forth in Exhibit 3.11, there are no material loans, leases, royalty agreements or other continuing transactions or agreements between (a) the Company or any of its customers or suppliers, and (b) any officer, employee, consultant or director of the Company or any Person owning directly or indirectly five percent (5%) or more of the capital stock of the Company on a fully diluted basis or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder.
3.12. Assumptions or Guaranties of Indebtedness of Other Persons. The Company has not assumed, guaranteed, endorsed, or otherwise become directly or contingently liable on (including, without limitation, liability by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), any Indebtedness of any other Person.
3.13. Investments in Other Persons. Except as set forth in Exhibit 3.13, the Company has not made any loans or advances to any Person which is outstanding on the date of this Agreement, except to the extent that such loans or advances to any one Person do not exceed $10,000 and to all such Persons do not exceed $20,000, nor is it committed or obligated to make any such loan or advance, nor does the Company own any capital stock, assets comprising the business of, obligations of, or any interest in, any Person. The Company does not have, and has not since its incorporation had, any Subsidiaries.
3.14. Securities Act of 1933. The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Series B Shares hereunder. If the Purchaser's representations set forth in Section 1.06 hereof are accurate, the offer, issuance and sale of the Series B Shares to the Purchaser are exempt from the registration requirements of the Securities Act and applicable state securities laws (other than the securities laws of the State of New York). The Company has complied with the registration
requirements of the securities laws of the State of New York with respect to the offer, issuance and sale of the Series B Shares. Neither the Company nor anyone acting on its behalf has sold, offered to sell or solicited offers to buy or will sell, offer to sell or solicit offers to buy the Series B Shares or similar securities to, or has solicited or will solicit offers with respect thereto from, or has entered or will enter into any preliminary conversations or negotiations relating thereto with, any Person, so as to bring the issuance and sale of the Series B Shares under the registration provisions of the Securities Act or applicable state securities laws (other than the securities laws of the State of New York).
3.15. Disclosure. Neither this Agreement, the Research Agreement, the Financial Statements, nor any other agreement, document, certificate, or statement, whether oral or written, furnished to the Purchaser by or on behalf of the Company in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact within the knowledge of the Company, any of its officers, or counsel which has not been disclosed herein or in writing by them to the Purchaser and which has a Material Adverse Effect, or in the future in their opinion may have, insofar as they can now foresee, a Material Adverse Effect. Without limiting the foregoing, the Company has no knowledge that there exists, or there is pending or planned, any Intellectual Property Rights, patent, invention, device, application or principle or any statute, rule, law, regulation, standard or code which would have a Material Adverse Effect.
3.16. Brokers or Finders. No Person has or will have, as a result of the transactions contemplated by this Agreement or the Research Agreement, any right, interest or valid claim against or upon the Company or the Purchaser for any commission, fee or other compensation as a finder or broker because of any act or omission by the Company or its agents.
3.17. Capitalization; Status of Capital Stock. As of the Closing, the Company will have a total authorized capitalization consisting of (i) 35,000,000 authorized shares of Common Stock and (ii) 22,201,080 authorized shares of Preferred Stock of which 14,879,651 shares are designated as Series A Preferred Stock and 7,321,429 shares will be designated as Series B Preferred Stock. As of the Closing, 4,320,000 shares of Common Stock and 14,879,651 shares of Series A Preferred Stock will be issued and outstanding, and, before giving effect to the transaction contemplated hereby, 4,821,429 shares of Series B Preferred Stock will be issued and outstanding. As of the Closing, the Company has reserved for issuance 22,201,080 shares of Common Stock upon conversion of the Preferred Stock. A complete list of the capital stock of the
Company which has been previously issued and the names in which such capital stock is registered on the stock transfer book of the Company is set forth in Exhibit 3.17A hereto. All the outstanding shares of capital stock of the Company have been duly authorized, and are validly issued, fully paid and non-assessable and were not issued in violation of any preemptive or similar rights. The Series B Shares, when issued, delivered and paid for in accordance with the terms hereof, and the Conversion Shares, when issued and delivered upon conversion of the Series B Shares, will be duly authorized, validly issued, fully-paid and non-assessable. Except for the issued and outstanding Preferred Stock and the stock options set forth in Exhibit 3.17A, no options, warrants, subscriptions or purchase rights of any nature to acquire from the Company, or commitments of the Company to issue, shares of capital stock or other securities are authorized, issued or outstanding, nor is the Company obligated in any other manner to issue shares or rights to acquire any of its capital stock or other securities except as contemplated by this Agreement. Immediately after the Closing, the Series B Shares will be convertible into approximately 9.4% of the outstanding Common Stock (computed on an as converted and fully diluted basis excluding any options to purchase Common Stock). On June 28, 1994, the Board of Directors of the Company adopted "Guidelines for Stock Option Grants", a copy of which is annexed hereto as Exhibit 3.17B. Except as set forth in Exhibit 3.17A, none of the Company's outstanding securities or the Series B Shares or the Conversion Shares is subject to any rights of redemption, repurchase, rights of first refusal, preemptive rights or other similar rights, whether contractual, statutory or otherwise, for the benefit of the Company, or, to the Company's knowledge, for the benefit of any stockholder or any other Person, except pursuant hereto, the BMS Preferred Stock Agreement and the Series A Preferred Stock Agreement. Except as set forth in Exhibit 3.17A, there are no restrictions on the transfer of shares of capital stock of the Company other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement, the BMS Preferred Stock Agreement, the Series A Preferred Stock Agreement and the Co-Sale Agreement. Except as set forth in Exhibit 3.17A, there are no agreements, understandings, trusts or other collaborative arrangements or understandings concerning the voting or transfer of the capital stock of the Company other than the Voting Agreement and the Co- Sale Agreement. The offer and sale of all capital stock and other securities of the Company issued before the Closing complied with or were exempt from all applicable federal and state securities laws and no stockholder has a right of rescission or damages with respect thereto.
3.18. Registration Rights. Except as set forth on Exhibit 3.18, and except for the rights granted to the Purchaser pursuant to Article V hereof, no Person has demand or other rights to cause the Company to file any registration statement under the Securities Act relating to any securities of the Company or any right to
participate in any such registration statement.
3.19. Insurance. The Company maintains insurance covering the Company's properties and business adequate and customary for the type and scope of its properties, assets and business, and similar to companies of comparable size and condition similarly situated in the same industry in which the Company operates, but in any event in amounts sufficient to prevent the Company from becoming a co-insurer or self-insurer, with provision for reasonable deductibles. The Company also maintains directors and officers liability insurance.
3.20. Books and Records. The books of account, ledgers, order books, records and documents of the Company accurately and completely reflect all material information relating to the business of the Company, the location and collection of its assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company.
3.21. Material Agreements. Except as set forth in Exhibit 3.21, the Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 if the Company were registering securities under the Securities Act, or any other agreement which (i) could have a Material Adverse Effect, (ii) requires the expenditure by the Company of more than $75,000 (other than purchase orders issued in the ordinary course of business), or (iii) limits the Company's ability to engage in any line of business or compete with any Person. The Company, and to the best of the Company's knowledge, each other party thereto have performed all the obligations required to be performed by them to date, have received no notice of default and are not in default under any lease, agreement or contract now in effect to which the Company is a party or by which it or any of its properties may be bound, except to the extent that any such default individually or in the aggregate would not have a Material Adverse Effect. Except as set forth in Exhibit 3.21, each of the contracts or agreements listed in Exhibit 3.21 is in full force and effect with no default, anticipated or threatened default or failure of performance or observance of any obligations or conditions contained therein, and none of the other parties thereto nor the Company has provided any notice of default or of its intention to terminate these agreements.
3.22. Absence of Certain Developments. Except as provided in Exhibit 3.22 attached hereto, since December 31, 1994 the Company has not:
(a) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company's business;
(c) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;
(e) mortgaged or pledged any of its assets, tangible or intangible, or subjected them to any lien, charge or other encumbrance, except liens for current property taxes not yet due and payable;
(f) sold, assigned or transferred any other tangible assets, or cancelled any debts or claims, except in the ordinary course of business;
(g) sold, assigned or transferred any patents, patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or Intellectual Property Rights, or disclosed any proprietary confidential information to any Persons except to potential customers, investors, merger candidates, or corporate or academic partners or collaborators in the ordinary course of business and under appropriate written confidentiality agreements;
(h) suffered any substantial losses (other than losses from operations for financial reporting purposes) or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;
(i) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;
(j) made capital expenditures or commitments therefor that aggregate in excess of $50,000;
(k) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;
(l) made charitable contributions or pledges in excess of $5,000;
(m) suffered any material damage, destruction or casualty loss, whether or not covered by insurance; or
(n) experienced any problems with labor or management in connection with the terms and conditions of their employment.
3.23. Environmental and Safety Laws. To the best of the Company's knowledge after due investigation, it is not in violation of any applicable federal, state or local statute, law, regulation or order relating to the environment or occupational safety and health, and to the best of its knowledge after due investigation, no expenditures, which could have a Material Adverse Effect, will be required in order to comply with any such statute, law, regulation or order.
3.24. U.S. Real Property Holding Corporation. The Company is not now and
has never been a "United States Real Property Holding Corporation" as defined in
Section 897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. Reporting Requirements. Until the consummation of a Qualified Public Offering, the Company will furnish the following to the Purchaser so long as the Purchaser or an affiliate of the Purchaser owns at least one million Shares (or such number of Shares as is equivalent to one million Shares if any change is made in the Shares through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or combination of shares):
(a) Monthly and Quarterly Reports. As soon as available and in any event within 45 days after the end of each calendar month, consolidated balance sheets of the Company and its Subsidiaries as of the end of such month, together with any available consolidating information, and consolidated statements of income and stockholders' equity and a summary statement of monthly cash flow of the Company and its Subsidiaries for such month and for the period commencing at the end of the previous fiscal year and ending with the end of such month, together with any available consolidating information, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding fiscal year, and prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the monthly budget or business plan and an analysis of the variances from the budget or plan; and, as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year, a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal quarter, together with any available
consolidating information, and consolidated statements of income, stockholders' equity and cash flow of the Company and its Subsidiaries for such quarter and for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, together with any available consolidating information, setting forth in each case in comparative form the corresponding figures for the corresponding period of the prior fiscal year, prepared in accordance with generally accepted accounting principles consistently applied, and including comparisons to the quarterly budget or business plan and an analysis of the variances from the budget or plan;
(b) Annual Reports. As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the annual audit report for such year for the Company and its Subsidiaries, including therein any available consolidating information, consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year and consolidated statements of income, retained earnings and of cash flow of the Company and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all such consolidated statements to be duly certified by the chief financial officer of the Company and an independent public accountant of recognized national standing selected by the Board of Directors;
(c) Budgets and Operating Plan. As soon as available and in any event at least 30 days before the beginning of each fiscal year of the Company, a business plan and monthly and quarterly operating budgets for the forthcoming fiscal year; as promptly as practicable, any changes to such budget or business plan; and copies of such business plan and budgets shall be delivered to the Board of Directors contemporaneously with the delivery to the Purchaser;
(d) Notice of Adverse Changes. Promptly after the occurrence thereof and in any event within five (5) business days after each occurrence, notice of any change in the business, assets, Intellectual Property Rights, management, operations or financial condition of the Company, which has a Material Adverse Effect;
(e) Certain Reports and Other Information. Contemporaneously with the distribution to holders of the Common Stock of the Company, copies of all reports, notices, and other information as the Company shall make available generally to the holders of its Common Stock; and
(f) Filings with the Commission. Contemporaneously with the filing thereof with the Commission, copies of all filings with the Commission.
4.02. Loans to Certain Persons. The Company will not lend money to any director or officer of the Company or to any person who is an affiliate (as that term is defined for purposes of the Exchange Act) of the Company except as approved from time to time by the Board.
4.03. Limitation on Repurchases. Until the consummation of a Qualified Public Offering, the Company shall not purchase any outstanding shares of its capital stock except pursuant to an agreement or transaction which has been approved by the Board of Directors prior to such purchase. Until the consummation of a Qualified Public Offering, the Company shall not purchase any outstanding shares of its capital stock from a stockholder of the Company who owns ten percent (10%) or more of the outstanding capital stock of the Company on a fully diluted basis without the prior written consent of the Purchaser (so long as the Purchaser or an affiliate of the Purchaser owns at least one million Shares (or such number of shares as is equivalent to one million Shares if any change is made in the Shares through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or combination of shares)).
ARTICLE V
REGISTRATION RIGHTS
5.01. Piggy-Back Registrations. If at any time the Company shall determine to register for its own account or the account of others under the Securities Act (including pursuant to the Qualified Public Offering, the Initial Public Offering or a demand for registration of any stockholder of the Company) any of its equity securities, other than on Form S-4 or Form S-8 or their then equivalents relating to shares of Common Stock to be issued solely in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit plans, it shall send to the Purchaser written notice of such determination and, if within fifteen (15) days after receipt of such notice, the Purchaser shall so request in writing, the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Shares the Purchaser requests to be registered, except that if, in connection with the Initial Public Offering or the Qualified Public Offering the managing underwriter shall impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because, in its judgment, such limitation is necessary to effect an orderly public distribution, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Shares with respect to which the Purchaser has requested inclusion hereunder. Any such exclusion of Common Stock shall be made pro rata among the Persons (who are entitled to and have requested registration) seeking to include shares of Common Stock, in proportion to the
number of shares of Common Stock sought to be included by them, provided, however, that the Company shall not exclude any Registrable Shares unless the Company has first excluded all outstanding securities the holders of which are not entitled by right to inclusion of securities in such registration statement. No incidental right under this Section 5.01 shall be construed to limit any registration required under Section 5.02. The obligations of the Company to the Purchaser under this Section 5.01 may be waived by the Purchaser at any time and shall expire on the seventh anniversary following the consummation of a Qualified Public Offering or at any time after the Company has effected five registrations for the benefit of the Purchaser under this Section 5.01; provided, however, that if the Purchaser shall have any Registrable Shares excluded from any registration statement in accordance with this Section 5.01, it shall be entitled to include in an additional registration statement filed by the Company the Registrable Shares so excluded.
5.02. Demand Registrations. If at any time after the Initial Public
Offering, the Purchaser shall notify the Company in writing that it intends to
offer or cause to be offered for public sale Registrable Shares held by it which
shares have an anticipated aggregate offering price, net of underwriting
discounts and commissions, equal to more than $2,500,000, based on the market
price of the shares of Common Stock at the time the Purchaser so notifies the
Company, then the Company will use its best efforts to cause such of the shares
of Common Stock as were requested to be registered by the Purchaser to be
registered under the Securities Act as expeditiously as possible. The Company
shall not be required to file a registration statement with the Commission
pursuant to this Section 5.02 at any time while another registration statement
(other than on Form S-3 or S-8) of the Company has been filed with the
Commission and is not yet effective or within six months after the effective
date of another registration statement (other than on Form S-3 or S-8) filed by
the Company with the Commission. The Company shall not be required to effect
more than one registration during any twelve month period pursuant to this
Section 5.02 and two such registrations in the aggregate. In connection with any
request by the Purchaser for registration of Registrable Shares pursuant to this
Section 5.02, the Company shall have the right to defer the filing of a
registration statement with the Commission for up to 120 days after such filing
would otherwise be required hereunder if the Company shall furnish to the
Purchaser a certificate signed by the President of the Company stating that, in
the good faith judgment of the Company, it would be detrimental to the interests
of the Company for such registration statement to be filed at such time, and if
the Company shall have furnished such certificate then the Company shall have
the right to defer the filing of such registration statement for an additional
period of up to 120 days if the Company shall furnish to the Purchaser a copy of
a resolution of the Board of Directors, certified by the Secretary of
the Company, to the effect that, in the good faith judgment of the Board of Directors, it would be detrimental to the interests of the Company for such registration statement to be filed at such time.
5.03. Registrations on Form S-3. In addition to the rights provided the Purchaser in Sections 5.01 and 5.02, if the registration of Registrable Shares under the Securities Act can be effected on Form S-3 (or any similar form promulgated by the Commission), then upon the written request of the Purchaser for the registration of a number of Registrable Shares held by the Purchaser which have an anticipated aggregate offering price, net of underwriting discounts and commissions, of at least $2,500,000, based on the market price of the shares of Common Stock at the time such request is made, the Company will so notify all persons entitled to similar registration rights, and then will, as expeditiously as possible, use its best efforts to effect qualification and registration under the Securities Act on Form S-3 of all or such portion of the shares of Common Stock as the Purchaser shall specify in the initial request to the Company or upon written request of a stockholder to the Company given within fifteen (15) days after the receipt by such stockholder from the Company of such notification; provided, however, the Company shall not be required to effect a registration pursuant to this Section 5.03 unless the market value of the shares of Common Stock to be sold in any such offering, less underwriting discounts and commissions, shall be estimated to be at least $2,500,000 at the time of filing such registration statement; and provided further, however, that the Company shall not be required to effect more than one registration during any twelve month period pursuant to this Section 5.03 and three such registrations in the aggregate. Subject to the foregoing, no registration of Registrable Shares pursuant to this Section 5.03 shall be construed to limit any registration required under Section 5.01 or 5.02.
5.04. Effectiveness. The Company will use its best efforts to maintain the effectiveness for up to 90 days (or such shorter period of time as the underwriters need to complete the distribution of the registered offering, or one year in the case of a "shelf" registration statement on Form S-3) of any registration statement pursuant to which any of the Registrable Shares are being offered, and from time to time will amend or supplement such registration statement and the prospectus contained therein to the extent necessary to comply with the Securities Act and any applicable state securities statute or regulation. The Company will also provide the Purchaser with as many copies of the prospectus contained in any such registration statement as it may reasonably request.
5.05. Indemnification by the Company. (a) In the event that the Company registers any of the Registrable Shares under the Securities Act, the Company will indemnify, defend and hold harmless the Purchaser and each underwriter of the Registrable
Shares (including the respective officers, directors, employees, affiliates and partners of the Purchaser and the underwriters) so registered (including any broker or dealer through whom such shares may be sold) and each Person, if any, who controls the Purchaser or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, costs, damages, penalties, expenses and liabilities, joint or several, to which they or any of them become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, as incurred, and, except as hereinafter provided, will reimburse the Purchaser, each such underwriter and each such controlling Person and their respective officers, directors, employees, affiliates and partners, if any, for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, as incurred, insofar as such losses, claims, costs, damages, penalties, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or in the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration, unless (i) such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or amended preliminary prospectus or final prospectus in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Purchaser (in the case of indemnification of the Purchaser), any such underwriter (in the case of indemnification of such underwriter) or any such controlling Person (in the case of indemnification of such controlling Person) expressly for use therein, or unless (ii) in the case of a sale directly by the Purchaser (including a sale of Registrable Shares through any underwriter retained by the Purchaser to engage in a distribution solely on behalf of the Purchaser), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus copies of which were delivered to the Purchaser or such underwriter on a timely basis, and the Purchaser failed to deliver a copy of the final or amended prospectus at or prior to the confirmation for the sale of the Registrable Shares to the Person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act.
(b) Promptly after receipt by the Purchaser, any underwriter
or any controlling Person of notice of the commencement of any action in respect of which indemnity may be sought against the Company, the Purchaser or such underwriter or such controlling Person, as the case may be, will notify the Company in writing of the commencement thereof (provided, that failure by any such Person to so notify the Company shall not relieve the Company from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder) and, subject to the provisions hereinafter stated, the Company shall be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Purchaser, such underwriter or such controlling Person, as the case may be), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company.
(c) The Purchaser, any such underwriter or any such controlling Person or their respective officers, directors, employees, affiliates or partners, shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel subsequent to any assumption of the defense by the Company shall not be at the expense of the Company unless the employment of such counsel has been specifically authorized in writing by the Company. The Company shall not be liable to indemnify any Person for any settlement of any such loss, claim, damage, expense, liability or action effected without the Company's written consent. The Company shall not, except with the approval of each party being indemnified under this Section 5.05, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which the Purchaser, or any controlling Person of the Purchaser or another Person entitled to indemnification pursuant to this Section 5.05, makes a claim for indemnification pursuant to this Section 5.05 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 5.05 provides for indemnification in such case, then the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of
the Company on the one hand and of the Purchaser on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Purchaser on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement, net of any underwriting discounts or commissions paid by it; and (B) no Person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person or entity who was not guilty of such fraudulent misrepresentation.
5.06. Indemnification by the Purchaser. (a) In the event that the Company registers any of the Purchaser's Registrable Shares under the Securities Act, the Purchaser will indemnify, defend and hold harmless the Company, each of its directors, each of its officers who have signed or otherwise participated in the preparation of the registration statement, each underwriter of the Registrable Shares so registered (including any broker or dealer through whom such shares may be sold) and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, costs, damages, penalties, expenses and liabilities, joint or several, to which they or any of them may become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, as incurred, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling Person for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, as incurred, insofar as such losses, claims, costs, damages, penalties, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or in the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Purchaser expressly for use therein; provided, however, that the Purchaser's obligations hereunder shall be limited to an amount equal to the aggregate public offering price of the Registrable Shares sold by it in such registration, net of any underwriting discounts or
commissions paid by it.
(b) Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against the Purchaser hereunder, the Company will notify the Purchaser in writing of the commencement thereof (provided, that failure by the Company to so notify the Purchaser shall not relieve the Purchaser from any liability it may have hereunder to any other Person entitled to claim indemnity or contribution hereunder), and the Purchaser shall, subject to the provisions hereinafter stated, be entitled to assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to the Company) and the payment of expenses insofar as such action shall relate to the alleged liability in respect of which indemnity may be sought against the Purchaser.
(c) The Company and each such director, officer, underwriter or controlling Person shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel subsequent to any assumption of the defense by the Purchaser shall not be at the expense of the Purchaser unless employment of such counsel has been specifically authorized in writing by the Purchaser. The Purchaser shall not be liable to indemnify any Person for any settlement of any such loss, claim, cost, damage, penalty, expense, liability or action effected without the Purchaser's written consent. The Purchaser shall not, except with the approval of each party being indemnified under this Section 5.06, consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation.
(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which the Company or another Person entitled to indemnification pursuant to this Section 5.06 makes a claim for indemnification pursuant to this Section 5.06, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding that this Section 5.06 provides for indemnification, in such case, then, the Company and the Purchaser will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Purchaser on the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Purchaser on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (A) the Purchaser will not be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement, net of any underwriting discounts or commissions paid by it; and (B) no Person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.
5.07. Exchange Act Registration. If the Company at any time shall list any class of equity securities of the type which may be issued upon the conversion of the Series B Preferred Stock on any national securities exchange or obtain authorization for shares of such class to be quoted on an automated quotation system and shall register such class of equity securities under the Exchange Act, the Company will, at its expense, simultaneously list on such exchange or qualify for trading on such automated quotation system and maintain such listing or authorization of the Conversion Shares of such class. If the Company becomes subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act, the Company will use its best efforts to timely file with the Commission such information as the Commission may require under either of said Sections; and in such event, the Company shall use its best efforts to take all action as may be required as a condition to the availability of Rule 144 or Rule 144A under the Securities Act (or any successor exemptive rule hereafter in effect) with respect to the Common Stock. The Company shall furnish to the Purchaser forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company as filed with the Commission, and (iii) such other reports and documents as the Purchaser may reasonably request in availing itself of any rule or regulation of the Commission allowing the Purchaser to sell any such Registrable Shares without registration. After the occurrence of the Initial Public Offering, the Company agrees to use its best efforts to facilitate and expedite transfers of the Shares pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Shares.
5.08. Damages. The Company recognizes and agrees that the Purchaser will not have an adequate remedy if the Company fails to comply with this Article V and that damages may not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, it shall not oppose an application by the Purchaser or any other Person entitled to the benefits of this
Article V requiring specific performance of any and all provisions hereof or enjoining the Company from continuing to commit any such breach of this Article V.
5.09. Further Obligations of the Company. Whenever under the preceding Sections of this Article V, the Company is required hereunder to register Registrable Shares, it agrees that it shall also do the following:
(a) Furnish to the Purchaser such copies of each preliminary and final prospectus and such other documents as the Purchaser may reasonably request to facilitate the public offering of its Registrable Shares;
(b) Use its best efforts to register or qualify the Registrable Shares covered by said registration statement under the applicable securities or "blue sky" laws of such jurisdictions as the Purchaser may reasonably request; provided, however, that the Company shall not be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the registration statement in any jurisdiction where it is not then so subject;
(c) Furnish to the Purchaser a signed counterpart, addressed to the Purchaser and any other selling holders, of (i) an opinion of counsel for the Company, dated the effective date of the registration statement, and (ii) "comfort" letters signed by the Company's independent public accountants who have examined and reported on the Company's financial statements included in the registration statement, to the extent permitted by the standards of the American Institute of Certified Public Accountants, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in the case of the accountants' "comfort" letters) with respect to events subsequent to the date of the financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' "comfort" letters delivered to the underwriters in underwritten public offerings of securities, to the extent that the Company is required to deliver or cause the delivery of such opinion or "comfort" letters to the underwriters in an underwritten public offering of securities;
(d) Permit the Purchaser or its counsel or other representatives to inspect and copy such corporate documents and records as may reasonably be requested by them;
(e) Furnish to the Purchaser a copy of all documents filed with and all correspondence from or to the Commission in connection with any such offering of securities;
(f) Use its best efforts to ensure the obtaining of all necessary approvals from the NASD;
(g) Cause all Registrable Shares so registered pursuant hereto to be listed on any securities exchange or authorized for quotation in any automated quotation system on or in which outstanding shares of such class are listed or authorized for quotation at the time such registration is declared effective by the Commission;
(h) Designate a transfer agent and registrar for the class or classes of shares which include such Registrable Shares and obtain a CUSIP number for such class or classes of shares, in each case not later than the date such registration is declared effective by the Commission; and
(i) Otherwise comply with all applicable rules and regulations of the Commission and any other applicable federal, state or local law or regulation, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with the first month after the effective date of the registration statement covering the Initial Public Offering, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
Whenever under the preceding Sections of this Article V the Purchaser is registering Registrable Shares pursuant to any registration statement, the Purchaser agrees to (i) timely provide to the Company, at its request, such information and materials as it may reasonably request in order to effect the registration of such Registrable Shares and (ii) convert the appropriate number of Series B Shares into the shares of Common Stock to be included in any registration statement, such conversion to be effective at or before the closing of such offering pursuant to such registration statement.
5.10. Expenses. In the case of each registration effected under Section 5.01, 5.02 or 5.03, the Company shall bear all costs and expenses of each such registration on behalf of the Purchaser, including, but not limited to, the Company's printing, legal and accounting fees and expenses, Commission and NASD filing fees and "Blue Sky" fees; provided, however, that the Company shall have no obligation to pay or otherwise bear any portion of the underwriters' commissions or discounts attributable to the Registrable Shares being offered and sold by the Purchaser, or the fees and expenses of counsel for the Purchaser in connection with the registration of the Registrable Shares. The Company shall pay all expenses of the Purchaser in connection with any registration initiated pursuant to this Article V which is withdrawn or abandoned at the request of the Company, except if such withdrawal
or abandonment is caused by the fraud, material misstatement or omission of a material fact by any holder of securities to be included in such registration, in which case such expenses shall be paid by the holder or holders who have caused such withdrawal or abandonment. If a registration requested by the Purchaser pursuant to Section 5.02 shall be withdrawn prior to becoming effective under the Securities Act at the request of the Purchaser, and in connection with such withdrawal the Purchaser agrees that, notwithstanding such withdrawal, for purposes of this Agreement such withdrawn registration shall satisfy the Company's obligation for one of the registrations which the Company is required to provide pursuant to Section 5.02, then the Company shall pay the expenses of such registration to the extent provided in the first sentence of this Section 5.10; provided, however, that if such registration statement is withdrawn by reason of the fact that, prior to effectiveness of such registration statement, the registration statement filed or to be filed with the Commission contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and the Company shall have failed, within a reasonable time after receipt of written notice thereof from the Purchaser to take reasonable measures to correct such deficiency, the Purchaser shall not be responsible for the costs of such registration (other than expenses described in the proviso to the first sentence of this Section 5.10).
5.11. Transferability. For all purposes of Article V of this Agreement, if
the Purchaser transfers all the Registrable Shares then owned by it to one
Person, the term "Purchaser" shall mean such transferee of all the Registrable
Shares then owned by the Purchaser; provided that such transferee (i) is not a
Competitor of the Company (as hereinafter defined in this Section 5.11) and (ii)
agrees in writing to be bound by all of the provisions of this Agreement,
including, without limitation, Section 5.12 hereof. For the purposes of this
Section 5.11, "Competitor of the Company" shall mean a Person who (i) poses a
significant competitive threat to a substantial portion of the Company's
business or to a significant product of the Company or (ii) is involved in an
ongoing litigation with the Company.
5.12. "Lock-Up" Agreement. The Purchaser, if so requested by the Company and an underwriter of Common Stock or other securities of the Company, shall not sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Company held by it or which it has the right to acquire, during the 180-day period following the effective date of a registration statement of the Company filed with the Commission in connection with such offering or such shorter period as such underwriter shall have advised the Company in writing is adequate to permit the successful and orderly
distribution of such Common Stock or other securities; provided, however, that such "lock-up" agreement shall be in writing and satisfactory to the Company and such underwriter and a copy shall have been provided to the Purchaser. The Company may impose stop-transfer instructions with respect to the shares subject to the foregoing restrictions until the end of said 180-day (or shorter) period. In connection with the preparation and filing of any such registration statement, the Company shall use its reasonable best efforts (1) to enforce the obligations of its stockholders (and any Person who shall have the right to acquire capital stock of the Company) who have agreed with the Company to enter into "lock-up" or "market stand-off" agreements and (2) to obtain a "lock-up" or "market-stand-off" agreement from all of its other stockholders and all other such Persons.
5.13. Mergers, Etc. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under Article V of this Agreement, and for that purpose references hereunder to Registrable Shares shall be deemed to be references to the securities which the Purchaser would be entitled to receive in exchange for Registrable Shares under any such merger, consolidation or reorganization; provided, however, that the provisions of this Section 5.13 shall not apply in the event of any merger, consolidation, or reorganization in which the Company is not the surviving corporation if all stockholders are entitled to receive in exchange for their Registrable Shares consideration consisting solely of (i) cash, (ii) securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act, or (iii) securities of the acquiring corporation which the acquiring corporation has agreed to and does register within 90 days of completion of the transaction for resale to the public pursuant to the Securities Act.
ARTICLE VI
RIGHT OF FIRST REFUSAL
6.01. Right of First Refusal. Before the Company shall issue, sell or exchange, agree or obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange (unless, in the case of an agreement, obligation, reservation or setting aside, the same is expressly subject to the rights of the Purchaser under the provisions of this Article VI), (i) any shares of Common Stock, (ii) any other equity security of the Company, including without limitation, shares of any series of the Company's class of Preferred Stock, (iii) any convertible debt security of the Company, including without limitation, any debt security which by its terms is convertible into or exchangeable for any equity security of the Company, (iv) any security of the Company that is
a combination of debt and equity, or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security or any
such debt security of the Company, the Company shall, in each case, first offer
to sell such securities (the "Offered Securities") to the Purchaser as follows:
the Company shall offer to sell to the Purchaser that portion of the Offered
Securities as the number of Conversion Shares then held by the Purchaser bears
to the total number of shares of Common Stock issuable upon conversion of the
Preferred Stock of the Company then outstanding, at a price and on such other
terms as shall have been specified by the Company in writing delivered to the
Purchaser (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of thirty (30) days from receipt by the Purchaser of
the Offer.
6.02. Notice of Acceptance. Notice of the Purchaser's intention to accept, in whole or in part, any Offer made pursuant to Section 6.01 shall be evidenced by a writing, in form, scope and substance reasonably satisfactory to the Company, signed by the Purchaser and delivered to the Company prior to the end of the 30-day period of such offer, setting forth such of the Offered Securities offered to the Purchaser as the Purchaser elects to purchase (the "Notice of Acceptance").
6.03. Conditions to Acceptances and Purchase.
(a) Permitted Sales of Refused Securities. In the event that a Notice of Acceptance is not given by the Purchaser in respect of all the Offered Securities offered to it, the Company shall have ninety (90) days from the end of said 30-day period to sell any Offered Securities offered to the Purchaser as to which a Notice of Acceptance has not been given by the Purchaser (the "Refused Securities") to the Person or Persons specified in the Offer, subject to the rights of first refusal of the holders of Series A Preferred Stock under the Series A Preferred Stock Agreement and only for an amount and kind (or the cash equivalent thereof)of consideration and otherwise in all respects upon the terms and conditions, including, without limitation, unit price and interest rates, which are no more favorable, in the aggregate, to such other Person or Persons or less favorable to the Company (as determined in good faith by the Board of Directors) than those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the Company shall propose to sell less than all of the Refused Securities (any such sale to be in the manner and on the terms specified in Section 6.03(a) above), then the Purchaser may reduce the number of shares or other units of the Offered Securities specified in its Notice of Acceptance to an amount which shall be not less than the amount of the Offered Securities which the Purchaser elected to purchase pursuant to Section 6.02 multiplied by a fraction, (i) the numerator of which shall be the
amount of Offered Securities which the Company actually proposes to sell, and
(ii) the denominator of which shall be the amount of all Offered Securities. In
the event that the Purchaser so elects to reduce the number or amount of Offered
Securities specified in its Notice of Acceptance, the Company may not sell or
otherwise dispose of more than the reduced amount of the Offered Securities
until such securities have again been offered to the Purchaser in accordance
with Section 6.01.
(c) Closing. At the closing of the sale to such other Person or Persons of all or less than all the Refused Securities, which closing shall include payment in full of the purchase price therefor, the Purchaser shall purchase from the Company, and the Company shall sell to the Purchaser, the number of Offered Securities specified in the Notice of Acceptance, as reduced pursuant to Section 6.03(b) if the Purchaser has so elected, upon the terms and conditions specified in the Offer, including, without limitation, payment in full for such Offered Securities. The purchase by the Purchaser of any Offered Securities is subject in all cases to the preparation, execution and delivery by the Company and the Purchaser of a purchase agreement relating to such Offered Securities in form and substance as offered to the purchasers or proposed purchasers of the Offered Securities who are not the Purchaser.
6.04. Further Sale. In each case, any Offered Securities not purchased by the Purchaser or other Person or Persons in accordance with Section 6.03 may not be sold or otherwise disposed of until they are again offered to the Purchaser under the procedures specified in Sections 6.01, 6.02 and 6.03.
6.05. Termination and Waiver of Right of First Refusal. The rights of the Purchaser under this Article VI may be waived by the Purchaser and shall terminate immediately prior to the effectiveness of the registration statement with respect to the Initial Public Offering, but expressly conditioned on the consummation of the Initial Public Offering.
6.06. Exceptions. The rights of the Purchaser under this Article VI shall not apply to:
(a) Common Stock issued as a stock dividend to holders of Common Stock or upon any subdivision or combination of shares of Common Stock;
(b) Preferred Stock issued as a dividend to holders of Preferred Stock upon any subdivision or combination of shares of Preferred Stock;
(c) Any shares of Common Stock issued upon conversion of Series A Preferred Stock or Series B Shares or other convertible securities; or any equity security or debt security of the Company
issued upon the exercise of any option, warrant or other right to subscribe for, purchase or otherwise acquire any such equity security or debt security;
(d) Up to 1,666,541 shares of Common Stock (with respect to which the Purchaser has not waived its rights under this Article VI), or options exercisable therefor, issued on or after the date hereof to directors, officers, employees or consultants of the Company and any Subsidiary pursuant to any qualified or non-qualified stock option plan or agreement, employee stock ownership plan, employee benefit plan, stock purchase agreement, stock plan, stock restriction agreement, or consulting agreement or such other options, arrangements, agreements or plans approved by the compensation or similar committee of the Board of Directors or, if no such committee exists, by the Board of Directors of the Company;
(e) Up to 500,000 shares of Common Stock, or options exercisable therefor, issued after the date hereof to James R. Broach;
(f) Securities described in any of clauses (i) through (v) of Section 6.01 which are to be issued as all or part of the consideration in the acquisition by the Company of all or part of the stock (or other equity interest), business, assets, technology, or know how of another Person, which transaction is approved by the Board of Directors of the Company; or
(g) Securities described in any of clauses (i) through (v) of Section 6.01 which are to be sold at $3.50 per share or more to any Person in connection with a transaction in which such Person will provide funding to the Company (other than through the purchase of securities of the Company) to pay for research to be conducted by the Company, which transaction is approved by the Board of Directors of the Company.
Each of the foregoing numbers shall be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event and, in the case of stock options and related shares referred to in Section 6.06(d), as provided in the Cadus Pharmaceutical Corporation 1993 Stock Option Plan and subsequent stock option plans of the Company.
If the rights of the Purchaser under this Article VI shall not apply to an issuance of securities by reason of Section 6.06(f) or 6.06(g) hereof, and if, as a result of such issuance, the Purchaser would own less than 5% of the outstanding shares of capital stock of the Company (computed on an as converted and fully diluted basis excluding any options to purchase securities in the Company), and if the Purchaser has not sold, transferred or otherwise disposed of any securities in the Company, the Purchaser shall have the right, exercisable contemporaneously with or within thirty (30) days after
the consummation of the issuance of such securities, to purchase such number of additional shares of Common Stock, which together with the shares in the Company owned by the Purchaser, shall equal 5% of the outstanding shares of capital stock of the Company (computed on an as converted and fully diluted basis excluding any options to purchase securities in the Company). The purchase price for such Common Stock, in case the Purchaser's rights hereunder are triggered by an issuance of securities covered by Section 6.06(f), shall be the greater of $4.00 per share or the fair market value of the securities (determined on an as converted to Common Stock basis) issued in such transaction as determined by an independent investment banking firm jointly selected by the Purchaser and the Company. The fees of such investment banking firm shall be paid by the Purchaser. The purchase price for such Common Stock, in case the Purchaser's rights hereunder are triggered by an issuance of securities covered by Section 6.06(g), shall be the price at which securities (determined on an as converted to Common Stock basis) in the Company are issued in such transaction. This paragraph shall cease to apply if the Purchaser fails to exercise its rights hereunder in connection with any transaction which triggers their applicability.
ARTICLE VII
DEFINITIONS AND ACCOUNTING TERMS
7.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Preferred Stock Purchase Agreement as from time to time amended and in effect between the parties, including all Exhibits hereto.
"BMS Preferred Stock Agreement" means the Preferred Stock Purchase Agreement, dated as of July 26, 1994, by and between the Company and Bristol-Myers Squibb Company.
"Board of Directors" or "Board" means the board of directors of the Company as constituted from time to time.
"Certificate of Incorporation" shall have the meaning assigned to that term in Section 1.01.
"Closing" shall have the meaning assigned to that term in Section 1.03.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act.
"Common Stock" means (a) the Company's Common Stock, $.001 par value per share, as authorized on the date of this Agreement, (b) any other capital stock of any class or classes (however designated) of the Company authorized on or after the date hereof, the holders of which shall have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to a preference, and the holders of which shall ordinarily, in the absence of contingencies or in the absence of any provision to the contrary in the Company's Certificate of Incorporation, be entitled to vote for the election of a majority of directors of the Company (even though the right so to vote has been suspended by the happening of such a contingency or provision), and (c) any other securities into which or for which any of the securities described in (a) or (b) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.
"Company" means Cadus Pharmaceutical Corporation, a Delaware corporation, and its successors and permitted assigns.
"Consolidated" and "consolidating" when used with reference to any term defined herein mean that term as applied to the accounts of the Company and its Subsidiaries consolidated in accordance with generally accepted accounting principles consistently applied throughout reporting periods.
"Conversion Shares" shall have the meaning assigned to that term in Section 1.02.
"Co-Sale Agreement" means the Co-Sale Agreement, dated as of July 30, 1993, among the Company, ImClone Systems Incorporated, Icahn Holding Corporation, M. Elliott Schnall, Mark H. Rachesky, and The Global Health Sciences Fund.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Financial Statements" shall have the meaning provided in Section 3.08(c).
"First Amendment to Voting Agreement" means the First Amendment to Voting Agreement dated as of the date hereof, which is referred to in Section 2.02(i) hereof.
"Indebtedness" means (i) any liability for borrowed money or evidenced by a promissory note, bond, indenture or similar
instrument given in connection with the acquisition of any property or other assets (other than trade accounts payable incurred in the ordinary course of business); (ii) all guaranties, endorsements and other contingent obligations, in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (iii) the present value of any lease payments due under leases required to be capitalized in accordance with applicable Statements of Financial Accounting Standards, determined by discounting all such payments at the interest rate determined in accordance with applicable Statements of Financial Accounting Standards.
"Initial Public Offering" means the first underwritten public offering of Common Stock of the Company for the account of the Company and offered on a "firm commitment" or "best efforts" basis pursuant to an offering registered under the Securities Act with the Commission on Form S-1, Form S-18 or their then equivalents.
"Intellectual Property Rights" means any and all, whether domestic or foreign, patents, patent applications, patent rights, trade secrets, confidential business information, formulae, processes, laboratory notebooks, algorithms, copyrights, mask works, claims of infringement against third parties, licenses, permits, license rights, contract rights with employees, consultants and third parties, trademarks, trademark rights, inventions and discoveries, and such other rights generally classified as intangible, intellectual property assets in accordance with generally accepted accounting principles.
"Material Adverse Effect" shall mean a material adverse effect on (i) the results of operations, business or financial condition of the Company, (ii) the Intellectual Property Rights of the Company, or (iii) the ability of the Company to perform its obligations under, or the legality, validity or enforceability of, this Agreement or the Research Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"Notice of Acceptance" shall have the meaning assigned to that term in
Section 6.02.
"Offer" shall have the meaning assigned to that term in Section 6.01.
"Offered Securities" shall have the meaning assigned to that term in
Section 6.01.
"Person" means an individual, corporation, partnership, joint venture, trust, university, or unincorporated organization, or a
government, or any agency or political subdivision thereof.
"Preferred Stock" means the Series A Preferred Stock and the Series B Preferred Stock.
"Purchaser" means Physica B.V., a Dutch corporation, and its successors and permitted assigns.
"Qualified Public Offering" shall have the meaning assigned to that term in Article Fourth, Section A.5(e)(i) of the Certificate of Incorporation.
"Refused Securities" shall have the meaning assigned to that term in
Section 6.03(a).
"Registrable Shares" shall mean and include (i) the Conversion Shares; and
(ii) the shares of Common Stock of the Company acquired by the Purchaser
pursuant to Article VI hereof or any shares of Common Stock issuable on the
conversion of other securities acquired by the Purchaser pursuant to Article VI
hereof or otherwise; provided, however, that shares of Common Stock which are
Registrable Shares shall cease to be Registrable Shares upon the consummation of
any sale of such Registrable Shares pursuant to an effective registration
statement under the Securities Act, Section 4(1) of the Securities Act or Rule
144 under the Securities Act.
"Research Agreement" means the Research Collaboration and License Agreement, dated as of the date hereof, between the Company and Solvay Duphar B.V.
"Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
"Series A Preferred Stock" means the Series A Convertible Preferred Stock, $.001 par value per share, of the Company having the rights, powers, privileges and preferences set forth in the Certificate of Incorporation.
"Series A Preferred Stock Agreement" means the Preferred Stock Purchase Agreement, dated as of July 30, 1993, by and between the Company and certain of its stockholders.
"Series B Preferred Stock" means the Series B Convertible Preferred Stock, $.001 par value per share, of the Company having the rights, powers, privileges and preferences set forth in the Certificate of Incorporation.
"Series B Shares" shall have the meaning assigned to that term in Section 1.01 of this Agreement.
"Shares" means, collectively, the Series B Shares and the Conversion Shares.
"Subsidiary" or "Subsidiaries" means any Person of which the Company and/or any of its other Subsidiaries (as herein defined) directly or indirectly owns at the time at least fifty percent (50%) of the outstanding voting shares or interests of every class of such Person other than directors' qualifying shares.
"Voting Agreement" shall mean the Voting Agreement, dated as of April 26, 1995, among the Company and certain stockholders of the Company, as amended.
7.02. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE VIII
MISCELLANEOUS
8.01. No Waiver; Cumulative Remedies. No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
8.02. Amendments, Waivers and Consents. No alteration, amendment or modification of any of the terms and provisions hereof shall be valid unless made pursuant to a written instrument signed by the parties hereto. The provisions of this Agreement may not be waived except by a written instrument signed by the party to be charged. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.
8.03. Notices. All notices or other communications required or permitted hereunder shall be sufficiently given if in writing and personally delivered, sent by electronic facsimile transmission with a copy by first class mail or air mail, sent by express overnight or international courier service, or sent by United States first class registered or certified mail, return receipt requested, postage prepaid addressed as follows or to such other address as a party may hereafter designate by notice given pursuant hereto:
In the case of the Company:
Cadus Pharmaceutical Corporation 777 Saw Mill River Road Tarrytown, New York 10591-6705 Attn: President Fax No.: (914) 345-3565
With a copy to:
Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Attn: Salomon R. Sassoon, Esq.
Fax No.: (212) 735-8708
In the case of the Purchaser:
Physica B.V.
C. J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
Attention: President
Fax No.: 011-31-2940-80253
With a copy to:
Solvay America, Inc.
3333 Richmond Avenue
Houston, Texas 77098
Attn: General Counsel
Fax No.: (713) 525-7887
8.04. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and the Purchaser and their respective successors and permitted assigns. Neither the Company nor the Purchaser shall have the right to delegate its obligations or to assign its rights hereunder or any interest herein without the prior written consent of the other party hereto and any attempted assignment without such consent shall be void and without effect. Notwithstanding the foregoing, if the Purchaser transfers all the Shares then owned by it to one Person, the Purchaser shall have the right to assign its rights hereunder to such Person, without the consent of the Company.
8.05. Survival of Representations and Warranties. All representations and warranties made in this Agreement, the Research Agreement, the Shares, or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof.
8.06. Entire Agreement. This Agreement, the Research
Agreement, the terms of the Series B Preferred Stock, and the other agreements executed and delivered in connection herewith constitute the entire agreement between the parties and supersede any prior understandings or agreements concerning the subject matter hereof.
8.07. Severability. The provisions of this Agreement, the Voting Agreement, the Research Agreement and the terms of the Series B Preferred Stock are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of a provision contained in this Agreement, the Voting Agreement, the Research Agreement or the terms of the Series B Preferred Stock shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, the Voting Agreement, the Research Agreement or the terms of the Series B Preferred Stock; but this Agreement, the Voting Agreement, the Research Agreement and the terms of the Series B Preferred Stock shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provisions or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent possible.
8.08. Confidentiality. The Purchaser agrees that, without the Company's prior written consent, it will keep confidential and will not disclose or divulge any confidential, proprietary or secret information which the Purchaser may obtain from the Company pursuant to financial statements, reports and other materials submitted by the Company to the Purchaser pursuant to this Agreement, or pursuant to visitation or inspection rights granted hereunder, unless such information (i) is in the public domain at the time of disclosure, (ii) is properly in the Purchaser's possession prior to the time of disclosure, (iii) after disclosure, enters the public domain through no act or omission of the Purchaser, (iv) after disclosure, is received by the Purchaser from a third party unless the Purchaser knows the third party is not entitled to receive and transfer the information, (v) is independently developed by persons in the Purchaser's employ or otherwise who have had no access to information received from the Company, or (vi) is required to be disclosed by law.
8.09. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without giving effect to choice of laws provisions, provided that this Section 8.09 shall not be construed as submission to the jurisdiction of the courts of the State of New York.
8.10 Arbitration. The parties hereto agree that they shall use their best efforts to settle amicably any disputes, differences or controversies arising between them out of or in connection with
this Agreement. However, the parties irrevocably agree that any dispute arising out of or in connection with this Agreement, including but not limited to any question regarding its existence, validity or termination, if not so settled within thirty (30) days after occurrence thereof, shall be finally determined by arbitration. Unless the parties otherwise agree, arbitration initiated by either party shall be held in London, England, in the English language. The arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the rules of the London Court of International Arbitration then obtaining. The award rendered by the arbitrators shall be final and binding upon the parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
8.11. Headings. Article, section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
8.12. Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the Shares.
IN WITNESS WHEREOF, the parties hereto have caused this Preferred Stock Purchase Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
-----------------------------
Jeremy M. Levin, President
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PHYSICA B.V.
By /s/ JAN VAN INGEN
-----------------------------
Name: Jan van Ingen
Title: President
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[Note: Certain portions of this document have been marked "[c.i.]" to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
RESEARCH COLLABORATION
AND
LICENSE AGREEMENT
BETWEEN
CADUS PHARMACEUTICAL CORPORATION
AND
BRISTOL-MYERS SQUIBB COMPANY
DATED AS OF JULY 26, 1994
PAGE
----
PRELIMINARY STATEMENTS.................................................... 1
1. DEFINITIONS...................................................... 2
2. REPRESENTATIONS AND WARRANTIES................................... 6
2.1 REPRESENTATIONS AND WARRANTIES OF BOTH
PARTIES................................................... 6
2.2 REPRESENTATIONS AND WARRANTIES OF CADUS................... 6
2.3 REPRESENTATIONS AND WARRANTIES OF BMS..................... 7
3. COLLABORATIVE RESEARCH PROGRAM................................... 7
3.1 SCOPE OF RESEARCH PROGRAMS................................ 7
3.2 OVERSIGHT COMMITTEE....................................... 8
3.3 STEERING COMMITTEE........................................ 10
3.4 FUNDING OF THE RESEARCH PROGRAM........................... 11
3.5 CONDUCT OF RESEARCH PROGRAMS BY CADUS..................... 12
3.6 CONDUCT OF RESEARCH PROGRAMS BY BMS....................... 13
3.7 RECORDS................................................... 14
3.8 TERM OF RESEARCH PROGRAM.................................. 14
3.9 EXCLUSIVITY............................................... 14
3.10 MATERIAL TRANSFER......................................... 15
3.11 LIABILITY................................................. 15
3.12 TREATMENT OF LEAD COMPOUNDS FROM AUTOCRINE
SYSTEM.................................................... 15
3.13 TERMINATION OF RESEARCH PROGRAMS BY BMS................... 16
4. DEVELOPMENT AND COMMERCIALIZATION................................ 16
4.1 DEVELOPMENT EFFORTS BY BMS................................ 16
4.2 DETERMINATION TO DEVELOP PRODUCT; EFFECT.................. 18
4.3 DETERMINATION TO NOT DEVELOP PRODUCT;
EFFECT.................................................... 18
4.4 EXCEPTION................................................. 18
4.5 CADUS OPTION.............................................. 18
5. GRANT OF LICENSES................................................ 19
5.1 LICENSE GRANT FOR EXCLUSIVE SCREENS....................... 19
5.2 LICENSE GRANT FOR NON-EXCLUSIVE SCREENS................... 19
5.3 RESERVATION OF RIGHTS BY CADUS............................ 20
5.4 RIGHT OF FIRST OFFER...................................... 20
6. ROYALTIES AND MILESTONE PAYMENTS................................. 21
6.1 ROYALTIES................................................. 21
6.2 BUNDLING AND CAPITATION TRANSACTIONS...................... 22
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PAGE
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6.3 THIRD PARTY ROYALTIES..................................... 23
6.4 MILESTONE PAYMENTS........................................ 24
6.5 OBLIGATION TO PAY ROYALTIES............................... 24
7. PAYMENTS AND REPORTS............................................. 24
7.1 PAYMENT................................................... 24
7.2 MODE OF PAYMENT........................................... 25
7.3 RECORDS RETENTION......................................... 25
7.4 AUDIT REQUEST............................................. 25
7.5 TAXES..................................................... 25
8. INFRINGEMENT ACTIONS BY THIRD PARTIES............................ 26
8.1 NOTICE OF SUIT OR CLAIM OF INFRINGEMENT................... 26
8.2 OBLIGATION TO DEFEND...................................... 26
9. OWNERSHIP OF INVENTIONS; PATENTS................................. 27
9.1 OWNERSHIP OF INVENTIONS................................... 27
9.2 JOINT INVENTIONS.......................................... 27
9.3 PATENT ENFORCEMENT........................................ 28
10. INDEMNIFICATION.................................................. 28
10.1 INDEMNIFICATION........................................... 28
10.2 NOTICE.................................................... 29
11. PUBLICATION; CONFIDENTIALITY..................................... 29
11.1 NOTIFICATION.............................................. 29
11.2 REVIEW OF PROPOSED PUBLICATIONS........................... 29
11.3 CONFIDENTIALITY; EXCEPTIONS............................... 30
11.4 EXCEPTIONS................................................ 30
11.5 CONFIDENTIALITY OBLIGATION OF CADUS....................... 31
11.6 LIMITATIONS ON USE........................................ 31
11.7 REMEDIES.................................................. 31
11.8 SURVIVAL.................................................. 31
12. TERM; TERMINATION................................................ 32
12.1 TERM...................................................... 32
12.2 BREACH.................................................... 32
12.3 ACCRUED RIGHTS, SURVIVING OBLIGATIONS..................... 32
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13. FORCE MAJEURE.................................................... 32
13.1 EVENTS OF FORCE MAJEURE................................... 32
14. MISCELLANEOUS.................................................... 33
14.1 RELATIONSHIP OF PARTIES................................... 33
PAGE
----
14.2 COVENANT NOT TO SOLICIT EMPLOYEES......................... 33
14.3 ASSIGNMENT................................................ 33
14.4 FURTHER ACTIONS........................................... 33
14.5 NOTICE.................................................... 33
14.6 USE OF NAME............................................... 34
14.7 PUBLIC ANNOUNCEMENTS...................................... 34
14.8 WAIVER.................................................... 34
14.9 COMPLIANCE WITH LAW....................................... 34
14.10 SEVERABILITY.............................................. 35
14.11 AMENDMENT................................................. 35
14.12 GOVERNING LAW............................................. 35
14.13 ARBITRATION............................................... 35
14.14 ENTIRE AGREEMENT.......................................... 35
14.15 COUNTERPARTS.............................................. 35
14.16 DESCRIPTIVE HEADINGS...................................... 35
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LIST OF APPENDICES
APPENDIX A List of Patents and Patent Applications APPENDIX B Description of Research Programs APPENDIX C Sample Calculation for Capitation Transactions APPENDIX D Form of Public Announcement |
RESEARCH COLLABORATION
AND
LICENSE AGREEMENT
This RESEARCH COLLABORATION AND LICENSE AGREEMENT (this "Agreement") dated as of July 26, 1994 between Bristol-Myers Squibb Company, a corporation duly organized and existing under the laws of the state of Delaware, having offices at P.O. Box 4000, Route 206 and Province Line Road, Princeton, New Jersey 08543-4000, for and on behalf of itself and its Affiliates ("BMS") and Cadus Pharmaceutical Corporation, a corporation duly organized and existing under the laws of the state of Delaware, and having offices at 180 Varick Street, New York, New York 10014-4606 ("CADUS").
PRELIMINARY STATEMENTS
A. CADUS is the owner of, and has all right, title and interest in, or has acquired the exclusive rights to certain technology involving the transfection and expression of G-protein- coupled receptors into yeast, for which CADUS has conducted and is continuing to conduct numerous research projects.
B. BMS recognizes that the technology represents a valuable source of development of screening assays for the discovery of potential products for manufacture, use and sale in the Territory, and BMS is interested in providing funding to CADUS for further development of its technology and obtaining a license for developed products.
C. CADUS has research and development facilities, experienced personnel and other capabilities conducive to further research and development of the technology.
D. In addition, CADUS is interested in obtaining access to BMS's compound library and obtaining an option to acquire a license to certain such compounds, and BMS is willing to grant such access and option.
E. CADUS and BMS are entering into this Agreement to provide for BMS to provide funding for further research involving the technology to be conducted by CADUS, and for CADUS to license, and BMS to obtain a license for, the use and practice of screening assays developed by CADUS using the technology in the Territory.
F. CADUS and BMS are simultaneously entering into the Screening and Option Agreement to provide access to BMS's compound library to CADUS and give CADUS an option to acquire a license to certain such compounds from BMS.
G. CADUS and BMS are also simultaneously entering into the Stock Purchase Agreement to provide for BMS to obtain an equity interest in CADUS and CADUS to sell an equity interest in CADUS to BMS.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements of the Parties contained in this Agreement, the Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have those meanings set forth in this Section 1 unless the context dictates otherwise.
1.1 "AFFILIATE", with respect to any Party, shall mean any Person controlling, controlled by, or under common control with, such Party. For these purposes, "control" shall refer to (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise or (b) the ownership, directly or indirectly, of at least 50% of the voting securities or other ownership interest of a Person.
1.2 "ANALOG" of any Lead Compound shall mean a compound in which the active substructure of such Lead Compound is conserved.
1.3 "ANNUAL RESEARCH PLAN" shall mean the annual research plan prepared annually during the term of the Research Programs as provided in Section 3.1.
1.4 "AUTOCRINE SYSTEM" shall mean that part of CADUS's Technology whereby any yeast cells into which human Receptors have been inserted and grow in response to compounds produced and secreted by the same yeast cells.
1.5 "BMS TECHNOLOGY" shall mean any and all Product Patents, inventions, improvements, discoveries, claims, trade secrets, technologies, technical data, information, material and know-how, including but not limited to formulae, procedures, protocols, techniques and results of experimentation and testing, owned, developed or acquired by BMS, which are necessary or useful to make, use or develop Products.
1.6 "CLASS OF COMPOUNDS" shall mean any Compounds or Products which are identified or confirmed by the use of the same Screen based on a particular Receptor, including Screens based on mutant forms of such Receptor.
1.7 "COMPOUND" shall mean any Lead Compound or any Analog of any Lead Compound.
1.8 "DEVELOPMENT COMPOUND" shall mean any marketed product of BMS or any compound being developed by BMS, whether or not subject to this Agreement, that has reached the stage of development where such compound has received approval as a pre- clinical lead profile candidate for a product pursuant to the then applicable internal policies and procedures of the BMS Pharmaceutical Research Institute, and is a therapeutic product or is being developed as a potential therapeutic product.
1.9 "EFFECTIVE DATE" shall mean the date of execution of this Agreement.
1.10 "FDA" shall mean the United States Food and Drug Administration, or the successor thereto.
1.11 "FIRST COMMERCIAL SALE" shall mean, with respect to any Product, the first sale for use or consumption by the general public of such Product in any country in the Territory after all required marketing and pricing approvals have been granted, or otherwise permitted, by the governing health authority of such country.
1.12 "INVENTION" shall mean any new or useful process, manufacture, compound or composition of matter, patentable or unpatentable, or any improvement thereof, conceived or first reduced to practice, or demonstrated to have utility during the conduct of any Research Program.
1.13 "JOINT INVENTION" shall mean any Invention for which it is determined, in accordance with applicable law, that both: (i) one or more employees or agents of CADUS or any other persons obliged to assign such Invention to CADUS, and (ii) one or more employees or agents of BMS or any other persons obliged to assign such Invention to BMS, are joint inventors of such Invention.
1.14 "KNOW-HOW" shall mean any and all technical data, information, material and other know-how, including but not limited to formulae, procedures, protocols, techniques and results of experimentation and testing, presently owned, developed or acquired by CADUS or subsequently owned, developed or acquired by CADUS during the term of the Research Programs (provided that, if subsequently acquired, CADUS has the right to license or otherwise make available such know-how to BMS), which relate to the Technology and are necessary or useful to use or practice Screens.
1.15 "LEAD COMPOUND" shall mean any compound identified or whose biological activity is confirmed, through the use of any Screen, in connection with any one or more anticipated indications.
1.16 "MATERIAL" shall mean any material including but not limited to Screens and other biologically active material produced in the performance of the Research Programs.
1.17 "NDA" shall mean a New Drug Application.
1.18 "NET SALES" shall mean, with respect to any Product, the gross amount invoiced for such Product by BMS, its Affiliates, licensees and sublicensees to Third Parties, less deductions for: (i) quantity and/or cash discounts, allowances and rebates actually allowed or given; (ii) freight, postage and shipping insurance expenses (if separately identified in such invoice); (iii) credits or refunds actually allowed for rejected, outdated
or returned Product; and (iv) sales, value-added, excise taxes and duties and other taxes directly related to the sale, to the extent that such items are included in the gross invoice price (but not including taxes assessed against the income derived from such sale). Any up- front payments which are creditable against future royalties to be paid to BMS by its Affiliates, licensees or sublicensees with respect to any Product shall be included in Net Sales at the time such payments are actually made.
1.19 "OVERSIGHT COMMITTEE" shall mean the entity organized and acting pursuant to Section 3.2.
1.20 "PARTY" shall mean CADUS or BMS and, when used in the plural, shall mean CADUS and BMS.
1.21 "PATENTS" shall mean all patents and patent applications throughout the Territory, and any substitutions, extensions, renewals, continuations, continuations-in-part, divisions, patents-of-addition and/or reissues thereof, which CADUS presently or hereafter owns or controls (provided that, if subsequently acquired, CADUS has the right to license or otherwise make available such patents and patent applications to BMS), or which are owned or controlled jointly by BMS and CADUS, to the extent that they cover the manufacture or use of any Screen. The Patents which exist on the Effective Date of this Agreement are listed on APPENDIX A attached hereto.
1.22 "PERSON" shall mean any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or any agency or political subdivision thereof.
1.23 "PLA" shall mean a Product License Application.
1.24 "PLP STAGE" shall mean the stage of development where a Compound has received approval as a pre-clinical lead profile candidate for a Product pursuant to the then applicable internal policies and procedures of the BMS Pharmaceutical Research Institute, and is being developed as a therapeutic product.
1.25 "PRODUCT" shall mean any product which uses as one of its active ingredients a Compound which, with respect to the relevant indication(s), has not been (A) previously identified in the public literature, or (B) previously identified by BMS, its Affiliates or research collaborators and actively pursued by BMS, its Affiliates or research collaborators for such indication(s). BMS shall be deemed to be actively pursuing a Compound for such indication(s) if such Compound is in development at the PLP Stage or later or is then being marketed.
1.26 "PRODUCT PATENTS" shall mean all patents and patent applications owned or controlled by BMS, and disclosing and claiming products, processes or a method of treatment employing the Compound(s) or Product(s), together with any and all patents that may issue or have issued therefrom in the applicable
countries, and any substitutions, extensions, renewals, continuations, continuations-in-part, divisions, patents-of-addition and/or reissues thereof.
1.27 "PROGRAM DEVELOPMENT COMPOUND" shall mean any Compound that has reached the PLP Stage of development.
1.28 "RECEPTOR" shall mean any human, G-protein-coupled, seven transmembrane receptor (including, without limitation, genes, vectors and cDNAs), and shall include any BMS Receptor or Other Receptor.
(a) "BMS RECEPTOR" shall mean a Receptor which is proprietary to BMS and is provided by BMS to CADUS for use in the Research Programs, or a Receptor which is proprietary to BMS and is cloned or obtained by CADUS pursuant to research performed under the Research Programs, or a Receptor provided by BMS to CADUS for use in the Research Programs which is deemed to be a BMS Receptor pursuant to Section 3.1(a).
(b) "OTHER RECEPTOR" shall mean a Receptor other than a BMS Receptor, which is used in the Research Programs, or a Receptor provided by BMS to CADUS for use in the Research Programs which is deemed to be an Other Receptor pursuant to Section 3.1(a).
1.29 "RESEARCH PROGRAMS" shall mean all of the yeast-based research programs conducted by CADUS, or by CADUS in collaboration with BMS, with respect to the Technology undertaken pursuant to Section 3 of this Agreement.
1.30 "ROYALTY TERM" shall mean, with respect to each Product in each country in the Territory, the period of time commencing on the Effective Date and ending on the latest of (1) ten years from the date of the First Commercial Sale of such Product in such country, or (2) if, at the time of the First Commercial Sale in such country, the Product was covered by a Valid Claim of a Product Patent, the date on which the last to expire of the Product Patents relating to such Product expires.
1.31 "SCREENING AND OPTION AGREEMENT" shall mean that certain screening and option agreement dated of even date herewith between BMS and CADUS.
1.32 "SCREEN" shall mean any screen, the manufacture or use of which screen: (i) is based upon, derived from, identified through or related to the Technology, or (ii) was developed by CADUS, alone or with any collaboration by BMS, during the conduct of any Research Program; and/or(iii) if covered by one or more Patents, would infringe a Valid Claim thereof. Screen shall include any Exclusive Screen or Non-Exclusive Screen.
(a) "EXCLUSIVE SCREEN" shall mean any Screen discovered or developed using any BMS Receptor, or any Screen deemed to be an Exclusive Screen pursuant to Section 3.1(a).
(b) "NON-EXCLUSIVE SCREEN" shall mean any Screen discovered or developed using any Other Receptor, or any Screen deemed to be a Non-Exclusive Screen pursuant to Section 3.1(a).
1.33 "STEERING COMMITTEE" shall mean the entity organized and acting pursuant to Section 3.3.
1.34 "STOCK PURCHASE AGREEMENT" shall mean that certain stock purchase agreement dated of even date herewith between BMS and CADUS.
1.35 "TECHNOLOGY" shall mean all inventions, improvements, discoveries, claims, formulae, processes, trade secrets, technologies, Patents and Know-How owned by CADUS or to which CADUS has the rights to grant licenses or sublicenses, and relating to or derived from: (i) CADUS's yeast-based, human G-protein-coupled receptor technology described in APPENDIX B, or (ii) the Research Programs.
1.36 "TERRITORY" shall mean the entire world.
1.37 "THIRD PARTY" shall mean any Person who or which is neither a Party nor an Affiliate of a Party.
1.38 "VALID CLAIM" shall mean a claim of any Patent or Product Patent, as the case may be, which has not been held invalid or unenforceable by final decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.
2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Party represents and warrants to the other Party that: (i) it is free to enter into this Agreement; (ii) in so doing, it will not violate any other agreement to which it is a party; and (iii) it has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement.
2.2 REPRESENTATIONS AND WARRANTIES OF CADUS. CADUS hereby represents and warrants to BMS that:
(a) It is the owner of, or has exclusive rights to, all of the Patents listed on APPENDIX A, and has the exclusive right to grant licenses therefor;
(b) It is the owner of, or is the licensee of, all of the Know-How in existence on the date of this Agreement, and has the right to grant licenses or sublicenses therefor;
(c) To the best of its knowledge, all such Patents are in full force and effect and have been maintained to date;
(d) It is not aware of any asserted or unasserted claim or demand which it believes can be enforced against such Patents;
(e) To the best of its knowledge, the practice of such Patents do not infringe upon or conflict with any patent or other proprietary rights of any Third Party; and
(f) It has not entered into any agreement with any Third Party which is in conflict with the rights granted to BMS pursuant to this Agreement.
2.3 REPRESENTATIONS AND WARRANTIES OF BMS. BMS hereby represents and warrants to CADUS that it is the owner of, or has exclusive rights to, all BMS Receptors, and, to the best of its knowledge, the use of such BMS Receptors by BMS or CADUS during the conduct of the Research Programs will not infringe on or conflict with the patent or other proprietary rights of any Third Party.
3. COLLABORATIVE RESEARCH PROGRAM.
3.1 SCOPE OF RESEARCH PROGRAMS.
(a) The Research Programs shall include the written description of the scientific research to be carried out by CADUS, as set forth in APPENDIX B, as hereafter modified by the Oversight Committee from time to time during the term of the Research Programs. Promptly following the execution of this Agreement by both Parties, CADUS shall provide BMS with a list of receptors which CADUS owns or has rights to, and BMS shall select which such receptors BMS wants to become a part of the Research Programs. Any such CADUS receptors not selected by BMS shall be excluded from the Research Programs, unless the Parties mutually agree to include such receptor(s) at a later date. If any such receptor is selected by BMS, and covers the same receptor as one that BMS owns or has rights to, then any screen developed with such receptor shall be deemed to be an Exclusive Screen under this Agreement. If any such receptor is selected by BMS, and BMS does not own or have rights to cover the same receptor, then any screen developed with such receptor shall be deemed to be a Non-Exclusive Screen under this Agreement. BMS may also provide receptors which are proprietary to BMS to CADUS for use in the Research Programs, which shall be deemed to be BMS Receptors under this Agreement. Any screens developed with such receptors shall then be deemed to be Exclusive Screens under this Agreement. In addition, BMS may also provide receptors which are not proprietary to BMS to CADUS for use in the Research Programs, and such receptors shall be deemed to be Other Receptors for purposes of this Agreement.
(b) During the three-month period following the execution of this Agreement by both Parties, the Oversight
Committee shall create a three-year plan for the Research Programs, which will
include a comprehensive list of all Receptors to be included in the Research
Programs and a comprehensive list of all [c.i.] which will be directly targeted
for drug intervention (e.g., see Goal 4 and Phase I, Part 4 of APPENDIX B)
[c.i.] ("Targets") in the Research Programs during the initial term of the
Research Programs (the "Three-Year Research Plan"). The Parties agree that the
number of receptors and [c.i.] Targets to be included in the Three-Year Research
Plan shall be within the scope of the funding to be provided by BMS during such
period. During such three-month period, CADUS shall not perform any research or
development work with or for the benefit of, or grant any rights or licenses to
or for the benefit of, any Third Party involving any [c.i.] or any receptors
which CADUS owns or has rights to.
(c) As of the Effective Date, and on each anniversary thereof during
the term of the Research Programs, the Oversight Committee shall prepare and
provide to each Party, in form and substance mutually acceptable to each Party,
a more detailed description of the specific Research Programs to be undertaken
during the upcoming year, which shall include a reasonably detailed description
of the goals and scope of such research, the research plan, a list of Receptors
to be included in the collaboration during such year and a budget (the "Budget")
[c.i.]
be provided by each Party to support the research described in such proposal (an "Annual Research Plan"). The Oversight Committee may revise any Annual Research Plan, from time to time, as approved by the mutual agreement of both Parties.
(d) If the Oversight Committee fails to agree on an Annual Research Plan: (i) BMS shall nevertheless continue to provide funding to CADUS for the Research Programs at the same level of funding as provided during the previous year (or, with respect to the first and second years of the Research Programs, at a level of $4,000,000), in accordance with and subject to adjustments provided in Section 3.4, and (ii) CADUS shall nevertheless continue to conduct the Research Programs in accordance with the goals and scope of such research as determined by BMS, provided that such goals and scope shall be within the scope of the level of funding to be provided by BMS and within the scope of the Research Programs conducted to date (or, with respect to the first year of the Research Programs, within the scope of the Research Programs described in APPENDIX B).
3.2 OVERSIGHT COMMITTEE. The Parties shall establish an Oversight
Committee (the "Oversight Committee"), which shall be comprised of four members:
(i) an Executive Director or Vice President of any therapeutic area in BMS, or
such other similar position designated by BMS from time to time, (ii) Vice
President, Biomolecular Screening at BMS, or such other similar position
designated by BMS from time to time, (iii) the Vice President of Research at
CADUS, or such other similar position designated by
CADUS from time to time, (ii) the Director of Research at CADUS, or such other similar position designated by CADUS from time to time. Members of the Oversight Committee may be represented at any meeting by a designee appointed by such member for such meeting. The chairperson of the Oversight Committee shall be designated annually on an alternating basis between the Parties. The Party not designating the chairperson shall designate one of its representative members as Secretary to the Oversight Committee for such year. Each Party shall be free to change its representative members, on notice to the other Party. The Oversight Committee shall exist until the termination or expiration of the Research Programs.
(a) RESPONSIBILITIES. The Oversight Committee shall be responsible for establishing long-term objectives for the Research Programs and evaluating the progress of the Research Programs, including, without limitation:
(1) Decisions regarding the direction and priority of the various Research Programs; and
(2) Determinations of appropriate staffing and resources that should be applied by each Party to each Research Program from time to time.
(b) MEETINGS. The Oversight Committee shall meet as soon as reasonably practical following the Effective Date of this Agreement, and thereafter, from time to time as the Parties deem appropriate. Meetings may be called by either Party on fifteen days written notice to the other unless such notice is waived by the Parties, and the meetings shall alternate between the offices of the Parties unless the Parties otherwise agree. The chairperson shall be responsible for sending notices of meetings to all members. The Oversight Committee may also convene or be polled or consulted from time to time by means of telecommunications or correspondence.
(c) DECISIONS OF THE OVERSIGHT COMMITTEE.
(1) All decisions of the Oversight Committee shall be made by unanimous agreement of the members (or their designees) present in person or by telephone at any meeting; provided that at least one representative of each Party is present at such meeting.
(2) In the event that unanimity cannot be reached by the Oversight Committee with respect to a matter that is subject to its decision-making authority, then the matter shall be referred for further review and resolution to the Senior Vice President, Exploratory and Drug Discovery Research at BMS, or such other similar position designated by BMS from time to time, and the President and Chief Executive Officer at CADUS, or such other similar position designated by CADUS from time to time. If they cannot resolve the issues within 30 days, the matter will be referred to arbitration pursuant to Section 14.12.
(d) REPORTS. Within 30 days after each Oversight Committee meeting, the secretary of the Oversight Committee shall prepare and distribute minutes of the meeting which shall provide: (1) a description in reasonable detail of the discussions had at the meeting, and (2) a list of any actions, decisions or determinations approved by the Oversight Committee. Such reports shall be distributed to the members of the Oversight Committee and the Chief Executive Officer of CADUS.
3.3 STEERING COMMITTEE. The Parties shall also establish a Steering
Committee (the "Steering Committee"), which shall be comprised of six members:
(i) the Director of Screening at BMS, or such other similar position designated
by BMS from time to time, (ii) the Director of Research at CADUS, or such other
similar position designated by CADUS from time to time, and (iii) two additional
representatives designated by each Party, who shall be scientists involved in
the Research Programs. Members of the Steering Committee may be represented at
any meeting by a designee appointed by such member for such meeting. The
chairperson of the Steering Committee shall be designated annually on an
alternating basis between the Parties. The Party not designating the chairperson
shall designate one of its representative members as Secretary to the Steering
Committee for such year. Each Party shall be free to change its representative
members, on notice to the other Party. The Steering Committee shall exist until
the termination or expiration of the Research Programs.
(a) RESPONSIBILITIES. The Steering Committee shall be responsible for the day-to-day conduct and progress of the Research Programs, including, without limitation:
(1) Providing ongoing scientific guidance to the Research Programs on a weekly basis; and
(2) Providing a forum for the exchange of scientific information among the scientists participating in the Research Programs.
(b) MEETINGS. The Steering Committee shall meet at least once every month, and more frequently as the Parties deem appropriate, on such dates and at such times as the Parties shall agree. Meetings may also be called by either Party on five days written notice to the other unless such notice is waived by the Parties. The meetings shall alternate between the offices of the Parties unless the Parties otherwise agree. The chairperson shall be responsible for sending notices of meetings to all members. The Steering Committee may also convene or be polled or consulted from time to time by means of telecommunications or correspondence.
(c) DECISIONS OF THE STEERING COMMITTEE.
(1) All decisions of the Steering Committee shall be made by unanimous agreement of the members (or their designees) present in person or by telephone at any meeting;
provided that at least two representatives of each Party is present at such meeting.
(2) In the event that unanimity cannot be reached by the Steering Committee with respect to a matter that is subject to its decision-making authority, then the matter shall be referred to the Oversight Committee for resolution pursuant to Section 3.2(c).
(d) REPORTS. Within fifteen days after each Steering Committee
meeting, the secretary of the Steering Committee shall prepare and distribute:
(1) a reasonably detailed summary report describing the work performed since the
period covered by the last report on the Research Programs and an evaluation of
the work performed in relation to the goals of the Research Program, and (2)
minutes of the meeting which shall provide a description in reasonable detail of
the discussions had at the meeting and a list of any actions, decisions or
determinations approved by the Steering Committee. Such reports shall be
distributed to the members of the Steering Committee and the members of the
Oversight Committee.
3.4 FUNDING OF THE RESEARCH PROGRAM. BMS agrees to provide funding to CADUS for the conduct of the Research Programs in the amount of up to Four Million Dollars ($4,000,000) each year during the term of the Research Programs. The actual amount of funding required to be made by BMS shall be based on the Budget provided in the Annual Research Plan for such year, and shall be adjusted on a quarterly basis based upon the [c.i.]
; provided that in any event, CADUS shall have the right
[c.i.] each year during the term of the Research Programs and receive funding therefor from BMS [c.i.] . Such amount shall be paid in quarterly installments in advance on the first day of July, October, January and April of each year, with adjustments made from time to time as required. However, the first payment shall be made in the amount of $1,000,000 on the Effective Date of this Agreement (in lieu of any payment on July 1, 1994). Within 30 days following the end of each such quarter, CADUS shall prepare and submit a statement setting forth [c.i.]
. If BMS elects to extend the term of the Research Programs beyond the initial
three-year term pursuant to Section 3.8, then the level of funding BMS shall
commit to for such additional years (i.e., up to $4,000,000 per annum) and
[c.i.]
shall be adjusted annually commencing with the first extension year of the term to reflect changes, since the Effective Date, in the average of the Consumer Price Index for the New York/New Jersey area and the "All Commodities" index of the Product Pricing Index.
3.5 CONDUCT OF RESEARCH PROGRAMS BY CADUS. During the term of the Research Programs, so long as BMS is providing funding pursuant to Section 3.4, CADUS shall:
(a) undertake interactive, cooperative Research Programs with BMS, as set forth in any Annual Research Plan, and such other activities which, from time to time, the Oversight Committee decides is necessary for the commercial success of the Research Programs;
(b) use all reasonable efforts and proceed diligently to perform the work set out for CADUS to perform in the Annual Research Plan, including, without limitation, by using its good faith efforts to allocate [c.i.]
using personnel with sufficient skills and experience, together with sufficient equipment and facilities, to carry out its obligations under the Research Programs and to accomplish the objectives of the Research Programs;
(c) conduct the Research Programs in good scientific manner, and in compliance in all material respects with all requirements of applicable laws, rules and regulations, and all other requirements of any applicable good laboratory practices to attempt to achieve its objectives efficiently and expeditiously;
(d) furnish BMS with Materials arising from the Research Programs as BMS from time to time shall reasonably request;
(e) within 30 days following the end of each quarter during the term of the Research Programs, furnish BMS with written reports summarizing all activities under the Research Programs during such quarter and a statement setting forth [c.i.]
(f) within 30 days following the end of each six-month period during the term of the Research Programs and within 30 days following the expiration or termination of the Research Programs, furnish BMS with fully-detailed, written reports on all activities under the Research Programs during such six-month period or the term of the Research Program, as the case may be;
(g) promptly provide an invention disclosure report to BMS with respect to any Invention or Joint Invention;
(h) allow representatives of BMS, upon reasonable notice and during normal business hours, to (1) visit the facilities where the Research Programs are being conducted, and (2) consult informally, during such visits and by telephone, with CADUS personnel performing work on the Research Programs;
(i) maintain liability insurance with respect to the work it is performing under the Research Programs in such amounts as it customarily maintains with respect to similar research programs, which insurance shall designate BMS as "insured", and to pay the premiums due thereunder. The terms and conditions of such insurance policy and any and all amendments thereto, as well as the amount insured, shall be submitted for prior approval to BMS, provided that BMS may only disapprove such policy or amendment if it is inconsistent with the terms and conditions customary for such insurance policies in the pharmaceutical industry at that time, and BMS shall receive a copy of any such policy or amendments; and
(j) Apply all research funds received from BMS pursuant to this Agreement to fund the Research Programs (including, without limitation, to pay for equipment, support staff and other overhead related to the Research Programs), carry out its obligations in connection therewith and accomplish the goals and objectives of the Research Programs as determined by the Oversight Committee.
3.6 CONDUCT OF RESEARCH PROGRAMS BY BMS. During the term of the Research Programs, BMS shall:
(a) undertake interactive, cooperative Research Programs with CADUS, as set forth in any Annual Research Plan, and such other activities which, from time to time, the Oversight Committee decides is necessary for the commercial success of the Research Programs;
(b) use all reasonable efforts and proceed diligently to perform the work set out for BMS to perform in the Annual Research Plan, including, without limitation, by using its good faith efforts to allocate sufficient time and effort, using personnel with sufficient skills and experience, together with sufficient equipment and facilities, to carry out its obligations under the Research Programs and to accomplish the objectives of the Research Programs;
(c) conduct the Research Programs in good scientific manner, and in compliance in all material respects with all requirements of applicable laws, rules and regulations, and all other requirements of any applicable good laboratory practices to attempt to achieve its objectives efficiently and expeditiously;
(d) furnish CADUS with BMS Receptors necessary for the conduct of the Research Programs as determined from time to time by the Steering Committee;
(e) within 30 days following the end of each quarter during the term of the Research Programs, furnish CADUS with written reports summarizing all BMS activities under the Research Programs during such quarter;
(f) within 30 days following the end of each six-month period during the term of the Research Programs and within 30 days following the expiration or termination of the Research Programs, furnish CADUS with fully-detailed, written reports on all BMS activities under the Research Programs during such six-month period or the term of the Research Program, as the case may be;
(g) promptly provide an invention disclosure report to CADUS with respect to any Invention or Joint Invention; and
(h) allow representatives of CADUS, upon reasonable notice and during normal business hours, to (1) visit the facilities where the Research Programs are being conducted, and (2) consult informally, during such visits and by telephone, with BMS personnel performing work on the Research Programs.
3.7 RECORDS.
(a) CADUS and BMS each shall maintain records, in sufficient detail and in good scientific manner, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of the Research Programs (including all data in the form required under all applicable laws and regulations).
(b) CADUS and BMS each shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all such records of the other Party to the extent reasonably required for the performance of its obligations under this Agreement. CADUS and BMS each shall maintain such records and the information of the other Party contained therein in confidence in accordance with Section 11 and shall not use such records or information except to the extent otherwise permitted by this Agreement.
3.8 TERM OF RESEARCH PROGRAM. The term of the Research Programs shall commence on the Effective Date, and shall continue, except as otherwise provided in this Agreement, for a period of three years after the Effective Date; provided, however, that BMS shall have the right, in its sole discretion, to extend the term of the Research Program for an additional two-year period by sending written notice to such effect to CADUS at least six months prior to the end of the initial term. In such event, BMS shall be required to continue to provide the level of funding to CADUS as provided in Section 3.4.
3.9 EXCLUSIVITY. During the term of the Research Programs, CADUS shall not perform any research or development work, with or for the benefit of any Third Party, involving any Receptors or Screens relating to [c.i.]
Targets worked on under the Research Programs or identified for research activities in the Three-Year Research Plan or any current Annual Research Plan, unless specifically permitted under the Agreement. In any event, CADUS shall not make available to any Third Party any Materials
(except (i) yeast strains that do not express a BMS Receptor or strains that are not engineered for screening against specific [c.i.]
Targets, or (ii) biological materials containing sequences that do not encode components that are uniquely required for the expression of a specific BMS Receptor, or (iii) biological materials that are not unique to Screens relating to [c.i.]
Targets, or (iv) reagents that are not uniquely intrinsic to the use of a specific Exclusive Screen) or Screens developed by CADUS pursuant to the Research Programs, except as specifically permitted by this Agreement.
3.10 MATERIAL TRANSFER. In order to facilitate the Research Programs,
either Party may provide to the other Party certain biological materials or
chemical compounds including, but not limited to, Receptors (collectively,
"Substances") owned by or licensed to the supplying Party (other than under this
Agreement) for use by the other Party in furtherance of the Research Programs.
Except as otherwise provided under the Agreement, all such Substances delivered
to the other Party (1) shall remain the sole property of the supplying Party,
(2) shall be used only in furtherance of the Research Programs and solely under
the control of the other Party, (3) shall not be used or delivered to or for the
benefit of any Third Party without the prior written consent of the supplying
Party, and (4) shall not be used in research or testing involving human
subjects. The Substances supplied under this Section 3.10 must be used with
prudence and appropriate caution in any experimental work, since not all their
characteristics may be known. THE SUBSTANCES ARE PROVIDED "AS IS" AND WITHOUT
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE
OR ANY WARRANTY THAT THE USE OF THE SUBSTANCES WILL NOT INFRINGE OR VIOLATE ANY
PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.
3.11 LIABILITY. During the Research Programs, each Party shall be responsible for, and hereby assumes, any and all risks of personal injury or property damage attributable to the negligent or willful acts or omissions of that Party or its Affiliates, and their respective directors, officers, employees and agents.
3.12 TREATMENT OF LEAD COMPOUNDS FROM AUTOCRINE SYSTEM. In the event that any compounds are developed or created during the Research Programs by use of the Autocrine System: (i) if such compound is identified using a BMS Receptor, all rights to such compound shall belong exclusively to BMS, and such compound shall be deemed to be a Compound developed from an Exclusive Screen for all purposes under this Agreement; and (ii) if such compound is identified using any Other Receptor, all rights to such compound shall belong exclusively to CADUS, provided that such compound shall be deemed to be a CADUS Compound (as defined in Section 5.3(b)) for all purposes under this Agreement, and BMS shall have a right of first offer to acquire an exclusive license to such compound pursuant to Section 5.4. Except as otherwise provided in this Section 3.12, any compound library contributed to the Research Programs by CADUS shall belong exclusively to CADUS,
unless such compound library is developed in part using proprietary sequence or structural information provided by BMS as a library targeted to a particular Receptor or Receptors, in which case such compound library shall belong exclusively to BMS.
3.13 TERMINATION OF RESEARCH PROGRAMS BY BMS. In the event that CADUS fails to diligently proceed with the Research Programs or otherwise fails to comply with any material obligation under this Section 3, such shall be deemed a breach of a material obligation of CADUS pursuant to Section 12.2, and shall entitle BMS to give notice to CADUS specifying the nature of the default and requiring it to cure such default. If such default is not cured within 60 days after the receipt of such notice (or, if such default cannot be cured within such 60-day period, if CADUS does not commence and diligently continue actions to cure such default), BMS shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate this Agreement with respect to the Research Programs by giving written notice to take effect immediately upon delivery of such notice. BMS's right to terminate this Agreement with respect to the Research Programs, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. Upon such termination, CADUS shall promptly transfer to BMS copies of all data, reports, records and materials in CADUS's possession or control which relate to the Research Programs and furnish to BMS all Materials and Substances developed under the Research Programs. Thereafter, BMS shall have no further obligation to fund the Research Programs. In the event of the termination of the Research Programs pursuant to this Section 3.13: (i) BMS shall have a right and license to use such Materials and Substances during the remainder of the original term of the Research Programs plus the two (2) extension years provided in Section 3.8 (as if BMS had elected to extend the term of the Research Programs for such two-year period); and (ii) the exclusive license granted to BMS with respect to Non-Exclusive Screens pursuant to Section 5.2 shall continue to be exclusive during the original term of the Research Programs plus the two (2) extension years and such additional period thereafter as would have applied pursuant to Section 5.2. Termination of this Agreement with respect to the Research Programs shall not terminate any other rights or obligations of the Parties under this Agreement other than those set forth in this Section 3. The remedy provided in this Section 3.13 for any breach by CADUS relating to its material obligations under this Section 3 shall be in lieu of any remedy set forth in Section 12.
4. DEVELOPMENT AND COMMERCIALIZATION.
4.1 DEVELOPMENT EFFORTS BY BMS.
(a) BMS shall have sole and absolute discretion to determine the means and methods by which it will conduct screening, assays and other research and development using the
Screens, provided that the Technology will not be made available to Third Parties. It is understood that this Agreement imposes no obligation of any nature whatsoever, express or implied, upon BMS to develop or commercialize any Compound arising out of BMS's use of the Screens. BMS shall have the sole and absolute discretion to determine all decisions relating to the research, development, marketing and other commercialization activities with respect to any Compound or Product derived by BMS from its use of the Screens. Subject to the foregoing, BMS shall use reasonable commercial efforts to develop Compounds and Products identified or confirmed using any Exclusive Screens in the event that BMS has elected to proceed with the development of such Compounds or Products. However, the decision as to whether to proceed with the preclinical and clinical development and marketing of any Compound or Product identified or confirmed using any Exclusive Screens shall be in the sole discretion of BMS. Nothing contained in this Agreement shall be interpreted as requiring BMS to develop or market any Compound or Product identified or confirmed using any Exclusive Screens.
(b) BMS shall comply with all applicable laws and regulations and good laboratory, clinical and manufacturing practices in the preclinical and clinical development of the Compounds and Products which BMS elects to develop, and shall cause its Affiliates and subcontractors to do the same.
(c) BMS shall not disassemble or seek to reverse engineer the Substances and Materials provided by CADUS to BMS.
(d) BMS shall provide CADUS with written notice of each of the following events within 30 days of its occurrence:
(1) BMS's determination that a Compound has reached the PLP Stage;
(2) The filing with the FDA of an IND in the United States (or its equivalent in any other country) for each Product;
(3) The commencement of Phase 3 clinical trials for each Product in the United States (or its equivalent in any other country);
(4) The filing of an NDA or a PLA in the United States (or its equivalent in any other country); and
(5) The receipt of NDA or PLA approval from the FDA, including the required marketing and pricing approval (or from the governing health authority of any other country).
(e) Within 60 days following the end of each six-month period ending June 30 and December 31 of each calendar year, BMS shall furnish CADUS with written reports summarizing all BMS activities using the Screens during such six-month period.
4.2 DETERMINATION TO DEVELOP PRODUCT; EFFECT. In the event that BMS determines to develop any Program Development Compound, then no Compound or Product in the same Class of Compounds as such Program Development Compound shall be subject to CADUS's option as provided in Section 4.5, unless BMS, in its sole and absolute discretion, determines to grant such option for any of such Compounds or Products to CADUS.
4.3 DETERMINATION TO NOT DEVELOP PRODUCT; EFFECT. In the event that BMS makes a good faith determination that it is not interested in pursuing or continuing to pursue the development of any Program Development Compound in any country in the Territory or any other Compound or Product in the same Class of Compounds as the Program Development Compound, then BMS shall promptly notify CADUS to that effect and such Program Development Compound in such country shall be subject to CADUS's option as provided in Section 4.5. Any determination by BMS to not pursue the development of any Program Development Compound shall not be deemed a breach by BMS, and the effect provided herein for such determination shall be in lieu of any remedy set forth in Section 12.2.
4.4 EXCEPTION. BMS's obligations under Sections 4.2 and 4.3 to grant CADUS the option provided in Section 4.5 shall not apply to any Program Development Compound which is active in the same screen as any other Development Compound, regardless of whether such other Development Compound shall have been identified as a candidate for development due to its activity in a Screen or through alternative research efforts.
4.5 CADUS OPTION.
(a) In the event that BMS is required, as provided in this Section 4, to grant CADUS an option under this Section 4.5 with respect to any Program Development Compound, and so long as CADUS is not in material breach of this Agreement at such time, then BMS hereby grants to CADUS an option to acquire an exclusive license to the BMS Technology and Product Patents with respect to such Program Development Compound. The term of each such option grant shall be for a period of 90 days commencing on the date BMS provides notice of such option grant to CADUS and sufficient information and data related thereto or reasonably requested by CADUS to allow CADUS to determine its interest in acquiring an exclusive license therefor. CADUS shall be deemed to have effectively exercised any such option if CADUS sends written notice of its exercise of such option to BMS within the applicable 90-day option period, provided that the Parties reach a definitive agreement for such license within six months after the date of the notice of such exercise. During such six-month period, BMS shall negotiate in good faith with CADUS to reach definitive agreements.
(b) Each exclusive license shall provide for: (i) royalties and milestone payments to be paid to BMS, as applicable, as are set forth in Section 6 of this Agreement, (ii) additional royalties to be paid by CADUS to BMS in the amount of any royalties that BMS may owe to any third party with respect to any
product which uses such Program Development Compound as one of its active ingredients, provided that CADUS shall be entitled to a credit against royalties in an amount equal to 50% of such royalties paid to such third parties, up to a maximum of one percent of net sales with respect to such product, and (iii) additional compensation to be paid by CADUS to BMS, which shall be negotiated in good faith by the Parties at the time of the option grant, to compensate BMS for its expenditures, based on its fully-allocated costs, for development of the Program Development Compound through the date of such option grant. In the event that CADUS fails to exercise its option within such 90-day period, the exclusive right to such Program Development Compound shall remain with BMS. Upon the execution of a definitive license agreement with respect to any Program Development Compound, BMS shall provide CADUS with all BMS Technology and Product Patents which relates to such Program Development Compound.
(c) BMS shall not be obligated under any circumstances to grant
CADUS the option provided in this Section 4.5: (i) for any Compound which has
not become a Program Development Compound; (ii) notwithstanding anything in
Section 4.3 to the contrary, for any Program Development Compound in the event
that BMS determines not to pursue such Program Development Compound at any time
for safety reasons or want of efficacy, [c.i.]
5. GRANT OF LICENSES.
5.1 LICENSE GRANT FOR EXCLUSIVE SCREENS. Subject to the terms and conditions of this Agreement, CADUS hereby grants to BMS an exclusive right and license (including as to CADUS, except as specifically provided in Section 5.3), under the Technology, Patents and Know-How, to use and practice the Exclusive Screens (including, without limitation, the right to grow sufficient amounts of Materials provided by CADUS to BMS).
5.2 LICENSE GRANT FOR NON-EXCLUSIVE SCREENS. Subject to the terms and conditions of this Agreement, CADUS hereby grants to BMS an exclusive right and license (including as to CADUS, except as specifically provided in Section 5.3), under the Technology, Patents and Know-How, to use and practice Non-Exclusive Screens (including, without limitation, the right to grow sufficient amounts of Materials provided by CADUS to BMS) during the term of the Research Programs, but in no event for less than nine months after BMS receives Materials and other information from CADUS identifying and enabling BMS to use such Non-Exclusive Screen. With respect to any Non-Exclusive Screen, if BMS identifies or confirms any Compound or Product using such Non-Exclusive Screen during the foregoing period of exclusivity for such Non-Exclusive
Screen, then, for so long as BMS continues to pursue the development of such Compound or Product, BMS shall continue to have an exclusive right and license, under the Technology, Patents and Know-How, to use and practice such Non-Exclusive Screen. BMS shall notify CADUS when BMS ceases to pursue the development of such Compound or Product. Thereafter, BMS shall have a non-exclusive right and license, under the Technology, Patents and Know-How, to use and practice Non-Exclusive Screens, subject, however, to the right of first offer granted to BMS pursuant to Section 5.4.
5.3 RESERVATION OF RIGHTS BY CADUS. During the period that BMS has any exclusive rights with respect to any Exclusive Screens or Non-Exclusive Screens, CADUS reserves the rights to use the Technology, Patents and Know-How, and to make, use and practice such Screens, solely for internal research and development purposes (including the testing of compounds obtained by CADUS from Third Parties).
(a) In the event that CADUS develops a Compound using an Exclusive Screen, CADUS hereby grants to BMS an exclusive right and license to make, have made, distribute, use and sell such Compound, or any products developed therefrom, under any patents, know-how or other proprietary information related thereto. Any products developed by BMS using such Compound shall be included in the definition of the term "Product" for purposes of this Agreement. However, BMS shall have no obligation to develop such Compound.
(b) In the event that CADUS develops a Compound using a
Non-Exclusive Screen (a "CADUS Compound"), CADUS hereby grants to BMS a right of
first offer to acquire an exclusive license to such CADUS Compound pursuant to
Section 5.4.
5.4 RIGHT OF FIRST OFFER. CADUS may conduct research related to the
development of CADUS Compounds using Non-Exclusive Screens as provided in
Section 5.3. With respect to CADUS Compounds that are discovered during the term
of the Research Programs or the nine-month period thereafter, and with respect
to Non-Exclusive Screens that are developed during the Research Programs, from
time to time during such period, CADUS will advise BMS of any such CADUS
Compounds or Non-Exclusive Screens it discovers or develops and supply
sufficient information and data related thereto or reasonably requested by BMS
to allow BMS to determine its interest in acquiring an exclusive license
therefor. At any time thereafter for a period of three (3) years after the term
of the Research Programs, as CADUS determines that it is interested in entering
into a development and licensing or marketing arrangement regarding any such
CADUS Compound, or a licensing arrangement regarding any such Non-Exclusive
Screen, with another party for exploitation in the Territory, CADUS hereby
grants to BMS a right of first offer to acquire: (i) an exclusive license to use
and practice any such Non-Exclusive Screen (including, without limitation, the
right to grow sufficient amounts of Materials provided by CADUS to BMS), and
(ii) to
acquire an exclusive license to make, have made, distribute, use and sell any such CADUS Compound, as follows:
(a) CADUS shall give written notice to BMS of its interest in entering into a development and licensing or marketing arrangement for such Non-Exclusive Screen or CADUS Compound, together with sufficient information regarding such Non-Exclusive Screen or CADUS Compound, as the case may be, which is reasonably necessary for BMS to make an informed decision regarding such arrangement, including, without limitation, the commercial terms upon which CADUS is interested in offering such Non-Exclusive Screen or CADUS Compound. BMS shall have ninety (90) days after receipt of such notice and information to decide whether or not it wishes to accept such offer. During such period, CADUS shall provide BMS with all additional information and data reasonably requested by BMS which is relevant to BMS's considerations.
(b) In the event that BMS declines to accept such offer or does not reply to CADUS's notice within the ninety (90) day period, CADUS shall be free, for a period of one (1) year thereafter, to negotiate a licensing or marketing arrangement with a Third Party for the particular Non-Exclusive Screen or CADUS Compound, but may not conclude any transaction with any Third Party on terms less advantageous to CADUS than those offered to BMS for such Non-Exclusive Screen or CADUS Compound without first offering said less advantageous terms to BMS in compliance with this Section 5.4.
(c) In the event additional significant new findings not yet presented to BMS are developed during such one (1) year period, CADUS shall give BMS the opportunity to review such additional data and to reconsider its interest in any Non-Exclusive Screen or CADUS Compound previously declined by BMS, if CADUS has not already concluded an arrangement with a Third Party with respect to such Non-Exclusive Screen or CADUS Compound, as the case may be. CADUS shall not subject itself to any restrictions during negotiations with Third Parties which would prohibit it from offering such additional data to BMS.
6. ROYALTIES AND MILESTONE PAYMENTS.
6.1 ROYALTIES. In consideration of the licenses and other rights granted to BMS under this Agreement, during the Royalty Term, BMS shall pay to CADUS a royalty on Net Sales of any Product commencing on the First Commercial Sale of such Product by BMS, its Affiliates, its licensees or its sublicensees as follows:
(a) With respect to all Products sold in the United States, royalties shall be paid on the Net Sales of such Products in an amount equal to the following percentages of the annual Net Sales of each Product:
On Annual Net Sales
of Each Product Royalty Rate
--------------- ------------
[c.i.] [c.i.]
|
(b) With respect to all Products sold in any other country in the Territory, royalties shall be paid on the Net Sales of such Products at a rate of [c.i.].
(c) Upon expiration of BMS's obligation to pay royalties with respect to a Product pursuant to this Section 6.1, BMS shall have the royalty-free, perpetual right to continue to manufacture, use and sell such Product in the Territory.
6.2 BUNDLING AND CAPITATION TRANSACTIONS.
(a) It is the intention of the Parties that BMS shall not use the Products as loss-leaders in bundling and capitation transactions involving Products under this Agreement and other BMS products. It is BMS's intention to not discount any of the Products disproportionately to discounts applied to any other products of BMS, after taking into consideration the relevant market factors pertaining to such Products and the other products of BMS included in such bundling and capitation transactions.
(b) Each time BMS submits a statement regarding the calculation of Net Sales of Products pursuant to Section 7.1, BMS shall also provide to CADUS a statement showing the average discount from list price of each Product and the average discount from list price of all other BMS products covered by patents, when taken as a whole. In the event that there is a substantial disparity between each of the foregoing, at the request of CADUS the Parties shall meet to discuss: (i) whether the intention of the Parties set forth in Section 6.2(a) has been satisfied, given the relevant market factors pertaining to such Products and the other products of BMS covered by patents; and, if not (ii) what adjustments BMS will use its reasonable efforts to make to satisfy such intention in the future.
(c) With respect to Products sold in combination with any other products of BMS in a capitation transaction, Net Sales of such Products shall be calculated in accordance with the following formula:
ASP-P X N-P
NS-P = --------------------------- x CTF
[ ]n
[SIGMA] i=1 ASP-pi x N-pi
[ ]
|
Where:
NS-P = Amount allocated to Net Sales of the
Product
ASP-P = Average Weighted Selling Price per
unit, during the applicable period, of
Product when sold alone
ASP-pi = Average Weighted Selling Price per
unit, during the applicable period, of
each Product or each other BMS product
in the capitation transaction when sold
alone
N-P = Total number of units of Product
included in the capitation transaction
during the applicable period
N-pi = Total number of units of each Product
or other BMS product included in the
capitation transaction during the
applicable period
[ ]n
[SIGMA] i=1 = The sum of ASP-pi times N-pi for each
[ ] and every Product or other BMS product
included in the capitation transaction
during the applicable period
CTF = The aggregate capitation fee for the
capitation transaction during the
applicable period
|
The Average Weighted Selling Price shall be based on the actual average selling price of the applicable Product or other BMS product, as the case may be, determined for the applicable period.
(d) For purposes of this Section 6.2, the term "market factors" with respect to any Product or other product of BMS shall mean, as compared to a product of similar market potential at a similar stage in its product life, taking into account the establishment of the product in the marketplace, the competitiveness of the marketplace, the proprietary position of the product, the regulatory structure involved, the profitability of the product and other relevant factors bearing on the marketability of such Product or other product of BMS.
(e) An example of the calculation of the amount includable in Net Sales for a Product included in a capitation transaction, using the formula provided in this Section 6.2, is set forth in APPENDIX C.
6.3 THIRD PARTY ROYALTIES. BMS, at its sole expense, shall pay all royalties owing to any Third Party in order to exercise BMS's rights hereunder to make, have made, use or sell any Product; provided that BMS shall be entitled to a credit against royalties due to CADUS under this Agreement in each calendar quarter in an amount equal to [c.i.] of such royalties paid to such Third Parties for such calendar quarter, but in no event shall the royalty owing to CADUS under Section 6.1 above for any
calendar quarter be reduced by more than [c.i.]
of Net Sales with respect to such Product for such calendar quarter.
6.4 MILESTONE PAYMENTS. As further consideration for the licenses and other rights granted to BMS under this Agreement, BMS shall pay CADUS the following milestone payments upon the first occurrence of each event set forth below with respect to each Product:
(a) [c.i.]
upon delivery of the first Compound that has reached the PLP Stage for each Product, plus [c.i.] for each additional Compound that reaches the PLP Stage for such Product;
(b) [c.i.]
upon filing with the FDA of an IND in the United States (or its equivalent in any other country);
(c) [c.i.]
upon commencement of Phase 3 clinical trials, in the United States (or their equivalent in any other country); and
(d) [c.i.]
upon filing a NDA or PLA in the United States (or its equivalent in any other country); and
(e) [c.i.]
upon receipt of NDA or PLA approval from the FDA, including the required marketing and pricing approval (or from the governing health authority of any other country).
With respect to any milestone payments made pursuant to Section 6.3(e),
BMS shall be entitled to a credit against royalties in an amount equal to
one-half of such payments, but in no event shall such credit be more than
[c.i.]of such royalties due hereunder for such Product in the Territory in any
calendar quarter.
6.5 OBLIGATION TO PAY ROYALTIES. The obligation to pay royalties to CADUS under this Section 6 is imposed only once with respect to the same unit of Product regardless of the number of Patents pertaining thereto. BMS shall only be entitled to a credit against royalties or a reduction of the royalty rate once with respect to any Product in any country pursuant to any provision in this Agreement. There shall be no obligation to pay royalties to CADUS under this Section 6 on sales of Products among BMS, its Affiliates, its licensees and sublicensees but in such instances the obligation to pay royalties shall arise upon the sale by BMS, its Affiliates, its licensees or sublicensees to unrelated third parties.
7. PAYMENTS AND REPORTS.
7.1 PAYMENT. All royalty payments due hereunder shall be paid quarterly within sixty (60) days of the end of each calendar quarter. Each such payment shall be accompanied by a statement, Product-by-Product and country-by-country, of the amount of Net
Sales during such quarter and the amount of royalties due on such Net Sales.
7.2 MODE OF PAYMENT. BMS shall make all payments required under this Agreement as directed by CADUS from time to time in United States Dollars. The royalty payments due shall be translated at the rate of exchange at which United States Dollars are listed in THE WALL STREET JOURNAL (or its equivalent if THE WALL STREET JOURNAL is no longer being published at the time) for the currency of the country in which the royalty is accrued for the last business day of the calendar quarter in which such sales were made.
7.3 RECORDS RETENTION. BMS, its Affiliates, its licensees and its sublicensees shall keep complete and accurate records (specifically including originals or copies of documents supporting entries in the books of account) pertaining to the sale of Products in the Territory and covering all transactions from which Net Sales are derived for a period of three calendar years after the year in which such sales occurred, and in sufficient detail to permit CADUS to confirm the accuracy of royalty calculations hereunder.
7.4 AUDIT REQUEST. At the request and expense of CADUS, BMS, its Affiliates, its licensees and its sublicensees shall permit CADUS or an independent, certified public accountant appointed by CADUS, at reasonable times and upon reasonable notice, to examine those records and all other material documents relating to or relevant to Net Sales in the possession or control of BMS, its Affiliates, its licensees or its sublicensees, for a period of two years after such royalties have accrued, as may be necessary to: (i) determine the correctness of any report or payment made under this Agreement; or (ii) obtain information as to the royalties payable for any calendar quarter in the case of BMS's failure to report or pay pursuant to this Agreement. Results of any such examination shall be made available to both Parties. CADUS shall bear the full cost of the performance of any such audit except as hereinafter set forth. If, as a result of any inspection of the books and records of BMS, its Affiliates, its licensees or its sublicensees, it is shown that BMS's royalty payments under this Agreement were less than the amount which should have been paid, then BMS shall make all payments required to be made to eliminate any discrepancy revealed by said inspection within 30 days after CADUS's demand therefor. Furthermore, if the royalty payments were less than the amount which should have been paid by an amount in excess of 10% of the royalty payments actually made during the period in question, BMS shall also pay to CADUS a late charge equal to 10% of the shortfall and reimburse CADUS for the cost of such inspection.
7.5 TAXES. In the event that BMS is required to withhold any tax to the revenue authorities in any country in the Territory regarding any payment to CADUS due to the laws of such country, such amount shall be deducted by BMS, and it shall notify CADUS
and promptly furnish CADUS with copies of any tax certificate or other documentation evidencing such withholding.
8. INFRINGEMENT ACTIONS BY THIRD PARTIES.
8.1 NOTICE OF SUIT OR CLAIM OF INFRINGEMENT. Each Party shall notify the other Party promptly in writing of any claim of, or action for, infringement of any patents belonging to third parties which is threatened, made or brought against either Party by reason of the manufacture, use or practice of any Screens or the manufacture, use or sale of the Products in the Territory.
8.2 OBLIGATION TO DEFEND.
(a) With respect to any Screens or Products other than as described in Section 8.2(b):
(1) In the event that an action for infringement is commenced against BMS, its licensees or its sublicensees based on the manufacture, use or practice of any Screens or its manufacture, use or sale of any Product in any country in the Territory, BMS shall defend such action at its own expense, and CADUS hereby agrees to assist and cooperate with BMS, at its own expense, to the extent necessary in the defense of such suit. If such action is commenced against BMS, its licensees or its sublicensees and CADUS jointly, BMS shall defend such action on behalf of both parties at its own expense and with attorneys of its own selection, and CADUS shall be entitled to counsel in such proceedings at its own expense. BMS shall have the right to settle the suit or consent to an adverse judgment thereto, in its sole discretion; provided that if such suit names CADUS as a defendant, then such settlement or consent shall either be with the consent of CADUS or shall provide for the release of CADUS from any liability with respect thereto. During the pendency of such action, BMS shall continue to pay all royalties due hereunder. In the event BMS fails to defend such action, CADUS may defend such action and shall have the right to take charge of the defense.
(2) If BMS finally prevails because it is held not to be infringing any patents belonging to such Third Party or because such Third Party's patent is held invalid, BMS shall continue to pay royalties as set forth in Section 6, but shall be entitled to a credit against royalties of an amount equal to one-half of the reasonable costs actually incurred in such action, but in no event shall such credit be more than 50% of such royalties due hereunder for Products in such country which is the subject of such action in any calendar quarter.
(3) If BMS finally loses, whether by judgment, award, decree or settlement, and is required to pay a royalty to such Third Party, BMS shall continue to pay royalties for such Products in the country which is the subject of such action, but shall be entitled to a credit against such royalties for each
calendar quarter in an amount equal to [c.i.] of the royalties paid to such Third Party for such calendar quarter, but in no event shall such credit be more than [c.i.] of Net Sales with respect to such Products in such country for such calendar quarter. In addition, if BMS incurs litigation expenses or is required to pay damages to such Third Party, BMS shall be entitled to a credit against such royalties in an amount equal to [c.i.] of the reasonable costs actually incurred in such action plus [c.i.] of the damages, but in no event shall the total credit provided herein in a calendar quarter be more than [c.i.] of the royalties due hereunder for Products in such country which is the subject of such action in any calendar quarter.
(b) With respect to the manufacture, use or practice of any Non-Exclusive Screens by CADUS:
(1) In the event that an action for infringement is commenced against BMS, its licensees or its sublicensees, or against BMS or its sublicensees and CADUS jointly, based on CADUS's manufacture, use or practice of any Non-Exclusive Screen, CADUS shall defend such action at its own expense and with attorneys of its own selection, and BMS shall be entitled to counsel in such proceedings at its own expense. During the pendency of such action, BMS shall continue to pay all royalties due hereunder. In the event CADUS fails to defend such action, BMS may defend such action and shall have the right to take charge of the defense.
(2) In such event, CADUS shall bear the full costs and expenses of such defense (including fees of its attorneys and other professionals) and it shall assume full responsibility for the payment of any award for damages, or any amount due pursuant to any settlement entered into by CADUS with such Third Party, which CADUS shall have the right to do in its sole discretion.
9. OWNERSHIP OF INVENTIONS; PATENTS.
9.1 OWNERSHIP OF INVENTIONS. Except as otherwise provided in this Agreement, the entire right and title in all Inventions, and any patent applications or patents based thereon, solely by employees or others acting on behalf of CADUS shall be owned solely by CADUS, and solely by employees or others acting on behalf of BMS shall be owned solely by BMS. The cost for patent applications and patent maintenance shall be borne by the respective Party who owns such Invention.
9.2 JOINT INVENTIONS. The Parties recognize that, as a result of the collaboration between BMS and CADUS during the conduct of the Research Programs hereunder, certain Inventions may be deemed to be Joint Inventions. In that event, the Parties shall jointly own patents, inventor's certificates and applications therefor covering such Joint Invention. The cost for
patent applications and patent maintenance shall be borne by the Parties on an equal basis (50/50).
9.3 PATENT ENFORCEMENT.
(a) With respect to any alleged infringement solely involving a Valid Claim(s) of any Patents involving any BMS Receptors or any Product Patents, BMS shall have the first right, but not the duty, to institute patent infringement actions against Third Parties. If BMS does not institute an infringement proceeding against an offending Third Party, CADUS shall have the right, but not the duty, to institute such an action.
(b) With respect to any alleged infringement solely involving a Valid Claim(s) of any Patents listed on APPENDIX A, CADUS shall have the right, but not the duty, to institute patent infringement actions against Third Parties.
(c) With respect to any alleged infringements other than as described in Section 9.3(a) or (b) (including, without limitation, any alleged infringement solely involving a Valid Claim(s) of any Patents other than those listed on APPENDIX A, except those involving any BMS Receptors), the Parties shall determine how they should proceed with respect to such alleged infringement at such time.
(d) The costs and expenses of any action instituted pursuant to this
Section 9.3 (including fees of attorneys and other professionals) shall be borne
by the Party instituting the action, or, if the Parties elect to cooperate in
instituting and maintaining such action, such costs and expenses shall be borne
by the Parties in such proportions as they may agree in writing. Each Party
shall execute all necessary and proper documents and take such actions as shall
be appropriate to allow the other Party to institute and prosecute such
infringement actions (if such other Party has the right to institute and
prosecute such infringement actions pursuant to this Section 9.3). Any award
paid by Third Parties as a result of such an infringement action (whether by way
of settlement or otherwise) shall be paid to the Party who instituted and
maintained such action, or, if both Parties instituted and maintained such
action, such award shall be allocated among the Parties in proportion to their
respective contributions to the costs and expenses incurred in such action, or
as they may have otherwise agreed.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION. Each Party shall indemnify and hold the other Party, its Affiliates, its licensees and its sublicensees, and their respective directors, officers, employees and agents, harmless from and against any and all liabilities, damages, losses, costs and expenses (including the fees of attorneys and other professionals) arising out of or resulting from:
(a) negligence, recklessness or intentional acts or omissions of the indemnifying Party, its Affiliates or sublicensees, and their respective directors, officers, employees and agents, in connection with the work performed by such party under the Research Programs;
(b) any warranty claims, Product recalls or any claims of personal injury or property damage relating to the manufacture, use, distribution or sale of any Screen or Product due to any negligence, recklessness or intentional acts or omissions by the indemnifying Party, its Affiliates or sublicensees, and their respective directors, officers, employees and agents, except, in each case, to the comparative extent such claim arose out of or resulted from the negligence, recklessness or intentional acts or omissions of the other Party, its Affiliates or sublicensees, and their respective directors, officers, employees and agents.
10.2 NOTICE. In the event that either Party is seeking indemnification under Section 10.1, such Party shall inform the indemnifying Party of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the right to settle it at the sole discretion of the indemnifying Party), and shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim.
11. PUBLICATION; CONFIDENTIALITY.
11.1 NOTIFICATION. Both parties recognize that each may wish to publish the results of their work relating to the Research Programs. However, both parties also recognize the importance of acquiring patent protection on inventions. Consequently, any proposed publication by either Party shall comply with this Section 11. At least 60 days before a manuscript is to be submitted to a publisher, the publishing Party will provide the other Party with a copy of the manuscript. If the publishing Party wishes to make an oral presentation, it will provide the other Party with a copy of the abstract (if one is submitted) at least 60 days before it is to be submitted. The publishing Party will also provide to the other Party a copy of the text of the presentation, including all slides, posters, and any other visual aids, at least 60 days before the presentation is made.
11.2 REVIEW OF PROPOSED PUBLICATIONS. The receiving Party will review the manuscript, abstract, text or any other material provided under Section 11.1 to determine if patentable subject matter is disclosed. The reviewing Party will notify the publishing Party within 30 days of receipt of the proposed publication if the reviewing Party, in good faith, determines that patentable subject matter is or may be disclosed, or if the reviewing Party, in good faith, believes confidential or
proprietary information is or may be disclosed. If it is determined by the reviewing Party that patent applications should be filed, the publishing Party shall delay its publication or presentation for a period not to exceed 90 days from the reviewing Party's receipt of the proposed publication to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the 90 day period, the Parties will discuss the need for obtaining an extension of the publication delay beyond the 90 day period. If it is determined in good faith by the reviewing Party that confidential or proprietary information is being disclosed, the Parties will consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication to avoid such disclosure. The publishing Party of any manuscript, text or oral presentation will acknowledge the other Party for its contribution to the material being published or presented and to the Research Programs.
11.3 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of the Research Programs and for five (5) years thereafter
the receiving Party, its Affiliates, its licensees and its sublicensees shall
keep, and shall ensure that its officers and directors keep, completely
confidential and shall not publish or otherwise disclose and shall not use for
any purpose any information furnished to it by the other Party, its Affiliates,
its licensees or its sublicensees or developed under any Research Program
pursuant to this Agreement, except to the extent that it can be established by
the receiving Party by competent proof that such information: (i) is or
hereafter becomes generally available to the public other than by reason of any
default with respect to a confidentiality obligation; (ii) was already known to
the recipient as evidenced by prior written documents in its possession; or
(iii) is disclosed to the recipient by a Third Party who is not in default of
any confidentiality obligation to the disclosing Party ("Confidential
Information").
11.4 EXCEPTIONS. The restrictions contained in Section 11.3 shall not apply to Confidential Information that (i) is submitted by the recipient to governmental authorities to facilitate the issuance of marketing approvals for Product, provided that reasonable measures shall be taken to assure confidential treatment of such information; (ii) is provided by the recipient to Third Parties under appropriate terms and conditions, including confidentiality provisions equivalent to those in this Agreement, for consulting, manufacturing development, manufacturing, external testing and marketing trials; or (iii) is otherwise required to be disclosed in compliance with applicable laws or regulations or order by a court or other regulatory body having competent jurisdiction; provided that if a Party is required to make any such disclosure of the other Party's Confidential Information it will, except where impracticable for necessary disclosures, for example to physicians conducting
studies or to health authorities, give reasonable advance notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.
11.5 CONFIDENTIALITY OBLIGATION OF CADUS. CADUS agrees that, for the term of the Research Programs and for seven years thereafter it shall keep completely confidential and shall not publish or otherwise disclose confidential information pertaining to its Technology, except to the extent that CADUS can establish by competent proof that such information:
(a) was or became generally available to the public or otherwise part of the public domain other than through any act or omission of CADUS in breach of this Agreement;
(b) was disclosed under requirement of law or by order or regulation of a governmental agency or a court of competent jurisdiction, including without limitation any requirement to disclose such information to any governmental agency for purposes of obtaining approval to market the Products;
(c) is information which CADUS has sought patent or equivalent protection, including the filing of a patent application; or
(d) was disclosed to any Third Party under an obligation of confidentiality, including consultants of CADUS, other licensees or potential licensees of CADUS or potential business partners of CADUS.
11.6 LIMITATIONS ON USE. Each Party shall use, and cause each of its Affiliates, its licensees and its sublicensees to use, any Confidential Information obtained by it from the other Party, its Affiliates, its licensees or its sublicensees, pursuant to this Agreement or otherwise, solely in connection with the covered activities or the transactions contemplated hereby.
11.7 REMEDIES. Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to an injunction, without the posting of any bond or other security, enjoining or restraining the other Party, its Affiliates, its licensees and/or its sublicensees from any violation or threatened violation of this Section.
11.8 SURVIVAL.
(a) This Section 11 shall survive the termination or expiration of this Agreement.
(b) The provisions of this Section 11 shall be in addition to, and not in limitation of, the provisions of a separate Confidentiality Agreement between the Parties dated January 3, 1994, as amended March 9, 1994, which shall remain in
full force and effect except to the extent it is fundamentally inconsistent with this Agreement.
12. TERM; TERMINATION.
12.1 TERM. This Agreement shall become effective as of the Effective Date and, unless terminated as provided in this Agreement, shall be perpetual.
12.2 BREACH. Failure by either Party to comply with any of the material obligations contained in this Agreement shall entitle the other Party to give to the Party in default notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within 60 days after the receipt of such notice (or, if such default cannot be cured within such 60-day period, if the Party in default does not commence and diligently continue actions to cure such default), the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate this Agreement by giving written notice to take effect immediately upon delivery of such notice. The right of either Party to terminate this Agreement, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. Termination of the Research Programs by BMS pursuant to a breach by CADUS of its obligations thereunder shall be governed by the provisions of Section 3.13.
12.3 ACCRUED RIGHTS, SURVIVING OBLIGATIONS.
(a) Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination, relinquishment or expiration. Such termination, relinquishment or expiration shall not relieve either Party from obligations which are expressly indicated to survive termination or expiration of this Agreement.
(b) Termination of this Agreement shall not terminate BMS's obligation to pay all royalties and milestone payments. All of the Parties' rights and obligations under Sections 4.5, 6, 7, 8, 9.3, 10, 11, 14.2, 14.12 and 14.13 shall survive termination.
13. FORCE MAJEURE.
13.1 EVENTS OF FORCE MAJEURE. Neither Party shall be held liable or responsible to the other Party nor be deemed to be in default under or in breach of any provision of this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement when such failure or delay is due to FORCE MAJEURE, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, FORCE MAJEURE is defined as causes beyond the control of the Party, including, without
limitation, acts of God; acts, regulations, or laws of any government; war; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of public utilities or common carriers. In such event BMS or CADUS, as the case may be, shall immediately notify the other Party of such inability and of the period for which such inability is expected to continue. The Party giving such notice shall thereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing for so long as it is so disabled and the 30 days thereafter.
14. MISCELLANEOUS.
14.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.
14.2 COVENANT NOT TO SOLICIT EMPLOYEES. Neither Party shall at any time during the term of the Research Programs and for a period of two (2) years thereafter, directly or indirectly, in any manner or under any circumstances or conditions whatsoever solicit, induce or attempt to induce any senior management employee, scientist, or sales and marketing personnel of the other Party or of any Affiliate of the other Party to terminate his or her employment with such Party or such Affiliate.
14.3 ASSIGNMENT. Neither Party shall be entitled to assign its rights hereunder without the express written consent of the other Party hereto, except that both BMS and CADUS may otherwise assign their respective rights and transfer their respective duties hereunder to any assignee of all or substantially all of their respective businesses or in the event of their respective merger or consolidation or similar transaction. No assignment and transfer shall be valid and effective unless and until the assignee/transferee shall agree in writing to be bound by the provisions of this Agreement.
14.4 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
14.5 NOTICE. Any notice or request required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and personally delivered or sent by registered or certified mail (return receipt requested), facsimile transmission (receipt verified), express courier service (signature required), or telegram, prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:
(a) In the case of BMS, to:
Bristol-Myers Squibb Company
P.O. Box 4000
Route 206 & Province Line Road
Princeton, New Jersey 08543-4000
Attention: Vice President and Senior Counsel,
Pharmaceutical Research Institute and
Worldwide Strategic Business
Development
Facsimile No.: (609) 252-4232
(b) In the case of CADUS, to:
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014-4606
Attention: President
Facsimile No.: (212) 229-1948
or to such other address for such Party as it shall have specified by like notice to the other Party, provided that notices of a change of address shall be effective only upon receipt thereof. If sent by mail, facsimile transmission, express courier service, or telegram, the date of mailing or transmission shall be deemed to be the date on which such notice or request has been given.
14.6 USE OF NAME. Except as otherwise provided herein, neither Party shall have any right, express or implied, to use in any manner the name or other designation of the other Party or any other trade name or trademark of the other Party for any purpose in connection with the performance of this Agreement.
14.7 PUBLIC ANNOUNCEMENTS. Except as required by law, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld. In the event of a required public announcement, the Party making such announcement shall provide the other Party with a copy of the proposed text prior to such announcement. The Parties agree that each may make public announcements consistent with APPENDIX D.
14.8 WAIVER. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.
14.9 COMPLIANCE WITH LAW. Nothing in this Agreement shall be deemed to permit a Party to export, reexport or otherwise
transfer any Product sold under this Agreement without compliance with applicable laws.
14.10 SEVERABILITY. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
14.11 AMENDMENT. No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.
14.12 GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to its choice of law principles.
14.13 ARBITRATION. Any dispute arising out of or relating to any provisions of this Agreement shall be finally settled by arbitration to be held in New York, New York, under the auspices and then current commercial arbitration rules of the American Arbitration Association. Such arbitration shall be conducted by three (3) arbitrators appointed according to said rules. Judgment upon any award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
14.14 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.
14.15 COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, any one of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.
14.16 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written.
BRISTOL-MYERS SQUIBB COMPANY
By: /s/WILLIAM A. SCOTT
--------------------------------
Name: William A. Scott
------------------------------
Title: Senior Vice President
-----------------------------
|
CADUS PHARMACEUTICAL CORPORATION
By: /s/JEREMY LEVIN
--------------------------------
Name: Jeremy M. Levin
------------------------------
Title: President & CEO
-----------------------------
|
APPENDIX A
LIST OF PATENTS AND PATENT APPLICATIONS
"[c.i.]"
APPENDIX B
DESCRIPTION OF RESEARCH PROGRAMS
APPENDIX B
Description of Research Programs
between
Cadus Pharmaceutical Corp. and Bristol-Myers Squibb Co.
"[c.i.]"
"[c.i.]"
"[c.i.]"
APPENDIX C
SAMPLE CALCULATION FOR CAPITATION TRANSACTIONS
The following example is based on a capitation transaction involving three products, one of which is a Product governed by this Agreement, and two of which are other products of BMS.
Assumptions:
With respect to the Product included in the capitation transaction, the average weighted selling price and number of units are as follows:
ASP-P = $10.00 per unit N-P = 2,000,000 units
With respect to the other two products included in the capitation transaction, the average weighted selling price and number of units are as follows:
ASP-p1 = $1.00 per unit N-P1 = 3,500,000 units ASP-p2 = $3.00 per unit N-P2 = 5,000,000 units |
The aggregate capitation fee for the capitation transaction is $5,000,000.
Formula:
ASP-P X N-P
NS-P = --------------------------- x CTF
[ ]n
[SIGMA] i=1 ASP-pi x N-pi
[ ]
|
Calculation:
$10.00 X 2,000,000
NS-P = -------------------------------------------------- x $5,000,000
($10.00 x 2,000,000) + ($1.00 x 3,500,000)
+ ($3.00 x 5,000,000)
20,000,000
NS-P = --------------------------------------------- x $5,000,000
20,000,000 + 3,500,000 + 15,000,000
Rounding fraction to four places after decimal point:
NS-P = 0.5195 x $5,000,000
NS-P = $2,597,500
The portion of the capitation transaction fee that is allocated to Net Sales of the Product is $2,597,500.
APPENDIX D
FORM OF PUBLIC ANNOUNCEMENT
BRISTOL-MYERS SQUIBB COMPANY [Letterhead}
P.O. Box 4000
Princeton, NJ 08534-4000
609/252-4000
CONTACT: Jeremy M. Levin, M.D., Ph.D.
President and Chief Executive Officer
Cadus Pharmaceutical Corporation
(212) 645-3738
William Dunnett
Bristol-Myers Squibb Company
(609) 252-5094
Anthony J. Russo, Ph.D.
Noonan/Russo Communications, Inc.
(212) 696-4455, Ext. 202
FOR RELEASE: July 28, 1994
BRISTOL-MYERS SQUIBB AND CADUS PHARMACEUTICAL
ANNOUNCE BIOTECHNOLOGY RESEARCH COLLABORATION
(Princeton, N.J. and New York) -- Bristol-Myers Squibb Company (NYSE: BMY)
and Cadus Pharmaceutical Corporation today announced a research collaboration
for the discovery and development of novel pharmaceuticals using Cadus's
yeast-based screening technologies.
Cadus is an early stage biotechnology company focusing on drug discovery through the creation of novel drug screens which could greatly simplify and shorten the often arduous screening methods now employed to find new drugs. Under the agreement, Cadus could receive up to $45 million in research funding and equity investments from Bristol-Myers Squibb.
"Screening chemicals and biologic compounds to determine their therapeutic potential is a critical step in the drug discovery process," said Leon E. Rosenberg, M.D., president, Bristol-Myers Squibb Pharmaceutical Research Institute. "This exciting technology from Cadus will provide Bristol-Myers Squibb
-more-
with innovative screening processes that are faster, more efficient and more meaningful than traditional methods. We look forward to fully exploring the potential of this frontier technology."
Jeremy M. Levin, M.D., Ph.D., president and chief executive officer of Cadus, said the agreement demonstrates the promise of Cadus's novel drug discovery technologies for accelerating the discovery process and increasing its cost-effectiveness.
"We are extremely pleased and excited about this collaboration," he said. "Bristol-Myers Squibb has the expertise and resources to make optimal use of Cadus's knowledge of novel drug screens, which can be a key component in the discovery of compounds to treat numerous diseases, including inflammatory disorders, neurological disorders and major cardiovascular diseases."
Under terms of the agreement, Bristol-Myers Squibb will provide Cadus with research funding for three years, with the option to extend the program for an additional two years. To launch the collaboration, Bristol-Myers Squibb has made an investment in Cadus comprising approximately 15 percent of Cadus equity. Bristol-Myers Squibb also has committed to further equity investments upon the achievement of certain scientific milestones or Cadus's next private equity offering, and upon Cadus's initial public offering. Additionally, Cadus would receive specific milestone and royalty payments from any products that result from the collaboration.
The core technology around which Cadus was formed involved G protein coupled receptors. These receptors regulate the physiologic behavior of the cell by blocking or transmitting signals from outside the cell, through G proteins, to the cell's interior. G proteins are found in the inner membrane of almost all cells, including human, animal, and plant cells.
Over 1,000 types of G protein coupled receptors have been identified, including receptors known or suspected to play a role in many diseases, including Alzheimer's disease, rheumatoid arthritis, hypertension,
-more-
atherosclerosis and some cancers. Researchers often try to screen for compounds that influence the transmission of signals, and thus may have a therapeutic benefit for a particular disease.
Cadus researchers have developed a method to simplify the testing of compounds against G protein signaling pathways. This method involves transferring the genes for a single human receptor complex into yeast cells. Such yeast cells contain human G protein coupled receptors that act as if they were in human cells. Cadus has constructed a series of such yeast strains which can be used in a high-throughput screening system to test thousands of compounds a day, a substantial improvement over existing mammalian cell-based screens which are time consuming and difficult to utilize.
"Most mammalian cell-based screening only determines if a compound shows binding activity necessary in a therapeutic candidate. The screening technology developed by Cadus also determines a biological effect which makes the screening results more meaningful," said Dr. Rosenberg.
Cadus is a privately held drug discovery company based in New York City. It was founded in 1992 by molecular biologists from Princeton University and the University of North Carolina, Chapel Hill. In July 1993, the company completed its first round of financing, raising $8 million.
Bristol-Myers Squibb is a diversified, research-based health and personal care company whose principal businesses are pharmaceuticals, consumer products, nutritionals, and medical devices. It is among the world's leading makers of cardiovascular, anticancer, anti-infective, central nervous system and dermatological drug therapies, diagnostic agents and non-prescription medicines.
# # #
072894/029
[Note: Certain portions of this document have been marked "[c.i.]" to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
SCREENING AND OPTION AGREEMENT
BETWEEN
CADUS PHARMACEUTICAL CORPORATION
AND
BRISTOL-MYERS SQUIBB COMPANY
DATED AS OF July 26, 1994
TABLE OF CONTENTS
Page
----
PRELIMINARY STATEMENTS....................................................... 1
1. DEFINITIONS............................................................. 1
2. REPRESENTATIONS AND WARRANTIES.......................................... 3
2.1 Representations and Warranties of Both
Parties............................................................ 3
2.2 DISCLAIMER OF WARRANTIES........................................... 3
3. SCREENING PROJECTS...................................................... 4
3.1 Access and Permitted Use........................................... 4
3.2 Restrictions on Transfer and Use................................... 4
3.3 Access to and Use of Compounds..................................... 5
3.4 CADUS Obligations Upon Completion of Each
Screening Project.................................................. 5
3.6 Access to and Use of the Results................................... 6
3.7 Conduct of Screening and Research Projects
by CADUS........................................................... 6
3.8 Screening Project Reports.......................................... 7
3.9 Research Project Reports........................................... 7
3.10 Records............................................................ 7
3.11 Return of Compounds to BMS......................................... 7
3.12 Liability.......................................................... 8
4. GRANT OF OPTION......................................................... 8
4.1 Grant of Option.................................................... 8
4.2 Term of Option..................................................... 8
4.3 Exercise of Option; Effect......................................... 9
4.4 Failure to Exercise Option; Effect................................. 9
4.5 Restrictions on Use During Option Period........................... 9
5. RIGHT OF NEGOTIATION.................................................... 10
5.1 Right of Negotiation............................................... 10
6. OWNERSHIP OF INVENTIONS; PATENTS........................................ 10
6.1 Library and Compounds.............................................. 10
6.2 Results............................................................ 10
6.3 No Other Technology Rights......................................... 10
7. INDEMNIFICATION......................................................... 10
7.1 Indemnification.................................................... 10
7.2 Notice............................................................. 11
|
8. PUBLICATION; CONFIDENTIALITY............................................ 11
8.1 Notification....................................................... 11
8.2 Review of Proposed Publications.................................... 11
8.3 Confidentiality; Exceptions........................................ 12
8.4 Exceptions......................................................... 12
8.5 Remedies........................................................... 12
8.6 Survival........................................................... 13
9. TERM; TERMINATION....................................................... 13
9.1 Term............................................................... 13
9.2 Breach............................................................. 13
9.3 Accrued Rights, Surviving Obligations.............................. 13
10.FORCE MAJEURE........................................................... 14
10.1 Events of Force Majeure............................................ 14
11.MISCELLANEOUS........................................................... 14
11.1 Relationship of Parties............................................ 14
11.2 Assignment......................................................... 14
11.3 Further Actions.................................................... 14
11.4 Notice............................................................. 14
11.5 Use of Name........................................................ 15
11.6 Public Announcements............................................... 15
11.7 Waiver............................................................. 15
11.8 Severability....................................................... 16
11.9 Amendment.......................................................... 16
11.10 Governing Law...................................................... 16
11.11 Arbitration........................................................ 16
11.12 Entire Agreement................................................... 16
11.13 Counterparts....................................................... 16
11.14 Descriptive Headings............................................... 16
LIST OF EXHIBITS
- ----------------
EXHIBIT A Form of Confidentiality and Non-Disclosure
Agreement
|
SCREENING AND OPTION AGREEMENT
This SCREENING AND OPTION AGREEMENT (this "Agreement") dated as of July 26, 1994 between Bristol-Myers Squibb Company, a corporation duly organized and existing under the laws of the state of Delaware, having offices at P.O. Box 4000, Route 206 and Province Line Road, Princeton, New Jersey 08543-4000 ("BMS") and Cadus Pharmaceutical Corporation, a corporation duly organized and existing under the laws of the state of Delaware, and having offices at 180 Varick Street, New York, New York 10014-4606 ("CADUS").
PRELIMINARY STATEMENTS
A. BMS is the owner of, and has all right, title and interest in, or has acquired the exclusive rights to, a certain compound library, together with all compounds contained therein and all formulae, constituent technology, patent applications, patents, know-how, data and information relating thereto.
B. CADUS desires to evaluate such library and test certain of the compounds contained therein, and to obtain an option to acquire a license for one or more compounds.
C. CADUS and BMS are simultaneously entering into that certain Research Collaboration and License Agreement to provide for BMS to provide funding for further research to be conducted by CADUS involving certain of CADUS's technology, and for CADUS to license, and BMS to obtain a license for, the use and practice of screening assays developed by CADUS using the technology and the manufacture, use and sale of products identified or confirmed by the use of such CADUS technology.
D. CADUS and BMS are also simultaneously entering into the Stock Purchase Agreement to provide for BMS to obtain an equity interest in CADUS and CADUS to sell an equity interest in CADUS to BMS.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements of the Parties contained in this Agreement, the Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have those meanings set forth in this Section 1 unless the context dictates otherwise.
1.1 "Affiliate", with respect to any Party, shall mean any Person controlling, controlled by, or under common control with, such Party. For these purposes, "control" shall refer to (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise or (b) the ownership, directly or indirectly, of at least 50% of the voting securities or other ownership interest of a Person.
1.2 "Analog" of any Compound shall mean a compound in which the active substructure of such Compound is conserved.
1.3 "Compound" shall mean any compound contained in the Library.
1.4 "Development Compound" shall mean any compound being developed by BMS, whether or not subject to this Agreement, that has reached the stage of development where such compound has received approval as a pre-clinical lead profile candidate for a product pursuant to the then applicable internal policies and procedures of the BMS Pharmaceutical Research Institute, and is being developed as a potential therapeutic product.
1.5 "Library" shall mean the compound library owned by BMS and to which BMS is providing access to CADUS pursuant to this Agreement.
1.6 "Know-How" shall mean any and all technical data, information, material and other know-how, including but not limited to formulae, procedures, protocols, techniques and results of experimentation and testing, owned, developed or acquired by BMS, which relate to a Compound or Analog and are necessary or useful to make, use or sell a Product having such Compound or Analog as one of its active ingredients.
1.7 "Party" shall mean CADUS or BMS and, when used in the plural, shall mean CADUS and BMS.
1.8 "Patents" shall mean all patents and patent applications which BMS presently or hereafter owns or controls and which claim a Compound or Analog or the process of manufacture or use of a Compound or Analog, in any country where a Product having such Compound or Analog as one of its active ingredients is licensed to CADUS, and any substitutions, extensions, renewals, continuations, continuations-in-part, divisions, patents-of-addition and/or reissues thereof, to the extent that they cover the manufacture, use or sale of such Product in such country.
1.9 "Person" shall mean any natural person, corporation, firm, business trust, joint venture, association, organization, company, partnership or other business entity, or any government or any agency or political subdivision thereof.
1.10 "Product" shall mean any product which uses as one of its active ingredients a Compound or an Analog of a Compound conceived, designed, synthesized or developed, directly or indirectly, incorporating or using the Results.
1.11 "Research Collaboration and License Agreement" shall mean that certain research collaboration and license agreement dated of even date herewith between BMS and CADUS.
1.12 "Research Project" shall mean each project by CADUS, directly or indirectly incorporating or using the Results and directed toward the research or development of a Product.
1.13 "Results" shall mean: (a) all data, information and other results arising from CADUS's evaluation of the Library, testing of the Compounds or other permitted use of the Library or the Compounds under the Screening Projects; and (b) all inventions, discoveries, improvements or other technology, whether or not patentable, and any patent applications or patents based thereon, conceived or reduced to practice by employees or others acting on behalf of CADUS, arising from CADUS's evaluation of the Library, testing of the Compounds or other permitted use of the Library or the Compounds under the Screening Projects.
1.14 "Screening Project" shall mean each research project by CADUS directly involving the evaluation of the Library, testing of the Compounds or other analysis of the Library or the Compounds designed to obtain data or information regarding activity of the Compounds toward a particular receptor.
1.15 "Screening Term" shall mean the period commencing on the date of this Agreement and, unless terminated earlier as provided in this Agreement, ending on the date that the Research Programs pursuant to the Research Collaboration and License Agreement end as provided therein.
1.16 "Stock Purchase Agreement" shall mean that certain preferred stock purchase agreement dated of even date herewith between BMS and CADUS.
1.17 "Third Party" shall mean any Person who or which is neither a Party nor an Affiliate of a Party.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Both Parties. Each Party represents and warrants to the other Party that: (i) it is free to enter into this Agreement; (ii) in so doing, it will not violate any other agreement to which it is a party; and (iii) it has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement.
2.2 DISCLAIMER OF WARRANTIES. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY BMS THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION, THAT ANY PATENT WHICH ISSUES WILL BE VALID, OR THAT THE USE OF THE LIBRARY, THE COMPOUNDS, THE RESULTS OR THE PRODUCTS WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY THIRD PARTY. FURTHERMORE, BMS MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LIBRARY, THE COMPOUNDS, THE RESULTS OR THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
3. SCREENING PROJECTS.
3.1 Access and Permitted Use. From time to time during the Screening Term, CADUS may request that BMS search the Library for Compounds that meet certain compound structures specified by CADUS. At such time, CADUS shall notify BMS of the receptors that CADUS intends to screen. BMS shall not be required to search the Library for Compounds if the receptors that CADUS intends to screen are the same as any receptors that BMS is screening against or has a research program directed towards. In such event, BMS shall promptly notify CADUS that its search request can not be commenced. Such search requests may be made no more frequently than twice in any year during the Screening Term. In the event that BMS is required to search the Library for Compounds pursuant to this provision, and BMS finds Compounds that meet the compound structures specified by CADUS in any search request, and provided that BMS has sufficient quantities of such Compound(s) in the Library at such time, BMS shall provide CADUS with such quantities of such Compound(s) as reasonably requested by CADUS to permit CADUS to run primary and secondary in vitro screens on such Compound(s), in order to allow CADUS to determine its interest in licensing one or more such Compound(s) and to obtain the Results for the purpose of designing, synthesizing, developing and commercializing Products on the terms and subject to the conditions of this Agreement. CADUS shall not use the Library or the Compounds for any other purpose. CADUS UNDERSTANDS THAT THE LIBRARY AND THE COMPOUNDS ARE EXPERIMENTAL IN NATURE, ARE FOR RESEARCH USE ONLY AND HAVE NOT BEEN APPROVED FOR HUMAN USE. CADUS SHALL NOT ADMINISTER THE COMPOUNDS TO HUMANS IN ANY MANNER OR FORM UNTIL CADUS HAS OBTAINED ALL GOVERNMENTAL APPROVALS NECESSARY TO DO SO.
3.2 Restrictions on Transfer and Use.
(a) CADUS shall not, directly or indirectly, transfer the Compounds or the Results to any Person other than to employees, consultants or collaborators of CADUS as provided in Section 3.3 or 3.5.
(b) CADUS shall not, directly or indirectly, (1) use the Compounds for any purpose whatsoever other than to evaluate and test the Compounds under this Agreement, solely in order to determine its interest in licensing one or more Compounds and to obtain the Results for the purpose of designing, synthesizing, developing and commercializing Products on the terms and subject to the conditions of this Agreement; (2) sell, assign, transfer, encumber or otherwise dispose of the Compounds or the Results; or (3) authorize, cause or assist in any way any other Person in any of the foregoing matters.
(c) CADUS acknowledges that the Library and the Compounds are, and shall remain, the sole property of BMS. Nothing herein shall be deemed to grant to CADUS rights in the
Library or the Compounds, under any patent or otherwise, except as expressly set forth in the Agreement. In addition, CADUS acknowledges and agrees that this Agreement in no way restricts BMS's use of the Library and the Compounds, other than as specifically set forth in this Agreement.
3.3 Access to and Use of Compounds. CADUS shall restrict access to the Compounds to: (i) those employees or consultants of CADUS who are reasonably necessary to conduct the Screening Projects, or (ii) those Third Parties with whom CADUS is conducting collaborative research efforts, but in all cases such employees, consultants and/or Third Party collaborators shall be required to enter into a confidentiality and non-disclosure agreement in the form attached hereto as Exhibit A. Each Screening Project shall be conducted at CADUS's facilities under the direct supervision of the CADUS employee with primary responsibility over such Screening Project for the sole purpose of conducting the evaluation and tests of the Compounds identified by BMS pursuant to Section 3.1.
3.4 CADUS Obligations Upon Completion of Each Screening Project. CADUS shall be obligated to complete all Screening Projects with "[c.i.]" after the expiration of the Screening Term. Upon the completion of each Screening Project:
(a) Within "[c.i.]" after completion of each Screening Project, the CADUS employee with primary responsibility over such Screening Project shall provide all tangible Results of such Screening Project to CADUS, and prepare and provide to CADUS a summary written report of such Screening Project and the Results thereof. Such report shall summarize in reasonably specific detail the evaluation of and the tests conducted on the Compound(s) under such Screening Project and the Results thereof.
(b) Within "[c.i.]" after completion of each Screening Project, CADUS shall advise BMS in writing that such Screening Project has been completed.
(c) Within "[c.i.]" after the completion of each Screening Project, CADUS shall advise BMS whether it intends to conduct a Research Project using the Results of such Screening Project, and shall provide BMS with a list of the Compound(s) that CADUS intends to pursue in such Research Project.
3.5 Undertaking of Research Projects. Upon receipt by BMS of the report required by CADUS pursuant to Section 3.4(c), BMS shall determine whether CADUS shall be permitted to undertake a Research Project with respect to the Compound(s) identified in such report. BMS shall permit CADUS to undertake a Research Project with respect to any Compound, except any Compound which:
(a) is an active ingredient in any product BMS is marketing or which BMS is conducting any research on, either directly in-house or indirectly through any Affiliate or Third Party; or
(b) is a member of the same chemical class or compound category or operates by the same mechanism of action as any compound described in Section 3.5(a); or
(c) is biologically active in the same screen based on a particular receptor, including screens based on mutant forms of such receptor, as any compound described in Section 3.5(a); or
(d) BMS does not own or have exclusive rights to, or which BMS is otherwise restricted from granting rights for; or
(e) "[c.i.]"
BMS shall notify CADUS that CADUS may undertake a Research Project with respect to any such Compound, or the reason why such Research Project may not be undertaken with respect to such Compound, within "[c.i.]" after BMS receives CADUS's notice pursuant to Section 3.4(c).
3.6 Access to and Use of the Results. CADUS shall restrict access to the Results to: (i) those employees or consultants of CADUS who are reasonably necessary to conduct the Research Projects, or (ii) those Third Parties with whom CADUS is conducting collaborative research efforts, but in all cases such employees, consultants and/or Third Party collaborators shall be required to enter into a confidentiality and non-disclosure agreement in the form attached hereto as Exhibit A. Each Research Project shall be conducted under the supervision of the CADUS employee with primary responsibility over such Research Project for the sole purpose of conducting the research and development activities with respect to those Results for which CADUS has advised BMS it intends to pursue pursuant to Section 3.4(c).
3.7 Conduct of Screening and Research Projects by CADUS. During the term of this Agreement, CADUS shall:
(a) limit and monitor access to and use of the Compounds and Analogs on the terms and conditions of this Agreement;
(b) archive and monitor access to and use of the Results on the terms and conditions of this Agreement;
(c) conduct the Screening Projects and Research Projects in good scientific manner, and in compliance in all material respects with all requirements of applicable laws, rules and regulations, and all other requirements of any applicable good laboratory practices to attempt to achieve its objectives efficiently and expeditiously;
(d) maintain liability insurance with respect to the work it is performing, or which is being performed by Third Parties on its behalf, under the Screening Projects and the Research Projects in such amounts as it customarily maintains with respect to similar research programs, which insurance shall designate BMS as "insured", and to pay the premiums due thereunder. The terms and conditions of such insurance policy and any and all amendments thereto, as well as the amount insured, shall be submitted for prior approval to BMS, provided that BMS may only disapprove such policy or amendment if it is inconsistent with the terms and conditions customary for such insurance policies in the pharmaceutical industry at that time, and BMS shall receive a copy of any such policy or amendments; and
(e) maintain such records and prepare and deliver to BMS such reports as required under Sections 3.7, 3.8 and 3.9.
3.8 Screening Project Reports. Within "[c.i.]" after the end of each "[c.i.]" during the Screening Term and immediately following the end of each Screening Project, CADUS shall prepare and deliver to BMS a written report summarizing: (a) the access to and use of the Compounds during the immediately preceding "[c.i.]" ; (b) the Screening Projects conducted during such period; and (c) the access to the Results during such period.
3.9 Research Project Reports. Within "[c.i.]" after the end of each
"[c.i.]" during the term of, and immediately following the end of, each Research
Project, CADUS shall prepare and deliver to BMS a written report summarizing:
(a) a list of the Compounds with respect to which Research Projects are being
pursued at such time; (b) the activities conducted under such Research Project
during the immediately preceding "[c.i.]" period, such summary only to include
non-confidential information; and (c) all potential Products recommended for
preclinical testing.
3.10 Records. CADUS shall maintain complete and accurate records, in reasonably sufficient detail and in good scientific manner, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of each Screening Project and Research Project (including all data in the form required under all applicable laws and regulations).
3.11 Return of Compounds to BMS. In the event that CADUS does not elect to conduct a Research Project with respect to any Compound following the end of the "[c.i.]" period set forth in Section 3.4(c), and, with respect to Screening Projects that have not been completed earlier, within "[c.i.]" after the expiration of the six month period provided in Section 3.4 following the expiration or earlier termination of the Screening Term, CADUS shall collect and return all unused samples of the Compound(s) to BMS, or destroy such unused samples, as BMS may so direct.
3.12 Liability. During the Screening Projects and the Research Projects, each Party shall be responsible for, and hereby assumes, any and all risks of personal injury or property damage attributable to the negligent or willful acts or omissions of that Party or its Affiliates, and their respective directors, officers, employees and agents.
4. GRANT OF OPTION.
4.1 Grant of Option.
(a) Subject to the terms and conditions of this Agreement, effective as of the date on which BMS notifies CADUS that it may proceed with a Research Project using the Results of any Screening Project as provided in Section 3.5, BMS hereby grants to CADUS a non-exclusive option (the "Option") to obtain an exclusive, worldwide, royalty-bearing right and license, under the Patents and Know-How, for any Compounds used in such Screening Project or any Analogs of such Compounds, and any Products resulting therefrom or developed, identified or confirmed using any of the Results arising from such Screening Project using such Compound(s) and/or Analog(s), and to make, have made, use and sell such Product(s) and the right to grant sublicenses therefor.
(b)The Option shall apply to any Compounds with which CADUS conducted a Screening Project or any Analogs of such Compounds and, thereafter, commences the conduct of a Research Project. If BMS notifies CADUS that it may proceed with a Research Project using the Results of any Screening Project as provided in Section 3.5 and at any time thereafter CADUS discontinues such Research Project, the Option with respect to the Compound(s) used in such Screening Project and any Analogs of such Compounds shall terminate and BMS shall have no further obligation to CADUS with respect to such Compound(s) and/or Analogs.
(c) The Option granted to CADUS under this Section 4 is limited to the extent that BMS has not granted a license or other rights to any Third Party in any such Compound, and BMS or its Affiliates have not commenced a bona fide program of research and development involving such Compound, prior to CADUS's exercise of such Option.
4.2 Term of Option. CADUS may exercise the Option at any time and from time
to time with respect to any Compound used in any Screening Project and any
Analogs of such Compounds commencing on the date CADUS notifies BMS that it
intends to proceed with a Research Project using the Results of any Screening
Project as provided in Section 3.4(b) and ending on the earlier of: (i) the
filing of an IND with the United States Food and Drug Administration in the
United States (or its equivalent in any other country) with respect to any
Compound identified in such Screening Project or any Analog of such Compound, or
(ii) "[c.i.]" after the Screening Term (the "Option Period").
4.3 Exercise of Option; Effect. To exercise the Option, CADUS shall send written notice to BMS of same, specifying the one or more Compounds or Analogs of such Compounds for which CADUS desires to acquire a license to develop and commercialize Products therefrom. Thereafter, BMS and CADUS shall negotiate diligently and in good faith the terms and conditions of a definitive license agreement to grant such rights. The Parties agree that the definitive license agreement shall provide, among other things, that:
(a) The royalty rate to be paid by CADUS to BMS shall be comparable to that being paid by BMS to CADUS pursuant to the Research Collaboration and License Agreement;
(b) All of the terms and conditions shall be reciprocal, as nearly as practicable, with the applicable terms and conditions contained in the Research Collaboration and License Agreement; and
(c) For such other customary and standard terms and conditions for agreements of the same kind and nature.
4.4 Failure to Exercise Option; Effect.
(a) If at any time during the Option Period, CADUS determines that it has no further interest in acquiring a license with respect to any Compound or Analog of such Compound for which it has undertaken a Research Project, CADUS shall so notify BMS. In such event, or in the event that the Option Period expires prior to exercise of the Option with respect to any Compound or Analog of such Compound, the Option shall terminate with respect to such Compound(s) and/or Analog(s) and neither Party shall have any obligation to the other with respect to the Option except as specifically provided in this Agreement.
(b) Upon the termination of the Option with respect to any Compound or Analog of such Compound pursuant to Section 4.4(a), CADUS shall, at BMS's option, return or dispose of all of such Compound and/or Analog, and return all data and other materials and information provided to CADUS by BMS, and all Results, data and other materials and information generated by CADUS during the Option Period relating to such Compound and/or Analog.
4.5 Restrictions on Use During Option Period. BMS agrees that, from the date of any Option granted under this Agreement until the expiration of the Option Period with respect to any Compound or Analog of such Compound, BMS shall not use any screening data or other information received from CADUS pursuant to this Agreement, including any summary form thereof, as a basis for the creation or establishment of screens with which it will screen receptors CADUS used in any Screening Project.
5. RIGHT OF NEGOTIATION.
5.1 Right of Negotiation. From time to time during the Screening Term and for a period of "[c.i.]" thereafter, if BMS becomes interested in out-licensing any Development Compound to a Third Party for commercialization, it shall give CADUS an opportunity to negotiate for such license. BMS shall give written notice to CADUS of its interest in negotiating such license together with sufficient information regarding such Development Compound which is reasonably necessary for CADUS to make an informed decision regarding such license. However, BMS shall be free to negotiate such license simultaneously with one or more Third Parties, and BMS may enter into a license agreement for any Development Compound with CADUS or any Third Party, as it determines in its sole discretion.
6. OWNERSHIP OF INVENTIONS; PATENTS.
6.1 Library and Compounds. The Library and the Compounds are and shall be owned solely by BMS. BMS shall have sole discretion and control over the preparation, filing, prosecution, grant, maintenance and enforcement of all patent applications and patents which claim any Compound in the Library or the process of manufacture or use thereof.
6.2 Results. Except as otherwise provided in this Agreement, all Results shall be owned solely by CADUS, and any patent applications or patents based thereon. All costs for the preparation, filing, prosecution, grant, maintenance and enforcement of all patent applications and patents which claim any Results shall be borne by CADUS.
6.3 No Other Technology Rights. Except as otherwise provided in the Agreement, under no circumstances shall either Party, as a result of this Agreement, obtain any ownership interest or other right in any technology, know-how, patents, pending patent applications, compounds, products, vaccines, antibodies, cell lines or cultures of the other Party, including items owned, controlled or developed by the other, or transferred by the other to such Party at any time pursuant to this Agreement. It is understood and agreed by the Parties that this Agreement does not grant to either Party any license or other right in technology of the other Party except to the extent necessary to enable CADUS to conduct the Screening Projects and the Research Projects.
7. INDEMNIFICATION.
7.1 Indemnification. CADUS shall indemnify and hold BMS, its Affiliates, and their respective directors, officers, employees and agents, harmless from and against any and all liabilities, damages, losses, costs and expenses (including the
fees of attorneys and other professionals) arising out of or resulting from:
(a) the use of the Library, the Compounds or the Results, or
(b) the work performed by CADUS under any Screening Project or any Research Project, except, in each case, to the comparative extent such claim arose out of or resulted from the negligence, recklessness or intentional acts or omissions of BMS, its Affiliates, and their respective directors, officers, employees and agents.
7.2 Notice. In the event that BMS is seeking indemnification under Section 7.1, BMS shall inform CADUS of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit CADUS to assume direction and control of the defense of the claim (including the right to settle it at the sole discretion of CADUS), and shall cooperate as requested (at the expense of CADUS) in the defense of the claim.
8. PUBLICATION; CONFIDENTIALITY.
8.1 Notification. BMS recognizes that CADUS may wish to publish the results of its work relating to the Screening Projects and the Research Projects. However, CADUS also recognizes the importance of acquiring patent protection on inventions. Consequently, any proposed publication by CADUS shall comply with this Section 8. At least 60 days before a manuscript is to be submitted to a publisher, CADUS will provide BMS with a copy of the manuscript. If CADUS wishes to make an oral presentation, it will provide BMS with a copy of the abstract (if one is submitted) at least 60 days before it is to be submitted. CADUS will also provide to BMS a copy of the text of the presentation, including all slides, posters, and any other visual aids, at least 60 days before the presentation is made.
8.2 Review of Proposed Publications. BMS will review the manuscript, abstract, text or any other material provided under Section 8.1 to determine if patentable subject matter is disclosed. BMS will notify CADUS within 30 days of receipt of the proposed publication if BMS, in good faith, determines that patentable subject matter is or may be disclosed, or if BMS, in good faith, believes confidential or proprietary information is or may be disclosed. If it is determined by BMS that patent applications should be filed, CADUS shall delay its publication or presentation for a period not to exceed 90 days from BMS's receipt of the proposed publication to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the 90 day period, the Parties will discuss the need for obtaining an extension of the publication delay beyond the 90 day period. If it is determined in good faith by BMS that confidential or proprietary information is being
disclosed, the Parties will consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication to avoid such disclosure. CADUS will acknowledge BMS for its contribution to the material being published or presented in any manuscript, text or oral presentation.
8.3 Confidentiality; Exceptions. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the term of this Agreement and for ten (10) years thereafter the receiving Party and its Affiliates shall keep, and shall ensure that its officers and directors keep, completely confidential and shall not publish or otherwise disclose and shall not use for any purpose any information furnished to it by the other Party or its Affiliates (including, without limitation, any Compounds or Results) or identified through or developed under any Screening Project or any Research Project pursuant to this Agreement, except to the extent that it can be established by the receiving Party by competent proof that such information: (i) is or hereafter becomes generally available to the public other than by reason of any default with respect to a confidentiality obligation; (ii) was already known to the recipient as evidenced by prior written documents in its possession; or (iii) is disclosed to the recipient by a Third Party who is not in default of any confidentiality obligation to the disclosing Party ("Confidential Information").
8.4 Exceptions. The restrictions contained in Section 8.3 shall not apply to Confidential Information that (i) is provided by the recipient to Third Parties who are consultants, outside contractors and clinical investigators, on a need-to-know basis, under appropriate terms and conditions, including confidentiality provisions equivalent to those in this Agreement; (ii) is submitted by the recipient to governmental authorities to facilitate the issuance of marketing approvals for Product, provided that reasonable measures shall be taken to assure confidential treatment of such information; or (iii) is otherwise required to be disclosed in compliance with applicable laws or regulations or order by a court or other regulatory body having competent jurisdiction; provided that if a Party is required to make any such disclosure of the other Party's Confidential Information it will, except where impracticable for necessary disclosures, for example to physicians conducting studies or to health authorities, give reasonable advance notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.
8.5 Remedies. Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to an injunction, without the posting of any bond or other security, enjoining or restraining any other Party from any violation or threatened violation of this Section.
8.6 Survival. This Section 8 shall survive the termination or expiration of this Agreement.
9. TERM; TERMINATION.
9.1 Term. This Agreement shall become commence on the date hereof and, unless sooner terminated as provided in this Agreement, shall terminate: (i) 90 days after the expiration of the Screening Term, in the event that no Option Periods have commenced at such time, or (ii) in the event that any Option Periods have commenced at such time, on the expiration of the last to expire of the Option Periods with respect to any Compound or Analog of such Compound.
9.2 Breach. Failure by either Party to comply with any of the material obligations contained in this Agreement shall entitle the other Party to give to the Party in default notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within 60 days after the receipt of such notice (or, if such default cannot be cured within such 60-day period, if the Party in default does not commence and diligently continue actions to cure such default), the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate this Agreement by giving written notice to take effect immediately upon delivery of such notice. The right of either Party to terminate this Agreement, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default.
9.3 Accrued Rights, Surviving Obligations.
(a) Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination, relinquishment or expiration. Such termination, relinquishment or expiration shall not relieve either Party from obligations which are expressly indicated to survive termination or expiration of this Agreement.
(b) All of the Parties' rights and obligations under Sections 3.10, 3.11, 7, 8, 11.10 and 11.11 shall survive termination.
(c) In the event that this Agreement is terminated by BMS pursuant to
Section 9.2, in addition to the rights and obligations of the Parties which
survive pursuant to Section 9.3 (b), BMS agrees that it shall not, for a period
of five years following such termination, use any screening data or other
information received from CADUS pursuant to this Agreement, including any
summary form thereof, as a basis for the creation or establishment of screens
with which it will screen receptors CADUS used in any Screening Project.
10. FORCE MAJEURE.
10.1 Events of Force Majeure. Neither Party shall be held liable or responsible to the other Party nor be deemed to be in default under or in breach of any provision of this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, force majeure is defined as causes beyond the control of the Party, including, without limitation, acts of God; acts, regulations, or laws of any government; war; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of public utilities or common carriers. In such event BMS or CADUS, as the case may be, shall immediately notify the other Party of such inability and of the period for which such inability is expected to continue. The Party giving such notice shall thereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing for so long as it is so disabled and the 30 days thereafter.
11. MISCELLANEOUS.
11.1 Relationship of Parties. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.
11.2 Assignment. Neither Party shall be entitled to assign its rights hereunder without the express written consent of the other Party hereto, except that both BMS and CADUS may otherwise assign their respective rights and transfer their respective duties hereunder to any assignee of all or substantially all of their respective businesses or in the event of their respective merger or consolidation or similar transaction. No assignment and transfer shall be valid and effective unless and until the assignee/transferee shall agree in writing to be bound by the provisions of this Agreement.
11.3 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
11.4 Notice. Any notice or request required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and personally delivered or sent by registered or certified mail (return receipt requested), facsimile transmission (receipt verified), express courier service (signature required), or
telegram, prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:
(a) In the case of BMS, to:
Bristol-Myers Squibb Company P.O. Box 4000 Route 206 & Province Line Road Princeton, New Jersey 08543-4000 Attention: Vice President and Senior Counsel, Pharmaceutical Research Institute and Worldwide Strategic Business Development Facsimile No.: (609) 252-4232
(b) In the case of CADUS, to:
Cadus Pharmaceutical Corporation 180 Varick Street New York, New York 10014-4606 Attention: President Facsimile No.: (212) 229-1948
or to such other address for such Party as it shall have specified by like notice to the other Party, provided that notices of a change of address shall be effective only upon receipt thereof. If sent by mail, facsimile transmission, express courier service, or telegram, the date of mailing or transmission shall be deemed to be the date on which such notice or request has been given.
11.5 Use of Name. Except as otherwise provided herein, neither Party shall have any right, express or implied, to use in any manner the name or other designation of the other Party or any other trade name or trademark of the other Party for any purpose in connection with the performance of this Agreement.
11.6 Public Announcements. Except as required by law, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld. In the event of a required public announcement, the Party making such announcement shall provide the other with a copy of the proposed text prior to such announcement. The Parties agree that each may make public announcements consistent with that contained in Appendix D of the Research Collaboration and Development Agreement.
11.7 Waiver. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.
11.8 Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
11.9 Amendment. No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.
11.10 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to its choice of law principles.
11.11 Arbitration. Any dispute arising out of or relating to any provisions of this Agreement shall be finally settled by arbitration to be held in New York, New York, under the auspices and then current rules of the American Arbitration Association. Such arbitration shall be conducted by three (3) arbitrators appointed according to said rules. Judgment upon any award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
11.12 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.
11.13 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, any one of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.
11.14 Descriptive Headings. The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written.
BRISTOL-MYERS SQUIBB COMPANY
By: /s/ WILLIAM A. SCOTT
---------------------------
Name: William A. Scott
Title: Senior Vice President
|
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
---------------------------
Name: Jeremy M. Levin
Title: President-CEO
|
EXHIBIT A
FORM OF CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
[OUTGOING]
CONFIDENTIAL DISCLOSURE AGREEMENT
THIS AGREEMENT is made in duplicate this ______ day of ______, 1994, by and between _____________________________________________ (NAME, LOCATION) ("____________") and Bristol-Myers Squibb Company, Princeton, New Jersey ("BMS").
1. "Confidential Information" shall mean all written and oral information relating to the subject Matter (including technical specifications, scientific and medical data and development plans, product and market descriptions, sales, cost and promotional expenditure data and plans as well as any other technical and business information of whatever nature) disclosed by BMS to _______________.
2. ______________ agrees to receive Confidential Information from BMS during the term of this Agreement and to hold in confidence such information, except:
(a) information which at the time of disclosure is in the public domain;
(b) information which, after disclosure, becomes part of the public domain by publication or otherwise, except by breach of this Agreement by _________________;
(c) information which _______________________ can establish by competent proof was in its possession at the time of disclosure by BMS and was not acquired, directly or indirectly, from BMS; and
(d) information which ___________ receives from a third party; provided, however, that such information was not obtained by said third party, directly or indirectly, from BMS under an obligation of confidentiality toward BMS.
3. _____________________ shall treat as strictly secret and confidential all Confidential Information subject to the terms of this Agreement, shall use best efforts to protect such Confidential Information, and shall not disclose or use any such Confidential Information, except for the purpose for which disclosed (as described above), without the express written permission of BMS.
[OUTGOING]
______________ shall use best efforts to ensure that is officers, employees and agents working with or otherwise having access to Confidential Information shall not disclose or make unauthorized use thereof. _____________ agrees that such Confidential Information shall not be disclosed to persons who do not have any direct need to know such Confidential Information in the performance of their corporate duties.
4. ____________________ agrees to return promptly to BMS, upon written request, all written materials and documents, software and other things made available or supplied by BMS to ___________ and all copies thereof containing Confidential Information upon request of BMS.
5. __________________'s obligations under this Agreement shall expire five years from the date first above written.
6. The provisions of the Agreement shall supersede and prevail over any other previous or contemporaneous arrangements, either oral or written, as to the Confidential Information. This Agreement is intended by the parties as a final expression of their agreement and as a complete and exclusive statement of the terms hereof. This Agreement may not be amended except in writing signed by the parties hereto or their duly authorized agents and shall be construed in accordance with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written.
BRISTOL-MYERS SQUIBB COMPANY ______________________________
By ______________________________ By __________________________
Its Its
P.O Box 4000 ______________________________
Princeton, NJ 08543-4000 ______________________________
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[Note: Certain portions of this document have been marked "[c.i.]" to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
RESEARCH COLLABORATION
AND
LICENSE AGREEMENT
BETWEEN
CADUS PHARMACEUTICAL CORPORATION
AND
SOLVAY DUPHAR B.V.
DATED AS OF NOVEMBER 1, 1995
TABLE OF CONTENTS
PRELIMINARY STATEMENTS............................................... 1
1. DEFINITIONS.................................................... 2
2. REPRESENTATIONS AND WARRANTIES................................. 7
2.1 Representations and Warranties of Both
Parties............................................... 7
2.2 Representations and Warranties of CADUS............... 8
2.3 Representations and Warranties of SOLVAY
DUPHAR................................................ 8
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3. COLLABORATIVE RESEARCH PROGRAM................................. 9
3.1 Scope of Research Program............................. 9
3.2 Research Committee.................................... 10
3.3 Funding of the Research Program....................... 12
3.4 Conduct of Research Program by CADUS.................. 14
3.5 Conduct of Research Program by SOLVAY
DUPHAR................................................ 15
3.6 Records............................................... 16
3.7 Training.............................................. 16
3.8 Term of Research Program.............................. 16
3.9 Exclusivity........................................... 17
3.10 Material Transfer..................................... 17
3.11 Liability............................................. 17
3.12 Treatment of Substances Secreted from
Autocrine System...................................... 18
3.13 Termination of Research Program by SOLVAY
DUPHAR................................................ 18
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4. DEVELOPMENT AND COMMERCIALIZATION.............................. 19
4.1 Use of Screens by SOLVAY DUPHAR....................... 19
4.2 [c.i.] Technology.............................. 20
5. GRANT OF LICENSES.............................................. 21
5.1 License Grant for Proprietary Screens................. 21 5.2 License Grant for Exclusive Screens................... 21 5.3 Use by CADUS of Screens............................... 22 5.4 SOLVAY DUPHAR's Rights to Use Technology.............. 24 5.5 No Right to Sublicense................................ 24 |
6. ACCESS TO SOLVAY DUPHAR'S COMPOUND LIBRARY..................... 25
6.1 Access and Permitted Use.............................. 25
6.2 Costs................................................. 25
(i)
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6.3 Restrictions on Transfer and Use...................... 25
6.4 Access to and Use of SOLVAY Library
Compounds............................................. 26
6.5 Grant of Option....................................... 26
6.6 Term of Option........................................ 26
6.7 Exercise of Option; Effect............................ 27
6.8 Effect of Failure to Exercise Option.................. 27
6.9 Reports............................................... 27
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7. ROYALTIES AND MILESTONE PAYMENTS............................... 28
7.1 Royalties............................................. 28 7.2 Bundling and Capitation Transactions.................. 28 7.3 Third Party Royalties................................. 29 7.4 Milestone Payments.................................... 29 7.5 Obligation to Pay Royalties........................... 29 |
8. PAYMENTS AND REPORTS........................................... 29
8.1 Payment............................................... 29 8.2 Payment of Royalties ................................. 29 8.3 Records Retention..................................... 30 8.4 Audit Request......................................... 30 8.5 Taxes................................................. 31 8.6 Notice of Development Milestones...................... 31 |
9. INFRINGEMENT ACTIONS BY THIRD PARTIES.......................... 31
9.1 Notice of Suit or Claim of Infringement............... 31
9.2 Obligation to Defend.................................. 32
10. OWNERSHIP OF INVENTIONS; PATENTS............................... 34
10.1 Ownership of Inventions............................... 34 10.2 Joint Inventions...................................... 34 10.3 Patent Enforcement.................................... 34 |
11. INDEMNIFICATION................................................ 36
11.1 Indemnification....................................... 36
11.2 Notice................................................ 36
12. PUBLICATION; CONFIDENTIALITY................................... 36
12.1 Notification.......................................... 36 12.2 Review of Proposed Publications....................... 36 12.3 Confidentiality; Exceptions........................... 37 12.4 Exceptions............................................ 37 12.5 Confidentiality Obligation of CADUS................... 38 12.6 Limitations on Use.................................... 38 12.7 Remedies.............................................. 38 12.8 Survival.............................................. 39 |
13. TERM; TERMINATION OF LICENSES.................................. 39
13.1 Term.................................................. 39
13.2 Termination of Licenses............................... 39
14. FORCE MAJEURE AND HARDSHIP..................................... 40
14.1 Events of Force Majeure............................... 40
14.2 Hardship.............................................. 41
15. MISCELLANEOUS.................................................. 41
15.1 Relationship of Parties............................... 41
15.2 Notice of Intent to Seek Partner...................... 41
15.3 Covenant Not to Solicit Employees..................... 41
15.4 Assignment............................................ 41
15.5 Further Actions....................................... 41
15.6 Notice................................................ 42
15.7 Use of Name........................................... 42
15.8 Public Announcements.................................. 43
15.9 Waiver................................................ 43
15.10 Compliance with Law................................... 43
15.11 Severability.......................................... 43
15.12 Amendment............................................. 43
15.13 Governing Law......................................... 43
15.14 Arbitration........................................... 44
15.15 Entire Agreement...................................... 44
15.16 Counterparts.......................................... 44
15.17 Descriptive Headings.................................. 44
LIST OF APPENDICES
- ------------------
APPENDIX A List of Patents and Patent Applications
APPENDIX B Description of Research Program
APPENDIX C First Annual Research Plan
APPENDIX D Form of Public Announcement
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RESEARCH COLLABORATION
AND
LICENSE AGREEMENT
RESEARCH COLLABORATION AND LICENSE AGREEMENT (the "Agreement"), dated as of November 1, 1995, between SOLVAY DUPHAR B.V., a corporation duly organized and existing under the laws of The Netherlands, having offices at C.J. van Houtenlaan 36, 1381 CP Weesp, The Netherlands ("SOLVAY DUPHAR"), and Cadus Pharmaceutical Corporation, a corporation duly organized and existing under the laws of the state of Delaware, and having offices at 777 Old Saw Mill River Road, Tarrytown, New York 10591-6705 ("CADUS").
PRELIMINARY STATEMENTS
A. CADUS is the owner of, and has all right, title and interest in, or has acquired the exclusive rights to, certain technology involving the transfection and expression of Targets into yeast and
[c.i.] .
B. CADUS has research facilities, experienced personnel and other capabilities conducive to further development of the technology and wishes to obtain funding therefor.
C. SOLVAY DUPHAR recognizes that such technology of CADUS represents a valuable source of development of screening assays for the discovery of potential products, and SOLVAY DUPHAR and its Affiliates are interested in the further development and manufacture by CADUS of screening assays for SOLVAY DUPHAR and its Affiliates and in obtaining a license for such screening assays for use in SOLVAY DUPHAR's Therapeutic Areas of Interest.
D. In addition, SOLVAY DUPHAR and its Affiliates wish to license from CADUS certain proprietary software of CADUS used by CADUS to automate screening assays and CADUS is willing to grant such license to SOLVAY DUPHAR and its Affiliates.
E. CADUS wishes to obtain access to SOLVAY DUPHAR's compound library and obtain an option to acquire licenses in CADUS's Therapeutic Areas of Interest to certain such compounds, and SOLVAY DUPHAR is willing to grant such access and option in CADUS's Therapeutic Areas of Interest.
F. CADUS and SOLVAY DUPHAR are entering into this Agreement to provide for CADUS to conduct further research and development involving CADUS Technology in order to primarily manufacture Screens for SOLVAY DUPHAR in exchange for certain funding by SOLVAY DUPHAR and for CADUS to license, and SOLVAY DUPHAR and its Affiliates to obtain a license for, the use and practice of Screens so developed and manufactured by CADUS in SOLVAY DUPHAR's Therapeutic Areas of Interest.
G. CADUS and SOLVAY DUPHAR are also entering into this Agreement to provide CADUS with access to SOLVAY DUPHAR's compound library in order for CADUS to screen compounds therein and to give CADUS an option to acquire licenses from SOLVAY DUPHAR to certain such compounds in CADUS's Therapeutic Areas of Interest.
H. CADUS and SOLVAY DUPHAR are simultaneously entering into a Software License Agreement to provide SOLVAY DUPHAR and its Affiliates with a license to certain proprietary software of CADUS used by CADUS to automate screening assays.
I. CADUS and an Affiliate of SOLVAY DUPHAR are also simultaneously entering into the Stock Purchase Agreement to provide for such Affiliate to obtain an equity interest in CADUS and CADUS to sell an equity interest in CADUS to such Affiliate. CADUS has agreed not to use the proceeds of such sale to pay dividends.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements of the Parties contained in this Agreement, the Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have those meanings set forth in this Section 1 unless the context dictates otherwise.
1.1 "AFFILIATE", with respect to any Party, shall mean any Person controlling, controlled by, or under common control with, such Party. For these purposes, "control" shall refer to (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise or (b) the ownership, directly or indirectly, of at least 50% of the voting securities or other ownership interest of a Person. Notwithstanding the foregoing, neither Carl C. Icahn nor High River Limited Partnership shall be deemed an Affiliate of CADUS for the purposes hereof.
1.2 "ANALOG" of any compound, extract, broth or other screening sample, shall mean a compound, extract, broth or other screening sample in which the active substructure of such substance is conserved.
1.3 "ANNUAL RESEARCH PLAN" shall mean the research plan annexed hereto as Appendix C for the period through December 31, 1996 and thereafter prepared annually and amended quarterly, if necessary, during the term of the Research Program as provided in Section 3.1(b).
1.4 "AUTOCRINE SYSTEM" shall mean that part of the Technology whereby Targets are inserted into yeast cells, which yeast cells grow in response to peptides or other substances produced and secreted by the same yeast cells.
1.5 "CADUS COMPOUND" shall have the meaning set forth in Section 5.3(b) hereof.
1.6 "CADUS TECHNOLOGY" shall mean the Screen Patents listed on Appendix A annexed hereto.
1.7 "CADUS'S THERAPEUTIC AREAS OF INTEREST" shall mean the following with respect to humans: cancer, autoimmune, allergic and inflammatory diseases, excluding inflammatory bowel disease and those diseases in SOLVAY DUPHAR's Therapeutic Areas of Interest that have an inflammatory and/or autoimmune component.
1.8 "COMPOUND" shall mean any Lead Compound or any Analog of any Lead Compound.
1.9 "EFFECTIVE DATE" shall mean the date of this Agreement as set forth at the beginning of this Agreement.
1.10 "FDA" shall mean the United States Food and Drug Administration, or the successor thereto.
1.11 "FIRST COMMERCIAL SALE" shall mean, with respect to any Product, the first sale for use or consumption by the general public of such Product.
1.12 [c.i.]
1.13 "IND" shall mean a Notice of Claimed Investigational Exemption for a New Drug.
1.14 "INVENTION" shall mean any new or useful process, compound or composition of matter, patentable or unpatentable, or any improvement thereof, conceived or first reduced to practice, or demonstrated to have utility during and in the framework of the conduct of the Research Program.
1.15 "JOINT INVENTION" shall mean any Invention for which it is determined, in accordance with applicable law, that (i) one or more employees, consultants or agents of CADUS or any other persons obliged to assign such Invention to CADUS, and (ii) one or more employees, consultants or agents of SOLVAY DUPHAR or an Affiliate of SOLVAY DUPHAR or any other persons obliged to assign such Invention to SOLVAY DUPHAR or an Affiliate of SOLVAY DUPHAR, are joint inventors of such Invention.
1.16 "KNOW-HOW" shall mean any and all technical data, information, material and other know-how, including but not limited to formulae, procedures, protocols, techniques and results of experimentation and testing, owned, developed or acquired by CADUS as of the Effective Date or subsequently owned, developed or acquired by CADUS during the term of the Research Program (provided that CADUS has, or, if subsequently acquired, shall have, the right to license or otherwise make available such know-how to SOLVAY DUPHAR and its Affiliates), which relate to the Technology and are necessary or useful to use or practice Screens.
1.17 "LEAD COMPOUND" shall mean any compound, extract, broth or other screening sample identified, or whose biological activity is identified or confirmed, through the use of any Screen and which is biologically active against a Screen and may be developed for a therapeutic indication based on the biological activity demonstrated in such Screen.
1.18 "NDA" shall mean a New Drug Application.
1.19 "NET SALES" shall mean, with respect to any Product, the gross amount
invoiced and received for sales in the Territory of such Product by a Party, its
Affiliates, licensees and sublicensees to Third Parties, less deductions for:
(i) quantity and/or cash discounts, allowances and rebates actually allowed or
given; (ii) freight, postage and shipping insurance expenses (if separately
identified in such invoice); (iii) credits or refunds actually allowed for
rejected, outdated or returned Product; and (iv) sales, value-added, excise
taxes and duties and other taxes directly related to the sale, to the extent
that such items are included in the gross invoice price (but not including taxes
assessed against the income derived from such sale).
1.20 "OPTION" shall have the meaning set forth in Section 6.5(a) hereof.
1.21 "PATENTS" shall mean all patents and patent applications throughout the Territory, and any substitutions, extensions, renewals, continuations, continuations-in-part, divisions, patents-of-addition and/or reissues thereof.
1.22 "PARTY" shall mean CADUS or SOLVAY DUPHAR and, when used in the plural, shall mean CADUS and SOLVAY DUPHAR.
1.23 "PERSON" shall mean any natural person, corporation, firm, business trust, joint venture, association, university, organization, company, partnership or other business entity, or any government or any agency or political subdivision thereof.
1.24 "PLA" shall mean a Product License Application.
1.25 "PRIORITY SUBSTANCE" shall mean a Compound selected to enter into the pre-clinical research phase.
1.26 "PRODUCT" shall mean any product which uses as one of its active ingredients a Compound (including a CADUS Compound) or a product developed by CADUS which uses as one of its active ingredients a SOLVAY Library Compound provided to CADUS by SOLVAY DUPHAR or an Analog thereof.
1.27 "PRODUCT PATENTS" shall mean all Patents throughout the Territory owned or controlled by a Party, and disclosing and claiming products, processes or a method of treatment employing the Compound(s) or Product(s).
1.28 "PROPRIETARY" shall mean, with respect to intellectual property, intellectual property that is not in the public domain and that is a trade secret or protected by Patent or copyright.
1.29 "RESEARCH COMMITTEE" shall have the meaning set forth in Section 3.2 hereof.
1.30 "RESEARCH PROGRAM" shall mean all of the research activities conducted by CADUS, or by CADUS in collaboration with SOLVAY DUPHAR and its Affiliates for the benefit of SOLVAY DUPHAR and its Affiliates, which are undertaken pursuant to Section 3 of this Agreement.
1.31 "ROYALTY TERM" shall mean, with respect to each Product in each country in the Territory, the period of time commencing on the date of the First Commercial Sale of such Product in such country and ending on the later of (i) ten years from such date, and (ii) the date on which the last to expire of the Product Patents relating to such Product in such country expires.
1.32 "SCREEN" shall mean any screening assay, the manufacture or use of which screening assay (i) was developed by CADUS, alone or with any collaboration by SOLVAY DUPHAR or an Affiliate thereof, as part of the Research Program or (ii) was developed by CADUS and provided to and accepted by SOLVAY DUPHAR or an Affiliate thereof. A Screen shall be either a Proprietary Screen or an Exclusive Screen.
(a) "PROPRIETARY SCREEN" shall mean any Screen that incorporates any Proprietary Target; provided however, that if a Proprietary Target ceases to be proprietary to SOLVAY DUPHAR or an Affiliate thereof, any Screen that incorporates such Proprietary Target shall become an Exclusive Screen. Proprietary Screen shall include any Novel Screen.
(b) "EXCLUSIVE SCREEN" shall mean any Screen that incorporates (i) any Other Target or (ii) any Proprietary Target
that ceases to be proprietary to SOLVAY DUPHAR or an Affiliate thereof.
(c) "NOVEL SCREEN" shall mean any Screen that incorporates a Novel Target.
1.33 "SCREENING PROJECT" shall mean each project by CADUS directly involving the evaluation, testing or other analysis of SOLVAY Library Compounds, designed to obtain data or information regarding the biological activity of SOLVAY Library Compounds.
1.34 "SCREEN PATENTS" shall mean all Patents which CADUS presently or hereafter owns or controls (provided that, if subsequently acquired, CADUS also has the right to license or otherwise make available such Patents to SOLVAY DUPHAR and its Affiliates), or which are owned or controlled jointly by SOLVAY DUPHAR or an Affiliate thereof and CADUS, all to the extent that they cover the manufacture or use of any Screen. The Screen Patents which exist on the Effective Date of this Agreement are listed on APPENDIX A attached hereto.
1.35 "SEMI-ANNUAL PERFORMANCE OBJECTIVES" shall mean the semi-annual performance objectives for the periods January through June and July through December, respectively, of each calendar year of the Research Program as determined by the Research Committee and set forth in an Annual Research Plan.
1.36 "SOFTWARE LICENSE AGREEMENT" shall mean that certain Software License Agreement dated of even date herewith between SOLVAY DUPHAR and CADUS.
1.37 "SOLVAY LIBRARY COMPOUND" shall mean any compound, extract, broth or other screening sample in the possession of SOLVAY DUPHAR or an Affiliate of SOLVAY DUPHAR on the Effective Date, which SOLVAY DUPHAR or such Affiliate is not restricted from providing to CADUS.
1.38 "SOLVAY DUPHAR'S THERAPEUTIC AREAS OF INTEREST" shall mean the following with respect to humans: disorders of the central nervous system, disorders of the cardiovascular system, gynecology, osteoporosis, hormone replacement therapy, gastroenterology, inflammatory bowel disease and urinary incontinence.
1.39 "STOCK PURCHASE AGREEMENT" shall mean that certain Preferred Stock Purchase Agreement dated of even date herewith between an Affiliate of SOLVAY DUPHAR and CADUS.
1.40 "SUBSTANCES" shall have the meaning set forth in Section 3.10 hereof.
1.41 "TARGET" shall mean any biological molecular entity that provides a specific interaction with compounds, extracts,
broths or other screening samples. Target shall include any Proprietary Target, Novel Target or Other Target.
(a) "PROPRIETARY TARGET" shall mean a Target which is proprietary to SOLVAY DUPHAR or an Affiliate thereof or contains Substances proprietary to SOLVAY DUPHAR or an Affiliate thereof or a Target which is proprietary to a Third Party and to which SOLVAY DUPHAR or an Affiliate thereof has obtained the right to use in the Research Program and that is (i) provided by SOLVAY DUPHAR or an Affiliate thereof to CADUS for use in the Research Program or (ii) cloned or obtained by CADUS pursuant to research performed under the Research Program.
(b) "NOVEL TARGET" shall mean a Target first cloned pursuant to research performed under the Research Program, with respect to which no prior art exists which precludes the obtaining of patent protection for such Target.
(c) "OTHER TARGET" shall mean a Target other than a Proprietary Target or a Novel Target, which is used in the Research Program.
1.42 "TECHNOLOGY" shall mean CADUS Technology and all inventions, improvements, discoveries, claims, formulae, processes, trade secrets, technologies, Patents and know-how owned or licensed by CADUS and to which CADUS has the rights to grant licenses or sublicenses, and derived from the CADUS Technology or the Research Program.
1.43 "TERRITORY" shall mean the entire world.
1.44 "THIRD PARTY" shall mean any Person who or which is neither a Party nor an Affiliate of a Party.
1.45 "VALID CLAIM" shall mean a claim of any Screen Patent or Product Patent, as the case may be, which has not been held invalid or unenforceable by final decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.
2. REPRESENTATIONS AND WARRANTIES.
2.1 REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Party represents and warrants to the other Party that: (i) it is free to enter into this Agreement; (ii) in so doing, it will not violate any other agreement to which it is a party; (iii) it has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement; and (iv) this Agreement constitutes a valid
and binding obligation of such Party and is enforceable against it in accordance with its terms.
2.2 REPRESENTATIONS AND WARRANTIES OF CADUS. CADUS hereby represents and warrants to SOLVAY DUPHAR and its Affiliates that:
(a) It is the owner, or the exclusive licensee, of the CADUS Technology and has the exclusive right to grant licenses therefor;
(b) It is the owner, or the licensee, of all of the Know-How in existence on the date of this Agreement, and has the right to grant licenses therefor;
(c) All Screen Patents owned by CADUS have been maintained to date and, to the best of its knowledge, all Screen Patents exclusively licensed to CADUS have been maintained to date;
(d) It is not aware of any asserted or unasserted claim or demand which it believes can be enforced against such Screen Patents;
(e) To the best of its knowledge, the practice of such Screen Patents do not infringe upon or conflict with any Patent or other proprietary rights of any Third Party, [c.i.]
(f) To the best of its knowledge, the risks to CADUS of the "Intellectual Property Rights" (as defined in Section 7.01 of the Stock Purchase Agreement) of others listed on Exhibit 3.07C to the Stock Purchase Agreement are fairly and accurately presented in the memorandum, dated October 30, 1995, from Jeremy M. Levin, Chief Executive Officer of CADUS, to Salomon R. Sassoon, Esq., corporate counsel of CADUS; and
(g) It has not entered into any agreement with any Third Party which is in conflict with any of the rights granted to SOLVAY DUPHAR and its Affiliates pursuant to this Agreement.
2.3 REPRESENTATIONS AND WARRANTIES OF SOLVAY DUPHAR. SOLVAY DUPHAR hereby represents and warrants to CADUS that it will be the owner of, or have the right to include in the Research Program, all Proprietary Targets and, to the best of its knowledge, the use of such Proprietary Targets in itself by SOLVAY DUPHAR and its Affiliates or CADUS in accordance with any Annual Research Plan during the conduct of the Research Program will not infringe on or conflict with a Patent or other proprietary rights of any Third Party.
3. COLLABORATIVE RESEARCH PROGRAM.
3.1 SCOPE OF RESEARCH PROGRAM.
(a) The Research Program is a program for collaborative research under which CADUS will carry out the research agreed upon by the Parties in order to develop and manufacture Screens that incorporate Targets that are decided upon by SOLVAY DUPHAR after consultation with CADUS and that have not been previously committed by CADUS to Third Parties, which Screens will enable SOLVAY DUPHAR and its Affiliates to screen compounds for biological activity as part of their efforts to develop human pharmaceutical therapeutics. The Research Program is described generally in Appendix B and will be described in greater specificity in the Annual Research Plans pursuant to the procedure set forth in Section 3.1(b).
(b) Prior to the commencement of the Research Program and thereafter prior to the commencement of each calendar year, the Research Committee shall prepare and provide to each Party, in form and substance mutually acceptable to each Party, an outline of the goals and scope of the research to be undertaken during the upcoming year, together with a detailed description of the specific research activities to be undertaken during the first six months of such calendar year and the Semi-Annual Performance Objectives for such calendar year (an "Annual Research Plan"). The Parties intend that the Annual Research Plan will also contain a list of selected Targets (specifying, to the extent possible, whether they are Proprietary, Novel or Other Targets, and describing any rights of Third Parties with respect thereto, if any), the research milestones identified, the time and capacity plan and the names and qualifications of the scientists to be involved. The Annual Research Plan for the period commencing on the Effective Date and ending on December 31, 1996 is annexed hereto as Appendix C. The Research Committee may revise each Annual Research Plan quarterly for the subsequent six (6) months and shall prepare a detailed description of the specific research activities to be undertaken during such six-month period. The Annual Research Plan and the Semi-Annual Performance Objectives may be amended only with the unanimous consent of the Research Committee. If the Research Committee cannot reach unanimity as to whether or not to amend such Semi-Annual Performance Objectives, they shall not be amended. SOLVAY DUPHAR, in consultation with CADUS, will decide the Targets to be included and the priorities within the Research Program. No Target which CADUS has previously committed to a Third Party will be included in the Research Program.
(c) If the Research Committee fails to agree on an Annual Research Plan the matter shall be referred for further review and resolution to the Vice President of Research of SOLVAY DUPHAR, or such other similar position designated by SOLVAY DUPHAR from time to time, and the Chief Executive Officer of CADUS, or
such other similar position designated by CADUS from time to time. Until the Vice President of Research of SOLVAY DUPHAR and the Chief Executive Officer of CADUS make a joint decision, and in the absence of such a decision, SOLVAY DUPHAR shall continue to provide funding to CADUS for the Research Program at the same level of funding as provided during the previous year (or, with respect to the first year of the Research Program, at a level of $2,500,000), in accordance with and subject to adjustments provided in Section 3.3, and CADUS shall continue to conduct the Research Program in accordance with the Semi-Annual Performance Objectives for the present or subsequent six (6) month period, insofar as they already have been fixed by the Research Committee, or, in the absence of such Semi-Annual Performance Objectives and thereafter, in accordance with at least the goals and scope of such research as set forth in the Research Program described in APPENDIX B. This Section 3.1(c) shall not prejudice SOLVAY DUPHAR's rights contained in Section 3.13.
3.2 RESEARCH COMMITTEE. The Parties shall establish a Research Committee (the "Research Committee"), which shall be comprised of six members: (i) the Director of Corporate Technology Acquisition at SOLVAY DUPHAR, or such other similar position designated by SOLVAY DUPHAR from time to time, (ii) the Vice President of Research at CADUS, or such other similar position designated by CADUS from time to time, and (iii) two additional representatives designated by each Party. Members of the Research Committee may be represented at any meeting by a designee appointed by such member for such meeting, if such member is unable to attend such meeting. The chairperson of the Research Committee shall be designated annually on an alternating basis between the Parties. The Party not designating the chairperson shall designate one of its representative members as secretary to the Research Committee for such year. Each Party shall be free to change its representative members, on notice to the other Party, provided that it does so in compliance with this Section 3.2. The Research Committee shall exist until the termination or expiration of the Research Program.
(a) RESPONSIBILITIES. The Research Committee shall be responsible for preparing the Annual Research Plan (based on priorities set by SOLVAY DUPHAR and taking into account CADUS's views as to the feasibility of the scope and timing of research activities and objectives), monitoring and adapting the Annual Research Plan based on the results and progress of the Research Program, establishing long-term objectives and the Semi-Annual Performance Objectives for the Research Program and evaluating the progress of the Research Program, including, without limitation:
(1) Deciding the direction and objectives of the Research Program;
(2) Determining appropriate staffing and resources that should be applied by CADUS to the Research Program from time to time, provided that such staffing is consistent with Section 3.3 hereof;
(3) Providing ongoing scientific guidance to the Research Program; and
(4) Providing a forum for the exchange of scientific information among the scientists participating in the Research Program.
(b) MEETINGS. The Research Committee shall meet at least once every calendar quarter, and more frequently as the Parties deem appropriate, on such dates and at such times as the Parties shall agree. At such meetings, the Research Committee shall, among other things, discuss the progress of and plans for the Research Program and seek to agree on the specific research activities to be undertaken during the next six months. The meetings shall be held at locations that are agreed upon by the Parties. The chairperson shall be responsible for sending notices of meetings to all members. The Research Committee may also convene or be polled or consulted from time to time by means of telecommunications or correspondence. If, at SOLVAY DUPHAR'S request, a meeting of the Research Committee is held at a location that is further than 75 miles from CADUS's principal offices, SOLVAY DUPHAR shall reimburse CADUS for the reasonable travel and lodging expenses of CADUS personnel who attend such meeting, promptly upon receipt of appropriate invoices therefor.
(c) DECISIONS OF THE RESEARCH COMMITTEE.
(1) All decisions of the Research Committee shall be made by unanimous agreement of the members (or their designees) present in person or by telephone at any meeting; provided that at least two representatives of each Party are present at such meeting.
(2) In the event that unanimity cannot be reached by the Research Committee with respect to a matter that is subject to its decision-making authority (other than a decision whether or not to amend the Semi-Annual Performance Objectives, which matter is specifically covered by Section 3.1(b) hereof), then the matter shall be referred for further review and resolution to the Vice President of Research at SOLVAY DUPHAR, or such other similar position designated by SOLVAY DUPHAR from time to time, and the Chief Executive Officer at CADUS, or such other similar position designated by CADUS from time to time. If they cannot resolve the issues within thirty (30) days, the matter will be referred to arbitration pursuant to Section 15.14, unless the matter is the failure to agree on an Annual Research Plan (which matter is governed by Section 3.1(c) hereof).
(d) REPORTS. Within thirty (30) days after each Research Committee meeting, the secretary of the Research Committee shall prepare and distribute minutes of the meeting which shall provide a description in reasonable detail of the discussions had at the meeting and a list of any actions, decisions or determinations approved by the Research Committee. Such reports shall be distributed to the members of the Research Committee and the Chief Executive Officer of CADUS and the Vice President of Research of SOLVAY DUPHAR.
3.3 FUNDING OF THE RESEARCH PROGRAM.
(a) SOLVAY DUPHAR shall provide funding to CADUS for the conduct of the Research Program in the amount of up to Two Million Five Hundred Thousand Dollars ($2,500,000), as adjusted as set forth below, each year during the term of the Research Program; and CADUS shall use such funding for the conduct of the Research Program. The amount of funding required to be made by SOLVAY DUPHAR shall be computed on a calendar quarterly basis based upon
[c.i.]
, provided that CADUS shall have the right
[c.i.]
each calendar quarter during the term of the Research Program and receive funding therefor from SOLVAY DUPHAR [c.i.]; and, provided, further, that SOLVAY DUPHAR shall have the right
[c.i.]
each calendar quarter during the term of the Research Program, subject to CADUS's ability to hire and retain scientists with sufficient qualifications, skills and experience, provided that SOLVAY DUPHAR is providing the funding therefor
[c.i.]
and the annual level of funding to be provided by SOLVAY DUPHAR (initially $2,500,000) shall be adjusted annually commencing with calendar year 1997 to reflect changes, since the Effective Date, in the U.S. Consumer Price Index.
(b) SOLVAY DUPHAR shall have the option, commencing with calendar year 1997, to increase to
[c.i.]
Such option may be exercised by SOLVAY DUPHAR, only prior to October 1, 1996, by its giving to CADUS written notice of its election to increase its funding commitment.
(c) SOLVAY DUPHAR shall provide the funding hereunder in quarterly installments equal to twenty-five percent (25%) of the then annual level of funding, in advance on the first day of
January, April, July and October of each year. However, the first payment shall be made in the amount of $417,808 on the Effective Date of this Agreement (in lieu of any payment on October 1, 1995), which amount is $2,500,000 multiplied by a fraction the numerator of which is the number of days from the Effective Date through December 31, 1995 and the denominator of which is 365. Within 30 days following the end of each calendar quarter, CADUS shall prepare and submit a statement setting forth
[c.i.]
Within 60 days following the end of each calendar quarter, CADUS shall prepare and submit an invoice for the upcoming calendar quarter. Such invoice shall reflect a deduction, and SOLVAY DUPHAR shall be entitled to deduct, from the next quarterly installment payment an amount equal to
[c.i.]
(d) If CADUS had less than
[c.i.]
CADUS shall have the right (after consultation with the Research Committee, but in its sole and absolute discretion)
[c.i.]
(e) CADUS shall pay for all out-of-pocket expenses incurred in connection with the Research Program other than the following which shall be paid by SOLVAY DUPHAR: (i) the cost of material, processes or equipment obtained or licensed by CADUS from Third Parties at the specific written request of SOLVAY DUPHAR and not set forth in the Annual Research Plan as being paid by CADUS, including, without limitation, cDNA libraries, processes for making the same, software licenses from Third Parties and automated screening equipment and (ii) travel and lodging expenses incurred by CADUS employees, consultants or advisors in connection with travel requested by SOLVAY DUPHAR. CADUS shall have the right to use, for its own purposes that are unrelated to the Research Program, any such material, processes or equipment obtained or licensed by it from Third Parties at the request of SOLVAY DUPHAR,
provided that CADUS shall pay for any additional expenses arising from such use.
(f) At SOLVAY DUPHAR's request (not to exceed once per calendar year), CADUS shall direct its regular independent, certified public accountants to examine CADUS's books and records relating to scientists working on the Research Program and to deliver to CADUS and SOLVAY DUPHAR a written report as to whether such books and records are consistent with the invoices submitted by CADUS to SOLVAY DUPHAR pursuant to subsection 3.3(c) above. SOLVAY DUPHAR shall pay for the cost of each such examination and report; provided, however, that if the audit proves that CADUS's books and records are materially inconsistent with the invoices submitted by CADUS, CADUS shall pay for the cost of such examination, without prejudice to SOLVAY DUPHAR's other rights.
3.4 CONDUCT OF RESEARCH PROGRAM BY CADUS. During the term of the Research Program, so long as SOLVAY DUPHAR is providing funding pursuant to Section 3.3, CADUS shall:
(a) diligently perform its obligations under the Research Program, as set forth in any Annual Research Plan, and such other activities which, from time to time, the Research Committee decides is necessary for the success of the Research Program;
(b) use all reasonable efforts and proceed diligently to perform the work set out for CADUS to perform in the Annual Research Plan, including, without limitation, by using its good faith efforts to
[c.i.]
to the Research Program, using personnel with sufficient qualifications, skills and experience, together with sufficient equipment and facilities, to carry out its obligations under the Research Program and to accomplish the objectives of the Research Program;
(c) conduct the Research Program in a good scientific and professional manner, and in compliance with all requirements of applicable laws, rules and regulations, and all other requirements of any applicable good laboratory practices to attempt to achieve its objectives efficiently and expeditiously;
(d) furnish SOLVAY DUPHAR with all Screens arising from the Research Program;
(e) within 30 days following the end of each calendar quarter during the term of the Research Program (commencing with the calendar quarter ending March 31, 1996), furnish SOLVAY DUPHAR with written reports (i) summarizing all activities under the Research Program during such quarter, (ii) listing the Semi-Annual
Performance Objectives achieved during such quarter and (iii)
[c.i.]
(f) provide to the Research Committee at each meeting thereof a written report summarizing all of the activities of CADUS using the Screens since the period covered by the previous report;
(g) as soon as practicable provide (i) an invention disclosure report to SOLVAY DUPHAR with respect to any Joint Invention and (ii) copies of all filed patent applications with respect to any Invention by CADUS;
(h) allow representatives of SOLVAY DUPHAR, upon reasonable notice and during normal business hours, to (1) visit the facilities where the Research Program is being conducted, and (2) consult informally, during such visits and by telephone, with CADUS personnel performing work on the Research Program; and
(i) maintain liability insurance with respect to the work it is performing under the Research Program in such amounts as it customarily maintains with respect to similar research programs, which insurance shall designate SOLVAY DUPHAR as an "insured", and to pay the premiums due thereunder.
3.5 CONDUCT OF RESEARCH PROGRAM BY SOLVAY DUPHAR. During the term of the Research Program, SOLVAY DUPHAR shall:
(a) use all reasonable efforts to perform the work and provide the Substances set out for SOLVAY DUPHAR to perform and provide in any Annual Research Plan, and undertake such other activities which, from time to time, the Research Committee decides is necessary for the success of the Research Program;
(b) as soon as practicable provide (i) an invention disclosure report to CADUS with respect to any Joint Invention and (ii) copies of all filed patent applications with respect to any Invention by SOLVAY DUPHAR or an Affiliate thereof;
(c) provide to the Research Committee at each meeting thereof a written report summarizing all of the activities of SOLVAY DUPHAR and its Affiliates using the Screens since the period covered by the previous report; and
(d) allow representatives of CADUS, upon reasonable notice and during normal business hours, to (1) visit the facilities where the Screens are being used, and (2) consult informally, during such visits and by telephone, with SOLVAY DUPHAR personnel performing work in connection with the Research Program.
3.6 RECORDS.
(a) CADUS shall maintain records, in sufficient detail and in good scientific manner, 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 (including all data in the form required under all applicable laws and regulations).
(b) SOLVAY DUPHAR shall have the right, during normal business hours and
upon reasonable notice, to inspect and copy all records of CADUS referred to in
Section 3.6(a) above. SOLVAY DUPHAR shall maintain such records and the
information of CADUS contained therein in confidence in accordance with Section
12 and shall not use such records or information except to the extent otherwise
permitted by this Agreement.
3.7 TRAINING. During the term of the Research Program, CADUS shall provide
training to SOLVAY DUPHAR personnel to enable them to use the Screens provided
to SOLVAY DUPHAR by CADUS pursuant to the Research Program. Training shall be
provided, to the extent practicable, by such CADUS scientists that are part of
[c.i.] the Research Program. If such scientists are not available and training
is provided, at SOLVAY DUPHAR's request, by other CADUS scientists, SOLVAY
DUPHAR shall pay for the time of such CADUS scientists at such rates as shall be
agreed by SOLVAY DUPHAR and CADUS in good faith. If, at SOLVAY DUPHAR's request,
CADUS personnel provide training or scientific assistance to SOLVAY DUPHAR other
than at CADUS's laboratories, SOLVAY DUPHAR shall also pay for all reasonable
travel and lodging expenses of such CADUS personnel promptly upon receipt of
appropriate invoices therefor.
3.8 TERM OF RESEARCH PROGRAM. The term of the Research Program shall commence on the Effective Date, and shall continue, except as otherwise provided in this Agreement, until December 31, 2000. SOLVAY DUPHAR shall have the right, in its sole discretion, to extend the term of the Research Program for such number of whole calendar years as shall not exceed five years and as shall not be less than (i) two years if SOLVAY DUPHAR is funding
[c.i.]
and (ii) three years if SOLVAY
DUPHAR is
[c.i.].
SOLVAY DUPHAR may so extend the term of the Research Program by sending written notice to CADUS specifying the number of years by which the term is being extended, (i) prior to December 31, 1998 or (ii) if SOLVAY DUPHAR's Vice President of Research recommends in writing to SOLVAY DUPHAR's management that the term of the Research Program be extended and provides to CADUS a copy thereof prior to December 31, 1998 (without prejudice to SOLVAY DUPHAR's management to decide otherwise), then prior to June 30, 1999. If SOLVAY DUPHAR extends the term of the Research Program, SOLVAY DUPHAR shall be required to continue to provide the level of funding to CADUS in effect at
the end of the initial term, as adjusted as provided in Section 3.3.
3.9 EXCLUSIVITY. During the term of the Research Program, CADUS shall not develop or make available, with or for the benefit of any Third Party, any Screens or any screens involving any Other Targets worked on under the Research Program or identified for research activities in the current year or in future years in the then current Annual Research Plan. Notwithstanding the foregoing, if SOLVAY DUPHAR extends the term of the Research Program, CADUS shall have the right, after December 31, 2000, to develop or make available, with or for the benefit of any Third Party, any Exclusive Screens or any screens involving any Other Targets worked on under the Research Program, if SOLVAY DUPHAR is not actively using any such Exclusive Screen or Other Target and has not identified or confirmed the biological activity of any Compound or Product using such Exclusive Screen or Other Target which SOLVAY DUPHAR or one of its Affiliates is actively developing, marketing or having marketed. CADUS may exercise the foregoing right unless SOLVAY DUPHAR had informed CADUS in writing, at the time such Exclusive Screen or Other Target was described in an Annual Research Plan, that the Target incorporated in such Exclusive Screen or such Other Target is subject to restrictions imposed by Third Parties.
3.10 MATERIAL TRANSFER. In order to facilitate the Research Program,
either Party may provide to the other Party certain biological materials or
chemical compounds including, but not limited to, Targets (collectively,
"Substances") owned by or licensed to the supplying Party (other than under this
Agreement) for use by the other Party in furtherance of the Research Program.
Except as otherwise provided under this Agreement, all such Substances delivered
to the other Party (1) shall remain the sole property of the supplying Party,
(2) shall be used only in furtherance of the Research Program and solely under
the control of the other Party, (3) shall not be used or delivered to or for the
benefit of any Third Party without the prior written consent of the supplying
Party, and (4) shall not be used in research or testing involving human subjects
by the receiving party. The Substances supplied under this Section 3.10 must be
used with prudence and appropriate caution in any experimental work, since not
all their characteristics may be known. THE SUBSTANCES ARE PROVIDED "AS IS" AND
WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE SUBSTANCES WILL NOT
INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.
3.11 LIABILITY. During the Research Program, each Party shall be responsible for, and hereby assumes, any and all risks of personal injury, death or property damage caused by the negligent
or willful acts or omissions of that Party or its Affiliates, and their respective directors, officers, employees or agents.
3.12 TREATMENT OF SUBSTANCES SECRETED FROM AUTOCRINE SYSTEM. In the event that any peptides or other substances secreted by a yeast cell are developed or created by SOLVAY DUPHAR or an Affiliate of SOLVAY DUPHAR or CADUS pursuant to the Research Program by use of the Autocrine System, all rights to such substances shall belong exclusively to CADUS, but such substances shall be deemed to be CADUS Compounds for all purposes under this Agreement. Any peptide or non-peptide library incorporated within yeast cells, including any Compounds provided by the library contributed to the Research Program by CADUS, shall belong exclusively to CADUS. Notwithstanding the foregoing, if the sequence of a peptide secreted by a yeast cell and such peptide's biological activity against a Target is in the public domain, such peptide shall not belong to CADUS and it shall not be deemed a CADUS Compound for any use thereof within the Research Program directed toward such Target. Furthermore, CADUS shall have no ownership rights to any small organic compound whose biological activity is identified by SOLVAY DUPHAR based on structural knowledge gained from a peptide secreted by a yeast cell, so long as such small organic compound is itself not a peptide and does not contain a sequence of such peptide.
3.13 TERMINATION OF RESEARCH PROGRAM BY SOLVAY DUPHAR.
(a) In the event that the Semi-Annual Performance Objectives for two consecutive semi-annual periods, commencing with the semi-annual period January 1, 1997 through June 30, 1997, are not achieved (unless the Parties agree that such Semi-Annual Performance Objectives could not have been achieved), SOLVAY DUPHAR shall have the right to give notice to CADUS of such failure. If CADUS does not achieve such Semi-Annual Performance Objectives for both such semi-annual periods and for the immediately subsequent semi-annual period within 180 days after the receipt of such notice, SOLVAY DUPHAR shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate the rights and obligations of the Parties set forth in Section 3 of this Agreement by giving written notice to take effect immediately upon delivery of such notice. SOLVAY DUPHAR's right to terminate the rights and obligations of the Parties set forth in Section 3 of this Agreement, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous failure to achieve Semi-Annual Performance Objectives. Upon such termination, (i) CADUS shall have no further obligation to conduct the Research Program, (ii) SOLVAY DUPHAR shall have no further obligation to fund the Research Program, (iii) CADUS shall, at SOLVAY DUPHAR's option, return to SOLVAY DUPHAR or destroy all Proprietary Targets and Proprietary Screens in its possession or control, and (iv) CADUS shall return all
SOLVAY Library Compounds then in its possession with respect to which it has not yet started a Screening Project or exercised the Option under Section 6 hereof. Termination by SOLVAY DUPHAR, pursuant to this Section 3.13(a), of the rights and obligations of the Parties set forth in Section 3 of this Agreement shall also terminate CADUS's rights under Section 6.1 hereof but shall not terminate any other rights or obligations of the Parties under this Agreement.
(b) If, during any calendar year after December 31, 1996, (i)
there is no Annual Research Plan in effect despite the Research Committee and
the Parties having acted in good faith to agree on an Annual Research Plan
(including utilizing the resolution procedure set forth in Section 3.1(c)
hereof) and (ii) CADUS does not [c.i.]
prior to the end of such calendar year, SOLVAY DUPHAR shall be entitled after
the end of such calendar year, without prejudice to any of its other rights
conferred on it by this Agreement, in addition to any other remedies available
to it by law or in equity, to terminate the rights and obligations of the
Parties set forth in Section 3 of this Agreement by giving written notice to
take effect immediately upon delivery of such notice. Upon such termination, (i)
CADUS shall have no further obligation to conduct the Research Program, (ii)
SOLVAY DUPHAR shall have no further obligation to fund the Research Program,
(iii) CADUS shall, at SOLVAY DUPHAR's option, return to SOLVAY DUPHAR or destroy
all Proprietary Targets and Proprietary Screens in its possession or control,
and (iv) CADUS shall return all SOLVAY Library Compounds then in its possession
with respect to which it has not yet started a Screening Project or exercised
the Option under Section 6 hereof. Termination by SOLVAY DUPHAR, pursuant to
this Section 3.13(b), of the rights and obligations of the Parties set forth in
Section 3 of this Agreement shall also terminate CADUS's rights under Section
6.1 hereof but shall not terminate any other rights or obligations of the
Parties under this Agreement.
4. DEVELOPMENT AND COMMERCIALIZATION.
4.1 USE OF SCREENS BY SOLVAY DUPHAR.
(a) SOLVAY DUPHAR shall have sole and absolute discretion to determine the means and methods by which it will conduct screening, assays and other research and development using the Screens, provided that the Screens and Technology will not be made available by SOLVAY DUPHAR and its Affiliates to Third Parties. Subject to the terms of this Agreement, SOLVAY DUPHAR shall have the sole and absolute discretion to make all decisions relating to the research, development, marketing and other commercialization activities with respect to any Compound or Product derived by it from its use of the Screens.
(b) Neither SOLVAY DUPHAR nor any Affiliate thereof shall disassemble or seek to reverse engineer the Substances and Screens provided by CADUS to SOLVAY DUPHAR. Notwithstanding the foregoing, SOLVAY DUPHAR and any Affiliate thereof shall have the right to test Screens under different growth conditions and media for the purpose of optimizing the sensitivity of such Screens.
4.2 [c.i.] TECHNOLOGY.
(a) If, during the term of the Research Program, (i) CADUS
decides not to practice [c.i.] that portion of its Technology related to
[c.i.] to develop the Screens specified for development within the period
covered by an Annual Research Plan as a result of
[c.i.]
CADUS shall develop such Screens by using
[c.i.]
(b) If, during the term of the Research Program,
[c.i.]
SOLVAY DUPHAR shall evaluate in good faith, in consultation with CADUS,
[c.i.]
If SOLVAY DUPHAR determines in good faith that
[c.i.]
, SOLVAY DUPHAR shall notify CADUS in writing of its determination and the reasons therefor and CADUS shall thereafter develop the aforementioned Screens by using
[c.i.]
(c) If, in any case in which CADUS is obligated to develop
Screens
[c.i.]
CADUS is not able to do so,
CADUS, at its option, will [c.i.] to SOLVAY DUPHAR by either (i) CADUS
practicing such [c.i.] technology for the purposes of developing such
[c.i.]
provided that CADUS has a
|
laboratory and personnel or a research collaboration reasonably acceptable to SOLVAY DUPHAR [c.i.] or [c.i.]
[c.i.]
(d) SOLVAY DUPHAR covenants and acknowledges that the information,
Know-How and Substances provided by CADUS to SOLVAY DUPHAR or one of its
Affiliates pursuant to this Section 4.2 shall not be provided to SOLVAY DUPHAR's
Affiliates (except to the Affiliate selected by SOLVAY DUPHAR to [c.i.]
in the event SOLVAY DUPHAR elects not to do so) or any Third Party, shall be
subject to the confidentiality obligations of Section 12.3 hereof, shall only
be used for the [c.i.] permitted hereunder and shall not be used
[c.i.] (other than [c.i.]
). Upon the termination of the Research Program, SOLVAY DUPHAR shall return to
CADUS or destroy all Substances (but not the [c.i.] ) proprietary to
CADUS in its possession or control provided by CADUS pursuant to this
Section 4.2.
5. GRANT OF LICENSES.
5.1 LICENSE GRANT FOR PROPRIETARY SCREENS. Subject to the terms and conditions of this Agreement, CADUS hereby grants to SOLVAY DUPHAR and its Affiliates, during the term of this Agreement, an exclusive right and license (including as to CADUS, except as specifically provided in Section 5.3), in the Territory and within SOLVAY DUPHAR's Therapeutic Areas of Interest, under the Technology, Screen Patents and Know-How, to use and practice the Proprietary Screens (including, without limitation, the right to grow sufficient amounts of Proprietary Screens provided by CADUS to SOLVAY DUPHAR) to identify and confirm potential human therapeutics.
5.2 LICENSE GRANT FOR EXCLUSIVE SCREENS. Subject to the terms and conditions of this Agreement, CADUS hereby grants to SOLVAY DUPHAR and its Affiliates an exclusive right and license (including as to CADUS, except as specifically provided in Section 5.3), in the Territory and within SOLVAY DUPHAR's Therapeutic Areas of Interest, under the Technology, Screen Patents and Know-How, to use and practice Exclusive Screens (including, without limitation, the right to grow sufficient amounts of Exclusive Screens provided by CADUS to SOLVAY DUPHAR), to identify and confirm human therapeutics, during the term of the Research Program, but in no event for less than six months after SOLVAY DUPHAR receives the Exclusive Screen and other information from CADUS identifying and enabling SOLVAY DUPHAR to use any such Exclusive Screen. With respect to any Exclusive Screen, if SOLVAY DUPHAR or an Affiliate
thereof identifies or confirms any Compound or Product using such Exclusive Screen during the foregoing period of exclusivity for such Exclusive Screen, then, for so long as SOLVAY DUPHAR or an Affiliate thereof continues to actively pursue the development of such Compound or Product or to actively market or have marketed such Product, SOLVAY DUPHAR and its Affiliates shall continue to have an exclusive right and license, under the Technology, Screen Patents and Know-How, to use and practice such Exclusive Screen in the Territory and within SOLVAY DUPHAR's Therapeutic Areas of Interest. SOLVAY DUPHAR shall notify CADUS when SOLVAY DUPHAR and its Affiliates cease to actively pursue the development of such Compound or Product or to actively market or have marketed such Product. After the period of exclusivity specified above, SOLVAY DUPHAR and its Affiliates shall have a non-exclusive right and license, in the Territory and within SOLVAY DUPHAR's Therapeutic Areas of Interest, under the Technology, Screen Patents and Know-How, to use and practice Exclusive Screens, which non-exclusive right shall not extend beyond five (5) years after the termination of the Research Program.
5.3 USE BY CADUS OF SCREENS.
(a) CADUS reserves for itself and its Affiliates the rights to use the Technology, Screen Patents and Know-How, and to make, use and practice Screens solely at CADUS's facilities, in the Territory and within CADUS's Therapeutic Areas of Interest, for the benefit of CADUS, its Affiliates or any joint venture or research collaboration in which CADUS or an Affiliate of CADUS has a substantial interest (but not solely for the benefit of the other party in the research collaboration); and SOLVAY DUPHAR hereby grants to CADUS the exclusive right and license (without the right to sublicense) to use Proprietary Targets (provided that SOLVAY DUPHAR has the right to grant licenses or sublicenses thereto) and Novel Targets, in the Territory and within CADUS's Therapeutic Areas of Interest, for research and development purposes, for the benefit of CADUS, its Affiliates or any joint venture or research collaboration in which CADUS or an Affiliate of CADUS has a substantial interest (but not solely for the benefit of the other party in the research collaboration). Notwithstanding the foregoing, CADUS shall not make, use or practice a Screen that is based on a Target provided to it by SOLVAY DUPHAR for which Third Parties have imposed on SOLVAY DUPHAR restrictions against use by third parties. SOLVAY DUPHAR will notify CADUS of the existence of such restrictions at the time it provides such Target to CADUS.
(b) In the event that CADUS identifies or develops a Compound using a Screen or CADUS exercises the Option with respect to a SOLVAY Library Compound or Analog thereof (a "CADUS Compound"), CADUS shall have the exclusive right to make, have made, distribute, use, sell, license and sublicense such CADUS Compound, or any Products developed therefrom, in the Territory and within CADUS's Therapeutic Areas of Interest, under any Patents,
know-how or other proprietary information related thereto. However, CADUS shall have no obligation to develop any CADUS Compound.
(c) In the event that SOLVAY DUPHAR or an Affiliate thereof identifies or confirms the biological activity of a Compound within CADUS's Therapeutic Areas of Interest using a Screen, SOLVAY DUPHAR or an Affiliate thereof selects such Compound as a Priority Substance for development for a therapeutic indication in SOLVAY DUPHAR's Therapeutic Areas of Interest, and SOLVAY DUPHAR and its Affiliates cease to actively pursue the development of any Compound for a therapeutic indication based on the biological activity demonstrated in such Screen or cease to actively market or have marketed any Product derived from any such Compound within SOLVAY DUPHAR's Therapeutic Areas of Interest, SOLVAY DUPHAR shall promptly notify CADUS thereof and hereby grants to CADUS and its Affiliates the exclusive right and license to make, have made, distribute, use, sell, license and sublicense such Compound, or any Products developed therefrom, in the Territory and within CADUS's Therapeutic Areas of Interest, under any Patents, know-how or other proprietary information related thereto; provided, however, that (i) there are no Third Party rights which restrict SOLVAY DUPHAR's ability to grant CADUS and its Affiliates such right and license, (ii) CADUS shall have agreed, upon prompt notice thereof from SOLVAY DUPHAR, to assume any royalty obligations to Third Parties with respect to such Compound and (iii) such right and license shall terminate if CADUS and its Affiliates cease to actively pursue the development of such Compound for a therapeutic indication in CADUS's Therapeutic Areas of Interest or cease to actively market or have marketed any Product derived from such Compound within CADUS's Therapeutic Areas of Interest. Such Compound shall be deemed a CADUS Compound for purposes of this Agreement.
(d) In the event that CADUS or an Affiliate thereof identifies or confirms the biological activity of a Compound within SOLVAY DUPHAR's Therapeutic Areas of Interest using a Screen, CADUS or an Affiliate thereof selects such Compound as a Priority Substance for development for a therapeutic indication in CADUS's Therapeutic Areas of Interest, and CADUS and its Affiliates cease to actively pursue the development of any Compound for a therapeutic indication based on the biological activity demonstrated in such Screen or cease to actively market or have marketed any Product derived from any such Compound within CADUS's Therapeutic Areas of Interest, CADUS shall promptly notify SOLVAY DUPHAR thereof and hereby grants to SOLVAY DUPHAR and its Affiliates the exclusive right and license to make, have made, distribute, use, sell, license and sublicense such Compound, or any Products developed therefrom, in the Territory and within SOLVAY DUPHAR's Therapeutic Areas of Interest, under any Patents, know-how or other proprietary Information related thereto; provided, however, that (i) there are no Third Party rights which restrict
CADUS's ability to grant SOLVAY DUPHAR and its Affiliates such right and license, (ii) SOLVAY DUPHAR shall have agreed, upon prompt notice thereof from CADUS, to assume any royalty obligations to Third Parties with respect to such Compound and (iii) such right and license shall terminate if SOLVAY DUPHAR and its Affiliates cease to actively pursue the development of such Compound for a therapeutic indication in SOLVAY DUPHAR's Therapeutic Areas of Interest or cease to actively market or have marketed any Product derived from such Compound within SOLVAY DUPHAR's Therapeutic Areas of Interest.
(e) In the event that CADUS develops a CADUS Compound, and if, during the term of the Research Program, CADUS determines that it is interested in entering into a development or marketing arrangement regarding any such CADUS Compound with a Third Party for exploitation in the Territory, CADUS hereby grants to SOLVAY DUPHAR a 90-day exclusive right of first negotiation to negotiate such development or marketing arrangement. CADUS shall give written notice to SOLVAY DUPHAR of its interest in entering into a development or marketing arrangement for such CADUS Compound. SOLVAY DUPHAR shall have 90 days after receipt of such notice within which to negotiate such development or marketing arrangement with CADUS. In the event that SOLVAY DUPHAR and CADUS do not enter into such development or marketing arrangement within such 90-day period for any reason whatsoever, CADUS shall be free at any time thereafter to negotiate a development or marketing arrangement with a Third Party for that particular CADUS Compound but shall not conclude any such arrangement with any Third Party on terms less advantageous to CADUS than those offered in writing by SOLVAY DUPHAR during such 90-day period without first offering said less advantageous terms to SOLVAY DUPHAR for a fifteen (15) day period.
5.4 SOLVAY DUPHAR'S RIGHTS TO USE TECHNOLOGY. Except for the specific licenses to use and practice Screens set forth in Sections 5.1 and 5.2 hereof and the license granted in Section 5.3(c) hereof, CADUS is not granting to SOLVAY DUPHAR or any Affiliate thereof any other license to use the Technology under this Agreement. Accordingly, (i) SOLVAY DUPHAR and its Affiliates shall not use the Technology other than the Screens (as permitted by this Agreement) for any purpose whatsoever and (ii) CADUS is retaining all rights to the Technology, Screen Patents and Know-How that are not specifically being licensed to SOLVAY DUPHAR and its Affiliates pursuant to Sections 5.1, 5.2 and 5.3(c) hereof.
5.5 NO RIGHT TO SUBLICENSE. SOLVAY DUPHAR and its Affiliates shall not have any right to sublicense to any Third Party any license granted by CADUS under this Agreement pursuant to Section 5.1 or 5.2.
6. ACCESS TO SOLVAY DUPHAR'S COMPOUND LIBRARY.
6.1 ACCESS AND PERMITTED USE. From time to time during the term of the Research Program, CADUS may request that SOLVAY DUPHAR provide to CADUS access to a representative sample (as determined by SOLVAY DUPHAR in its sole and absolute discretion but which shall contain from [c.i.] SOLVAY Library Compounds having maximum diversity) or a specific class of SOLVAY Library Compounds. In each such event, SOLVAY DUPHAR shall provide CADUS with such reasonable quantities of such SOLVAY Library Compounds, together with written information describing the complete chemical structure of each such SOLVAY Library Compound, as are reasonably requested by CADUS to permit CADUS to run primary and secondary IN VITRO screens on such SOLVAY Library Compounds, in order to allow CADUS to determine its interest in licensing one or more such SOLVAY Library Compounds. CADUS UNDERSTANDS THAT THE SOLVAY LIBRARY COMPOUNDS ARE EXPERIMENTAL IN NATURE, ARE FOR RESEARCH USE ONLY AND HAVE NOT BEEN APPROVED FOR HUMAN USE. CADUS SHALL NOT ADMINISTER SOLVAY LIBRARY COMPOUNDS TO HUMANS IN ANY MANNER OR FORM UNTIL CADUS HAS OBTAINED ALL GOVERNMENTAL APPROVALS NECESSARY TO DO SO.
6.2 COSTS. CADUS shall pay all of its costs related to Screening Projects other than the cost of providing representative samples of SOLVAY Library Compounds, which will be borne by SOLVAY DUPHAR. CADUS shall pay to SOLVAY DUPHAR the costs of providing SOLVAY Library Compounds other than representative samples, which costs shall be SOLVAY DUPHAR's costs of synthesis and out-of-pocket costs incurred in connection with providing such SOLVAY Library Compounds. Upon each request by CADUS for SOLVAY Library Compounds other than representative samples, SOLVAY DUPHAR shall estimate for CADUS, prior to fulfilling CADUS's request, the costs of synthesis and out-of-pocket costs SOLVAY DUPHAR will incur in providing such SOLVAY Library Compounds.
6.3 RESTRICTIONS ON TRANSFER AND USE.
(a) Except as set forth in this Agreement, CADUS shall not, directly or indirectly, transfer SOLVAY Library Compounds to any Third Party.
(b) Except as set forth in this Agreement, CADUS shall not, directly or indirectly, use SOLVAY Library Compounds for any purpose whatsoever other than to evaluate and test SOLVAY Library Compounds under this Agreement.
(c) CADUS shall not screen SOLVAY Library Compounds against Screens, except for the purpose of developing Screens under the Research Program. CADUS shall provide SOLVAY DUPHAR with the data on SOLVAY Library Compounds derived from such use.
(d) CADUS acknowledges that SOLVAY Library Compounds are, and shall remain, the sole property of SOLVAY DUPHAR. Nothing
herein shall be deemed to grant to CADUS rights in the SOLVAY Library Compounds, under any Patent or otherwise, except as expressly set forth in this Agreement.
6.4 ACCESS TO AND USE OF SOLVAY LIBRARY COMPOUNDS. CADUS shall restrict access to SOLVAY Library Compounds to: (i) those employees or consultants of CADUS who are reasonably necessary to conduct the Screening Projects and (ii) those Third Parties with whom CADUS has entered into an agreement to develop specific SOLVAY Library Compounds (and then only to such specific SOLVAY Library Compounds for which the Option has been exercised by CADUS), provided that such employees, consultants and/or Third Party collaborators have entered into a confidentiality agreement with CADUS. The screening shall be conducted at CADUS's facilities.
6.5 GRANT OF OPTION.
(a) Subject to the terms and conditions of this Agreement, SOLVAY DUPHAR and its Affiliates hereby grant to CADUS a non-exclusive option (the "Option") to obtain an exclusive right and license, under the Patents and know-how relating to any SOLVAY Library Compound or Analog thereof to develop, make, have made, use, sell, license and sublicense, in the Territory and in CADUS's Therapeutic Areas of Interest, Products incorporating a SOLVAY Library Compound used in a Screening Project or any Analog thereof or incorporating a Compound developed, identified or confirmed using any of the results arising from such Screening Project.
(b) For the purposes of Section 6.5(a), non-exclusive shall mean that SOLVAY DUPHAR will remain free to provide any SOLVAY Library Compound subject to the Option or any Analog thereof to any Affiliate of SOLVAY DUPHAR or any Third Party for screening and further development and will also itself remain entitled to screen and further develop such SOLVAY Library Compounds or Analogs thereof.
6.6 TERM OF OPTION. CADUS may exercise the Option at any time and from time to time with respect to any SOLVAY Library Compound used in any Screening Project and any Analogs of such SOLVAY Library Compound commencing on the date CADUS receives such SOLVAY Library Compound from SOLVAY DUPHAR or an Affiliate thereof pursuant to Section 6.1 hereof and ending one year following the date of expiration or earlier termination of the Research Program. The Option will also terminate with respect to a SOLVAY Library Compound and any Analog thereof (i) upon proper notice from SOLVAY DUPHAR to CADUS that SOLVAY DUPHAR or an Affiliate thereof has identified relevant biological activity in SOLVAY DUPHAR's Therapeutic Areas of Interest for such SOLVAY Library Compound or (ii) upon receipt by SOLVAY DUPHAR from a Third Party of proper notice that such Third Party has identified relevant biological activity in any therapeutic area of interest for such SOLVAY
Library Compound. SOLVAY DUPHAR shall promptly notify CADUS of the receipt of any such notification from a Third Party.
6.7 EXERCISE OF OPTION; EFFECT.
(a) The Option may be exercised with respect to any SOLVAY Library Compound for which CADUS identifies relevant biological activity in the course of a Screening Project or any Analogs of such SOLVAY Library Compound.
(b) To exercise the Option, CADUS shall send written notice to SOLVAY DUPHAR of same, specifying the one or more SOLVAY Library Compounds or Analogs of such SOLVAY Library Compounds for which CADUS desires to acquire a license to develop and commercialize Products therefrom and to manufacture and market such Products.
(c) Upon the giving of such notice, such SOLVAY Library Compound or Analog thereof shall be deemed to have been exclusively licensed to CADUS and its Affiliates pursuant to Section 5.3(b) hereof and shall be deemed a CADUS Compound for purposes of this Agreement. Notwithstanding the foregoing, SOLVAY DUPHAR and its Affiliates shall have the right to develop such SOLVAY Library Compound or Analog thereof for a therapeutic indication in SOLVAY DUPHAR's Therapeutic Areas of Interest. Such license shall terminate if CADUS and its Affiliates cease to actively pursue the development of such SOLVAY Library Compound or Analog thereof for a therapeutic indication in CADUS's Therapeutic Areas of Interest or cease to actively market or have marketed any Product derived from such SOLVAY Library Compound or Analog thereof in CADUS'S Therapeutic Areas of Interest. CADUS shall promptly notify SOLVAY DUPHAR of its ceasing to conduct such activities.
6.8 EFFECT OF FAILURE TO EXERCISE OPTION. Upon the expiration of the Option with respect to any SOLVAY Library Compound or Analog of such SOLVAY Library Compound, CADUS shall, at SOLVAY DUPHAR's discretion, return or dispose of all of such SOLVAY Library Compound and/or Analog(s) thereof, and return all data and other materials and information provided to CADUS by SOLVAY DUPHAR, and all results, data and other materials and information generated by CADUS during the Option period relating to such SOLVAY Library Compound and/or Analog(s) thereof, except results, data and other materials and information which are in the public domain.
6.9 REPORTS. If CADUS exercises the Option with respect to a SOLVAY Library Compound or Analog thereof, it shall provide SOLVAY DUPHAR with the written notices, if any, with respect to such SOLVAY Library Compound or Analog thereof as are set forth in Section 8.6 hereof.
7. ROYALTIES AND MILESTONE PAYMENTS.
7.1 ROYALTIES.
(a) In consideration of the licenses and other rights granted to SOLVAY
DUPHAR and its Affiliates under this Agreement, during the Royalty Term, SOLVAY
DUPHAR shall pay to CADUS a royalty equal to (i) [c.i.] of Net Sales,
by SOLVAY DUPHAR, its Affiliates, its licensees and its sublicensees, of any
Product based on a Compound identified or whose biological activity was
identified or confirmed through the use of a Screen other than a Novel Screen
plus, for Products other than those subject to Section 7.1(a)(i),
(ii) [c.i.] of Net Sales, by SOLVAY DUPHAR, its Affiliates, its
licensees and its sublicensees, of any Product based on a Compound identified
or whose biological activity was identified or confirmed through the use of a
Novel Screen, commencing on the First Commercial Sale of such Product by SOLVAY
DUPHAR, its Affiliates, its licensees or its sublicensees.
(b) In consideration of the licenses and other rights granted to CADUS under this Agreement, during the Royalty Term, CADUS shall pay to SOLVAY DUPHAR a royalty equal to (i) [c.i.] of Net Sales, by CADUS, its Affiliates, its licensees and its sublicensees, of any Product based on a Compound identified or whose biological activity was identified or confirmed through the use of a Screen other than a Novel Screen plus, for Products other than those subject to Section 7.1(b)(i), (ii) [c.i.] of Net Sales, by CADUS, its Affiliates, its licensees and its sublicensees, of any Product based on a Compound identified or whose biological activity was identified or confirmed through the use of a Novel Screen, commencing on the First Commercial Sale of such Product by CADUS, its Affiliates, its licensees or its sublicensees.
(c) Upon expiration of a Party's obligation to pay royalties with respect to a Product pursuant to this Section 7.1, such Party shall have the royalty-free, perpetual right to continue to manufacture, use and sell or have manufactured and sold such Product in the Territory.
(d) Neither Party or its Affiliates shall avoid using Screens to identify Compounds or to identify or confirm the biological activity of any compound, extract, broth or other screening sample in its drug discovery efforts, in order to circumvent the obligation to pay royalties imposed by this Section 7.1.
7.2 BUNDLING AND CAPITATION TRANSACTIONS. If a Product is sold in combination with any other products of a Party in bundling or capitation transactions and if in such bundling or capitation transactions the Net Sales of such Product are substantially lower than the Net Sales that would have been realized if the Product had
been sold outside of bundling or capitation transactions, the Parties will negotiate in good faith a formula pursuant to which the royalties on such sales of such Product will be calculated.
7.3 THIRD PARTY ROYALTIES. Each Party, at its sole expense, shall pay all royalties owing to any Third Party in order to exercise its rights hereunder to make, have made, use, sell or have sold any Product.
7.4 MILESTONE PAYMENTS. As further consideration for the licenses and other rights granted to each Party under this Agreement, each Party (or an Affiliate thereof) developing Products (the "Developing Party") shall pay to the other Party the following milestone payments upon the first occurrence of each event set forth below with respect to each Product being developed by the Developing Party:
(a) [c.i.] upon [c.i.]
by the Developing Party [c.i.] and
(b) [c.i.] (which shall be at the discretion of the Developing Party or its Affiliates)
[c.i.]
7.5 OBLIGATION TO PAY ROYALTIES. The obligation to pay royalties under this Section 7 is imposed only once with respect to the same unit of Product regardless of the number of Product Patents pertaining thereto. There shall be no obligation to pay royalties under this Section 7 on sales of Products among a Party, its Affiliates, its licensees and/or sublicensees but in such instances the obligation to pay royalties shall arise upon the sale by a Party, its Affiliates, its licensees or sublicensees to Third Parties.
8. PAYMENTS AND REPORTS.
8.1 PAYMENT. Each Party shall make all payments required under this Agreement by wire transfer in United States Dollars to such accounts as are directed by the other Party from time to time. If a Party fails to make payment in full to the other Party on the date any payment hereunder is due, for any reason whatsoever, the Party owed such payment shall be entitled to a late fee on all past due amounts at a rate equal to the lower of (i) one and one-half percent (1-1/2%) per month or part thereof and (ii) the maximum rate permitted by applicable law.
8.2 PAYMENT OF ROYALTIES . All royalty payments due hereunder shall be paid quarterly within sixty (60) days of the end of each calendar quarter. Each such payment shall be accompanied
by a statement, Product-by-Product and country-by-country, of the amount of Net Sales during such quarter and the amount of royalties due on such Net Sales. The royalty payments due shall be translated at the rate of exchange at which United States Dollars are listed in THE WALL STREET JOURNAL (or its equivalent if THE WALL STREET JOURNAL is no longer being published at the time) for the currency of the country in which the royalty is accrued for the last business day of the calendar quarter in which such sales were made.
8.3 RECORDS RETENTION. Each Party, its Affiliates, its licensees and its sublicensees shall keep complete and accurate records (specifically including originals or copies of documents supporting entries in the books of account) pertaining to the sale of Products in the Territory and covering all transactions from which Net Sales are derived for a period of three calendar years after the year in which such sales occurred, and in sufficient detail to permit the other Party to confirm the accuracy of royalty calculations hereunder.
8.4 AUDIT REQUEST. At the request and expense of a Party, the other Party, its Affiliates, its licensees and its sublicensees shall permit the requesting Party or an independent, certified public accountant appointed by the requesting Party, at reasonable times (not to exceed once per calendar year) and upon reasonable notice, to examine those records and all other material documents relating to or relevant to the computation of Net Sales in the possession or control of the other Party, its Affiliates, its licensees or its sublicensees, for a period of two years after such royalties have accrued, as may be necessary to: (i) determine the correctness of any report or payment made under this Agreement; or (ii) obtain information as to the royalties payable for any calendar quarter in the case of the other Party's failure to report or pay pursuant to this Agreement. Results of any such examination shall be made available to both Parties. The requesting Party shall bear the full cost of the performance of any such audit except as hereinafter set forth. If, as a result of any inspection of the books and records of the other Party, its Affiliates, its licensees or its sublicensees, it is shown that the other Party's royalty payments under this Agreement were less than the amount which should have been paid, then the other Party shall make all payments required to be made to eliminate any discrepancy revealed by said inspection within 30 days after the requesting Party's demand therefor. Furthermore, if the royalty payments were less than the amount which should have been paid by an amount in excess of 5% of the royalty payments actually made during the period in question, the other Party shall also pay to the requesting Party, in addition to the late fee set forth in Section 8.1, a late charge equal to 25% of the shortfall and reimburse the requesting Party for the cost of such inspection. Prior to commencing such audit, the independent, certified public accountant shall execute a
confidentiality agreement reasonably satisfactory to the other Party.
8.5 TAXES. In the event that a Party is required to withhold and remit any tax to the revenue authorities in any country in the Territory regarding any milestone payment or royalties payable to the other Party due to the laws of such country, such amount shall be deducted by such Party, and it shall notify the other Party and promptly furnish the other Party with copies of any tax certificate or other documentation evidencing such withholding.
8.6 NOTICE OF DEVELOPMENT MILESTONES. Each Party shall provide the other Party with written notice of each of the following events within 30 days of its occurrence:
(a) Such Party's or its Affiliate's designation of a Compound as a Priority Substance;
(b) Such Party's or its Affiliate's determination not to continue to pursue the development of any Compound that has been designated by it as a Priority Substance;
(c) The filing by such Party or an Affiliate thereof with the FDA of an IND in the United States (or its equivalent in any other country) for each Product;
(d) The commencement by such Party or an Affiliate thereof of [c.i.] clinical trials for each Product in the United States (or its equivalent in any other country);
(e) The filing by such Party or an Affiliate thereof of an NDA or a PLA with the FDA in the United States (or its equivalent in any other country) for each Product;
(f) The receipt by such Party or an Affiliate thereof of NDA or PLA approval from the FDA (or from the governing health authority of any other country) for each Product;
(g) The First Commercial Sale by such Party or an Affiliate thereof of each Product in any of the United States, Japan, Germany, France or the United Kingdom.
9. INFRINGEMENT ACTIONS BY THIRD PARTIES.
9.1 NOTICE OF SUIT OR CLAIM OF INFRINGEMENT. Each Party shall notify the other Party promptly in writing of any claim of, or action for, infringement of any Patents belonging to Third Parties which is alleged, threatened, made or brought against either Party or its Affiliates, licensees or sublicensees by reason of the manufacture, use or practice of any Screens or Targets or the manufacture, use or sale of the Products in the Territory.
9.2 OBLIGATION TO DEFEND.
(a) In the event that an action for infringement is commenced against a Party, its Affiliates, its licensees or its sublicensees based on its manufacture, use or [c.i.] in any country in the Territory, such Party shall defend such action at its own expense, and the other Party hereby agrees to assist and cooperate with such Party, at its own expense, to the extent necessary in the defense of such suit. A Party shall have the right to settle the suit or consent to an adverse judgment thereto, in its sole discretion; provided that if such suit names the other Party as a defendant, then such settlement or consent shall either be with the consent of the other Party or shall provide for the release of the other Party from any liability with respect thereto. During the pendency of such action, each Party shall continue to pay all royalties due hereunder. In the event a Party fails to defend such action, the other Party may defend such action and shall have the right to take charge of the defense thereof.
(b) In the event that an action for infringement is commenced against CADUS, its Affiliates, its licensees or its sublicensees, based on CADUS's manufacture or use [c.i.] (except for the manufacture and use thereof by CADUS for its own purposes or as permitted by Section 3.9 hereof), CADUS shall defend such action with attorneys of its own selection. CADUS shall be entitled to reimbursement from SOLVAY DUPHAR of up to [c.i.] in the aggregate for its costs, expenses, judgments and settlement payments incurred in connection with all such actions, within thirty (30) days of the presentation of invoices evidencing the same, and a credit against royalties and milestone payments payable pursuant to Section 7 hereof for any such amounts in excess of an aggregate of [c.i.] . CADUS shall not settle any such action without the prior written consent of SOLVAY DUPHAR, which shall not be unreasonably withheld. During the pendency of such action, each Party shall continue to pay all royalties due hereunder.
(c) In the event that an action for infringement is commenced against SOLVAY DUPHAR, its Affiliates, its licensees or its sublicensees, based on the manufacture, use or
[c.i.]
SOLVAY DUPHAR shall defend such action with attorneys of its own selection. SOLVAY DUPHAR shall be entitled to reimbursement from CADUS of up to
[c.i.]
in the aggregate for its costs, expenses, judgments and settlement payments incurred in connection with all such actions, within thirty (30) days of the presentation of invoices evidencing the same, and a credit against royalties and milestone payments payable pursuant to Section 7 hereof for any such amounts in excess of an aggregate of [c.i.] SOLVAY DUPHAR shall not settle any such action without the prior written consent of CADUS, which shall not be unreasonably
withheld. During the pendency of such action, each Party shall continue to pay all royalties due hereunder.
(d) In the event that an action for infringement is commenced jointly against SOLVAY DUPHAR, its Affiliates, its licensees or its sublicensees and CADUS, its Affiliates, its licensees or its sublicensees, based on SOLVAY DUPHAR'S manufacture, use or [c.i.] SOLVAY DUPHAR shall defend such action on behalf of both parties at its own expense and with attorneys of its own selection, and CADUS shall be entitled to counsel in such proceedings at its own expense. During the pendency of such action, each Party shall continue to pay all royalties due hereunder. In the event SOLVAY DUPHAR fails to defend such action, CADUS may defend such action and shall have the right to take charge of the defense thereof and have its costs and expenses therefor reimbursed by SOLVAY DUPHAR.
(e) In the event that an action for infringement is commenced jointly against SOLVAY DUPHAR, its Affiliates, its licensees or its sublicensees and CADUS, its Affiliates, its licensees or its sublicensees, based on CADUS's manufacture, use or [c.i.] CADUS shall defend such action on behalf of both parties at its own expense and with attorneys of its own selection, and SOLVAY DUPHAR shall be entitled to counsel in such proceedings at its own expense. During the pendency of such action, each Party shall continue to pay all royalties due hereunder. In the event CADUS fails to defend such action, SOLVAY DUPHAR may defend such action and shall have the right to take charge of the defense thereof and have its costs and expenses therefor reimbursed by CADUS.
(f) If a Party finally prevails in any action described in Section 9.2(a),
(d) or (e) because it is held not to be infringing any Patents belonging to such
Third Party or because such Third Party's Patent is held invalid, such Party
shall continue to pay royalties as set forth in Section 7 hereof, but shall be
entitled to a credit against such royalties payable in subsequent calendar
quarters in an amount equal to [c.i.] of the
reasonable costs actually incurred in such action and not reimbursed or paid for
by the other Party, but in no event shall such credit in any calendar quarter be
more than [c.i.] of such royalties due hereunder for Products in such country
which is the subject of such action in such calendar quarter.
(g) If a Party finally loses in any action described in Section 9.2(a), (d) or (e), whether by judgment, award, decree or settlement, and is required to pay a royalty to such Third Party, such Party shall continue to pay royalties as set forth in Section 7 hereof for such Products in the country which is the subject of such action, but shall be entitled to a credit against such royalties payable in subsequent calendar quarters in an amount equal to [c.i.] of the royalties paid to such Third Party, but in no
event shall such credit in any calendar quarter be more than [c.i.]
of such royalties due hereunder for such Products in such country which is the subject of such action in such calendar quarter. In addition, if such Party incurs litigation expenses (which are not reimbursed or paid for by the other Party) or is required to pay damages to such Third Party, such Party shall be entitled to a credit against the royalties payable pursuant to Section 7 hereof in subsequent calendar quarters in an amount equal to [c.i.] of the reasonable costs actually incurred in such action plus [c.i.] of the damages, but in no event shall the total credit provided herein in any calendar quarter be more than [c.i.] of the royalties due hereunder for such Products in such country which is the subject of such action in such calendar quarter.
10. OWNERSHIP OF INVENTIONS; PATENTS.
10.1 OWNERSHIP OF INVENTIONS. Except as otherwise provided in this Agreement, the entire right and title in all Inventions and any Patent, derived solely from the efforts of employees or others acting on behalf of CADUS, shall be owned solely by CADUS, and derived solely from the efforts of employees or others acting on behalf of SOLVAY DUPHAR shall be owned solely by SOLVAY DUPHAR. The cost for patent applications and patent maintenance for such Invention shall be borne by the Party who owns it.
10.2 JOINT INVENTIONS. The Parties recognize that, as a result of the collaboration between SOLVAY DUPHAR and CADUS during the conduct of the Research Program hereunder, certain Inventions may be deemed to be Joint Inventions. In that event, the Parties shall jointly own Patents and inventor's certificates covering such Joint Invention. The cost for patent applications and patent maintenance for such Joint Inventions shall be borne by the Parties on an equal basis. Notwithstanding the foregoing, the Parties acknowledge that (i) the entire right and title in Novel Targets and any Patents derived thereunder shall be owned solely by SOLVAY DUPHAR (subject to CADUS's rights under Section 5.3 hereof) and (ii) the entire right and title to any improvements to CADUS's Technology shall be owned solely by CADUS (subject to SOLVAY DUPHAR's rights under Sections 5.1 and 5.2 hereof).
10.3 PATENT ENFORCEMENT.
(a) With respect to any alleged infringement solely involving a Valid Claim(s) of any Patents involving any Proprietary Targets or Product Patents owned by SOLVAY DUPHAR or an Affiliate thereof, SOLVAY DUPHAR shall have the first right, but not the duty, to institute patent infringement actions against Third Parties. If SOLVAY DUPHAR or an Affiliate thereof does not institute an infringement proceeding against an offending Third Party, SOLVAY DUPHAR hereby grants to CADUS, and CADUS shall have, the right, but not the duty, to institute such an action. This
Section 10.3(a), however, shall not be construed as granting any rights to CADUS in such Patents or Product Patents.
(b) With respect to any alleged infringement solely involving a Valid
Claim(s) of Product Patents owned by CADUS, CADUS shall have the first right,
but not the duty, to institute patent infringement actions against Third
Parties. If CADUS does not institute an infringement proceeding against an
offending Third Party, CADUS hereby grants to SOLVAY DUPHAR, and SOLVAY DUPHAR
shall have, the right, but not the duty, to institute such an action. This
Section 10.3(b), however, shall not be construed as granting any rights to
SOLVAY DUPHAR in such Patents or Product Patents.
(c) With respect to any alleged infringement solely involving a Valid Claim(s) of any Screen Patents listed on APPENDIX A, CADUS shall have the right, but not the duty, to institute patent infringement actions against Third Parties. If CADUS does not institute an infringement proceeding against an offending Third Party, CADUS and SOLVAY DUPHAR shall discuss whether CADUS should grant to SOLVAY DUPHAR the right to institute such an action.
(d) With respect to any alleged infringements other than as described in
Section 10.3(a), (b) or (c) (including, without limitation, any alleged
infringement solely involving a Valid Claim(s) of any Screen Patents other than
those listed on APPENDIX A, except those involving any Proprietary Targets), the
Parties shall determine how they should proceed with respect to such alleged
infringement at such time.
(e) The costs and expenses of any action instituted pursuant to this
Section 10.3 (including fees of attorneys and other professionals) shall be
borne by the Party instituting the action, or, if the Parties elect to cooperate
in instituting and maintaining such action, such costs and expenses shall be
borne by the Parties in such proportions as they may agree in writing. Each
Party shall execute all necessary and proper documents and take such actions as
shall be appropriate to allow the other Party to institute and prosecute such
infringement actions (if such other Party has the right to institute and
prosecute such infringement actions pursuant to this Section 10.3). Any award
paid by Third Parties as a result of such an infringement action (whether by way
of settlement or otherwise) shall be paid to the Party who instituted and
maintained such action, or, if both Parties instituted and maintained such
action, such award shall be allocated among the Parties in proportion to their
respective contributions to the costs and expenses incurred in such action, or
as they may have otherwise agreed.
11. INDEMNIFICATION.
11.1 INDEMNIFICATION. Each Party shall indemnify, defend and hold the other Party, its Affiliates, its licensees and its sublicensees, and their respective directors, officers, employees and agents, harmless from and against any and all liabilities, damages, losses, penalties, costs and expenses (including the fees of attorneys and other professionals) arising out of or resulting from:
(a) negligence, recklessness or intentional acts or omissions of the indemnifying Party, its Affiliates or sublicensees, and their respective directors, officers, employees and agents, in connection with the work performed by such party under the Research Program; and
(b) any warranty claims, Product recalls or any claims of personal injury or property damage relating to the manufacture, use, distribution or sale of any Product developed or marketed by it.
11.2 NOTICE. In the event that either Party is seeking indemnification under Section 11.1, such Party shall inform the indemnifying Party of a claim as soon as reasonably practicable after it receives notice of the claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the right to settle it at the sole discretion of the indemnifying Party), and shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim.
12. PUBLICATION; CONFIDENTIALITY.
12.1 NOTIFICATION. Both Parties recognize that each may wish to publish the results of their work relating to the Research Program. However, both parties also recognize the importance of acquiring patent protection on inventions. Consequently, any proposed publication by either Party shall comply with this Section 12. At least 30 days before a manuscript is to be submitted to a publisher, the publishing Party will provide the other Party with a copy of the manuscript. If the publishing Party wishes to make an oral presentation, it will provide the other Party with a copy of the abstract (if one is submitted) at least 15 days before it is to be submitted. The publishing Party will also provide to the other Party a copy of the text of the presentation, including all slides, posters, and any other visual aids, at least 15 days before the presentation is made.
12.2 REVIEW OF PROPOSED PUBLICATIONS. The receiving Party will review the manuscript, abstract, text or any other material provided under Section 12.1 to determine if patentable subject matter is disclosed. The reviewing Party will notify the
publishing Party within 15 days of receipt of the proposed publication if the reviewing Party, in good faith, determines that patentable subject matter is or may be disclosed, or if the reviewing Party, in good faith, believes confidential or proprietary information is or may be disclosed. If it is determined by the reviewing Party that patent applications should be filed, the publishing Party shall delay its submission for publication or presentation for a period not to exceed 30 days from the reviewing Party's receipt of the proposed publication to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the 30-day period, the Parties will discuss the need for obtaining an extension of the publication delay beyond the 30-day period. If it is determined in good faith by the reviewing Party that confidential or proprietary information is being disclosed, the Parties will consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication to avoid such disclosure. The publishing Party of any manuscript, text or oral presentation will acknowledge the other Party for its contribution to the material being published or presented and to the Research Program. Notwithstanding the foregoing, CADUS will not seek to publish or publish the structures of Compounds owned, being researched, or being developed by SOLVAY DUPHAR, without SOLVAY DUPHAR'S prior written consent.
12.3 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, the Parties agree that, for the term of the Research Program and for five (5) years thereafter (and in perpetuity with respect to structures of compounds provided by either Party) the receiving Party, its Affiliates, its licensees and its sublicensees shall keep, and shall ensure that its officers, directors, employees and consultants keep, completely confidential and shall not publish or otherwise disclose and shall not use for any purpose any information furnished to it by the other Party, its Affiliates, its licensees or its sublicensees or developed under any Research Program pursuant to this Agreement, except to the extent that it can be established by the receiving Party by competent proof that such information: (i) is or hereafter becomes generally available to the public other than by reason of any default with respect to a confidentiality obligation; (ii) was already known to the recipient as evidenced by prior written documents in its possession; or (iii) is disclosed to the recipient by a Third Party who is not in default of any confidentiality obligation to the disclosing Party ("Confidential Information").
12.4 EXCEPTIONS. The restrictions contained in Section 12.3 shall not apply to Confidential Information that (i) is submitted by the recipient to governmental authorities to facilitate the issuance of marketing approvals for a Product, provided that reasonable measures shall be taken to assure confidential treatment
of such information; (ii) is provided by the recipient to Third Parties under appropriate terms and conditions, including confidentiality provisions equivalent to those in this Agreement, for consulting, development, manufacturing, external testing and marketing trials; or (iii) is otherwise required to be disclosed in compliance with applicable laws or regulations or order by a court or other regulatory body having competent jurisdiction; provided that if a Party is required to make any such disclosure of the other Party's Confidential Information it will, except where impracticable for necessary disclosures, for example to physicians conducting studies or to health authorities, give reasonable advance notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its best efforts to secure confidential treatment of such Confidential Information required to be disclosed.
12.5 CONFIDENTIALITY OBLIGATION OF CADUS. CADUS agrees that, for the term of the Research Program it shall keep completely confidential and shall not publish or otherwise disclose confidential information pertaining to its Technology, except to the extent that CADUS can establish by competent proof that such information:
(a) was or became generally available to the public or otherwise part of the public domain other than through any act or omission of CADUS in breach of this Agreement;
(b) was disclosed under requirement of law or by order or regulation of a governmental agency or a court of competent jurisdiction, including without limitation any requirement to disclose such information to any governmental agency for purposes of obtaining approval to market the Products;
(c) is information for which CADUS has sought patent or equivalent protection, including the filing of a patent application; or
(d) was disclosed to any Third Party under an obligation of confidentiality, including consultants of CADUS, other licensees or potential licensees of CADUS or potential investors in or business partners of CADUS.
12.6 LIMITATIONS ON USE. Each Party shall use, and cause each of its Affiliates, its licensees and its sublicensees to use, any Confidential Information obtained by it from the other Party, its Affiliates, its licensees or its sublicensees, pursuant to this Agreement or otherwise, solely in connection with the covered activities or the transactions contemplated hereby.
12.7 REMEDIES. Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to an
injunction, without the posting of any bond or other security, enjoining or restraining the other Party, its Affiliates, its licensees and/or its sublicensees from any violation or threatened violation of this Section 12.
12.8 SURVIVAL. The provisions of this Section 12 shall be in addition to, and not in limitation of, the provisions of a separate Confidentiality Agreement among CADUS, SOLVAY DUPHAR and Solvay Pharmaceuticals, Inc., dated February 23, 1995, which shall remain in full force and effect except to the extent it is fundamentally inconsistent with this Agreement.
13. TERM; TERMINATION OF LICENSES.
13.1 TERM. This Agreement shall become effective as of the Effective Date and shall terminate on December 31, 2030; provided, however, that the term hereof shall be automatically extended by the number of years by which SOLVAY DUPHAR extends the term of the Research Program pursuant to Section 3.8 hereof.
13.2 TERMINATION OF LICENSES.
(a) Failure by either Party or its Affiliates to comply with any of the material obligations contained in this Agreement shall entitle the other Party to give to the defaulting Party notice specifying the nature of the default and requiring it to cure such default. If such default is not cured within 60 days after the receipt of such notice (or, if such default cannot be cured within such 60-day period, if the Party in default does not commence and diligently continue actions to cure such default), the notifying Party shall be entitled, without prejudice to any of its other rights conferred on it by this Agreement, in addition to any other remedies available to it by law or in equity, to terminate the licenses it granted to the defaulting Party and its Affiliates pursuant to Section 5 of this Agreement by giving written notice to take effect immediately upon delivery of such notice. The right of either Party to terminate such licenses, as hereinabove provided, shall not be affected in any way by its waiver or failure to take action with respect to any previous default. None of the failure by CADUS to achieve Semi-Annual Performance Objectives, the failure to agree on an Annual Research Plan pursuant to Section 3.1, or the failure by CADUS to deliver a minimum of three (3) Screens in any calendar year for which there is no Annual Research Plan shall give SOLVAY DUPHAR the ability to exercise its termination rights under this Section 13.2(a).
(b) Termination by CADUS, pursuant to this Section 13.2, of the licenses
it granted to SOLVAY DUPHAR and its Affiliates under Section 5 of this Agreement
shall also terminate the rights and obligations of the Parties set forth in
Section 3 of this Agreement but shall not terminate any other rights and
obligations of the Parties under this Agreement. Within 10 days after such termination, SOLVAY DUPHAR shall pay to CADUS the amount of research funding it would have provided to CADUS pursuant to Section 3.3 hereof through the end of the term of the Research Program
[c.i.]
had CADUS not exercised its termination rights hereunder. Upon such termination,
(i) CADUS shall have no further obligation to conduct the Research Program, (ii)
SOLVAY DUPHAR shall deliver to CADUS all data, reports and records in SOLVAY
DUPHAR's possession or control which relate to the Research Program and (iii)
SOLVAY DUPHAR shall return to CADUS or destroy all Screens and Substances
developed under the Research Program in its possession or control.
(c) Termination by SOLVAY DUPHAR, pursuant to this Section 13.2, of the licenses it granted to CADUS under Section 5 of this Agreement shall also terminate the rights and obligations of the Parties set forth in Section 3 of this Agreement but shall not terminate any other rights and obligations of the parties under this Agreement. Upon such termination, (i) CADUS shall have no further obligations to conduct the Research Program, (ii) SOLVAY DUPHAR shall have no further obligation to fund the Research Program, and (iii) CADUS shall return to SOLVAY DUPHAR or destroy all Proprietary Targets and Proprietary Screens in its possession or control.
14. FORCE MAJEURE AND HARDSHIP.
14.1 EVENTS OF FORCE MAJEURE. Neither Party shall be held liable or responsible to the other Party nor be deemed to be in default under or in breach of any provision of this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement (other than its payment and reporting obligations set forth in Section 7 hereof) when such failure or delay is due to FORCE MAJEURE, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, FORCE MAJEURE is defined as causes beyond the control of the Party, including, without limitation, acts of God; acts, regulations, or laws of any government; war; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of pubic utilities or common carriers. In such event SOLVAY DUPHAR or CADUS, as the case may be, shall immediately notify the other Party of such inability and of the period for which such inability is expected to continue. The Party giving such notice shall thereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing (other than its payment and reporting obligations set forth in Section 7 hereof) for so long as it is so disabled (but not beyond the period of 12 months following its giving of such notice) and the 30 days thereafter.
14.2 HARDSHIP. The underlying objective of this Agreement is to realize in an economical and reasonable way the mutual interests and requirements of the Parties. If, at any time after the term of the Research Program (as it may be extended), this Agreement should no longer meet this objective because of economic developments or political changes that could not reasonably be foreseen at the time of the signing of this Agreement thus causing undue and prolonged hardship to a Party, the Parties shall meet to discuss a mutually agreeable solution according to the economic and reasonable objectives of this Agreement.
15. MISCELLANEOUS.
15.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.
15.2 NOTICE OF INTENT TO SEEK PARTNER. During the term of the Research Program, CADUS shall notify SOLVAY DUPHAR if CADUS or an Affiliate thereof intends to seek a development or marketing partner with respect to any potential pharmaceutical product identified by it pursuant to its proprietary research and development efforts, which is not subject to any conflicting obligations to Third Parties.
15.3 COVENANT NOT TO SOLICIT EMPLOYEES. Neither Party shall at any time during the term of the Research Program and for a period of two (2) years thereafter, directly or indirectly, in any manner or under any circumstances or conditions whatsoever solicit, induce or attempt to induce any senior management employee, scientist, or sales and marketing personnel of the other Party or of any Affiliate of the other Party to terminate his or her employment with such Party or such Affiliate.
15.4 ASSIGNMENT. Neither Party shall be entitled to assign its rights or transfer its obligations hereunder without the express written consent of the other Party hereto, except that both SOLVAY DUPHAR and CADUS may otherwise assign their respective rights and transfer their respective obligations hereunder to any assignee of all or substantially all of their respective businesses or in the event of their respective merger or consolidation or similar transaction. No assignment and transfer shall be valid and effective unless and until the assignee/transferee shall agree in writing to be bound by the provisions of this Agreement.
15.5 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.
15.6 NOTICE. Any notice or request required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and personally delivered or sent by registered or certified mail (return receipt requested), facsimile transmission (receipt verified), express courier service (signature required), or telegram, prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:
(a) In the case of SOLVAY DUPHAR, to:
Solvay Duphar B.V.
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
Attention: Vice President of Research
Facsimile No.: 011-31-2940-77109
With a copy to:
Solvay Duphar, B.V.
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
Attention: Legal & Trademark Department
Facsimile No.: 011-31-2940-77126
(b) In the case of CADUS, to:
Cadus Pharmaceutical Corporation 777 Old Saw Mill River Road Tarrytown, New York 10591-6705 Attention: President Facsimile No.: (914) 345-3565
With a copy to:
Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, New York 10022 Attention: Salomon R. Sassoon, Esq.
Facsimile No.: (212) 735-8708
or to such other address for such Party as it shall have specified by like notice to the other Party, provided that notices of a change of address shall be effective only upon receipt thereof. If sent by mail, facsimile transmission, express courier service, or telegram, the date of mailing or transmission shall be deemed to be the date on which such notice or request has been given.
15.7 USE OF NAME. Except as otherwise provided herein, neither Party shall have any right, express or implied, to use in
any manner the name or other designation of the other Party or any other trade name or trademark of the other Party for any purpose in connection with the performance of this Agreement.
15.8 PUBLIC ANNOUNCEMENTS. Except as required by law, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld. In the event of a required public announcement, the Party making such announcement shall provide the other Party with a copy of the proposed text prior to such announcement. The Parties agree that each may make public announcements consistent with APPENDIX D. Notwithstanding the foregoing, either Party may publicly disclose previously disclosed non-confidential information without the consent of the other.
15.9 WAIVER. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.
15.10 COMPLIANCE WITH LAW. Nothing in this Agreement shall be deemed to permit a Party to export, reexport or otherwise transfer any Product sold under this Agreement without compliance with applicable laws.
15.11 SEVERABILITY. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement, and the Parties shall negotiate in good faith to modify this Agreement to preserve (to the extent possible) their original intent.
15.12 AMENDMENT. No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.
15.13 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of England, without regard to its choice of law principles, provided that this Section 15.13 shall not be construed as submission to the jurisdiction of the courts of England.
15.14 ARBITRATION. The Parties agree that they shall use their best efforts to settle amicably any disputes, differences or controversies arising between them out of or in connection with this Agreement. However, the Parties irrevocably agree that any dispute arising out of or in connection with this Agreement, including but not limited to any question regarding its existence, validity or termination, if not so settled within thirty (30) days after occurrence thereof, shall be finally determined by arbitration. Unless the Parties otherwise agree, arbitration initiated by either Party shall be held in London, England, in the English language. The arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the rules of the London Court of International Arbitration then obtaining. The award rendered by the arbitrators shall be final and binding upon the Parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
15.15 ENTIRE AGREEMENT. So far as permitted by law and except in the case of fraud or misrepresentation, this Agreement sets forth the entire agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.
15.16 COUNTERPARTS. This Agreement may be executed simultaneously in any number of counterparts, any one of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.
15.17 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are for convenience only and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized officer as of the day and year first above written.
SOLVAY DUPHAR B.V.
By:/s/ JAN VAN INGEN -------------------------- Name: Jan van Ingen Title: President |
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY LEVIN -------------------------- Jeremy M. Levin, President |
APPENDIX A
LIST OF PATENTS AND PATENT APPLICATIONS
[c.i.]
APPENDIX B
DESCRIPTION OF RESEARCH PROGRAM
APPENDIX B
DESCRIPTION OF RESEARCH PROGRAM
TO THE RESEARCH COLLABORATION AND LICENSE AGREEMENT BETWEEN
CADUS PHARMACEUTICAL CORPORATION AND SOLVAY DUPHAR B.V.
DATED AS OF NOVEMBER 1, 1995
[c.i.]
[c.i.]
[c.i.]
[c.i.]
APPENDIX C
FIRST ANNUAL RESEARCH PLAN
[c.i.]
APPENDIX C
ANNUAL RESEARCH PLAN
[c.i.]
TABLE
SELECTED TARGETS
[c.i.]
FIGURE 1
[c.i.]
FIGURE 2
[c.i.]
APPENDIX D
FORM OF PUBLIC ANNOUNCEMENT
APPENDIX D
FORM OF PUBLIC ANNOUNCEMENT
[LETTERHEAD]
JOINT PRESS RELEASE
FOR IMMEDIATE RELEASE
Contact:
Jeremy M. Levin, M.D., Ph.D. L.D. Muschek, Ph.D. President and Chief Executive Officer Solvay Pharma Deutschland GmbH Cadus Pharmaceutical Corporation Hannover, Germany (914) 345-3344, ext. 222 +511-857-3177 Noonan/Russo Communications, Inc. A. de Jonge, Ph.D. (212) 696-4455 Solvay Duphar B.V. Anthony J. Russo, Ph.D. ext. 202 Weesp, Netherlands Rich Tammero ext. 222 +294-479633 |
CADUS AND SOLVAY DUPHAR SIGN $50 MILLION
DRUG DISCOVERY COLLABORATION
Weesp, Netherlands and Tarrytown, NY, November 2, 1995 -- Solvay Duphar B.V., a company of the Solvay Group (Brussels, Belgium) and Cadus Pharmaceutical Corporation today announced that they signed a five-year collaboration to identify new drugs that regulate specific signal transduction pathways, which serve as critical communication links between and within cells.
Under terms of the agreement, Cadus could receive over U.S. $50 million in research funding, equity, and milestone payments from Solvay Duphar, in addition to royalties. To commence the relationship, Solvay has made a U.S. $10 million equity investment in Cadus for approximately 9.5 percent of the company. In connection with this investment, a senior manager of Solvay's Health Sector has become a member of Cadus's Board of Directors.
"We have a high regard for the Cadus people and for the quality of their technologies," said Lawrence D. Muschek, Ph.D., Senior Vice President, R&D for Solvay's Health Sector. "We expect that the collaboration with Cadus will give Solvay's Health Sector a distinct competitive advantage in identifying new drugs."
Solvay and Cadus will share potential product rights to drugs which emerge from the research collaboration, depending upon the therapeutic area. Solvay Duphar will retain worldwide rights to drugs that treat central nervous system, endocrine, and metabolic disorders, as well as cardiovascular and gastrointestinal disease. Cadus will retain worldwide rights to drugs that treat inflammatory and immunological disorders and cancer.
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"This collaboration will combine the therapeutic expertise of Solvay with Cadus's understanding of signal transduction pathways," said Jeremy M. Levin, M.D., Ph.D., President and Chief Executive Officer of Cadus. "We look forward to working with a European partner who is strongly committed to using new technologies to advance the drug discovery process."
Solvay is a Belgium-based international chemical and pharmaceutical concern with annual revenues in excess of U.S. $8.2 billion. Solvay's Health Sector, which includes Solvay Duphar, is a fast-growing sector within the Solvay Group of companies, contributing over U.S. $1.4 billion in sales. The Solvay Health Sector companies are focused on human and animal health products and enzymes and operate worldwide. Solvay's Human Health companies are leading makers of pharmaceuticals for the treatment of gastroenterological diseases, for hormone replacement therapy, and for disorders of the central nervous and the cardiovascular systems.
Cadus, based in Tarrytown, New York, is a privately held biotechnology company focused on the development of research technologies that accelerate the discovery of novel human therapeutics. Cadus researchers have developed technology to simplify the identification of drugs which regulate signal transduction pathways. Signal transduction pathways in a receiving cell internalize messages from sending cells and produce a physiological response within the cell. Drugs targeted at signal transduction pathways may, for example, turn off a signal, preventing an undesirable cellular response, such as cell proliferation, from occurring. Cadus's proprietary drug discovery efforts are targeted at inflammatory and immunological disorders, cardiovascular disease, and certain types of cancer.
# # #
EDITOR'S NOTES:
This release is available on the Internet at http://www.noonanrusso.com.
VOTING AGREEMENT
VOTING AGREEMENT, dated as of April 26, 1995, by and among High River Limited Partnership, a Delaware limited partnership ("High River"), Carl C. Icahn ("Icahn"), The Global Health Sciences Fund, a Massachusetts business trust ("INVESCO," and collectively with High River and Icahn, including all successors and assigns thereof, the "Shareholders"), Bristol-Myers Squibb Company, a Delaware corporation ("Bristol") and Cadus Pharmaceutical Corporation, a Delaware corporation ("Cadus").
W I T N E S S E T H:
WHEREAS, the Shareholders, Bristol and Cadus are parties to a certain Voting Agreement dated as of July 30, 1993, as amended (the "Voting Agreement"), pursuant to which each of them and certain of the other holders of shares of capital stock of Cadus, have agreed to vote the shares of capital stock of Cadus owned by them for the election of directors designated by the others and by certain other parties;
WHEREAS, pursuant to a Stock Purchase Agreement dated as of April __, 1995 by and between ImClone Systems Incorporated and High River (the "Stock Purchase Agreement"), High River has agreed to purchase an aggregate of 1,050,000 shares of common stock of Cadus, par value $.001 per share and 1,810,396 shares of series A preferred stock of Cadus, par value $.001 per share (collectively, the "Cadus Shares");
WHEREAS, a condition to the purchase by High River of the Cadus Shares is the execution and delivery by INVESCO, Bristol and Cadus of this separate voting agreement relating to, among other things, the election of certain additional members to Cadus' Board of Directors (the "Board of Directors") and the termination of the Voting Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
ELECTION OF DIRECTORS
1.1 Election of Directors. At any time at which shareholders of Cadus will have the right to vote in the election of directors of Cadus, each of the Shareholders will vote all shares of capital stock of Cadus presently owned or hereafter acquired by such Shareholder as follows:
a. to cause and maintain the election to the Board of Directors such number of directors as, together with the Icahn Directors (as defined in the Voting Agreement), will give High River 51%, rounded up to the nearest whole number, of the total number of directors of the Board of Directors, which directors will be designated by High River (each a "High River Director" and together with the Icahn Directors, the "High River Directors");
b. following the termination of the Voting Agreement pursuant to Section 1.4 hereof, to cause and maintain the election to the Board of Directors of one director designated by INVESCO;
c. following the termination of the Voting Agreement pursuant to Section 1.4 hereof, to cause and maintain the election to the Board of Directors of one director designated by Bristol;
d. following the termination of the Voting Agreement pursuant to Section 1.4 hereof, to cause and maintain the election to the Board of Directors of the then- current President and Chief Executive Officer of Cadus; and
e. following the termination of the Voting Agreement pursuant to Section 1.4 hereof, to cause and maintain the election to the Board of Directors of one director designated by the Founders (as defined in the Voting Agreement).
Cadus shall use its best efforts to cause the nomination for election to the Board of Directors of the individuals set forth above.
1.2 Vacancies and Removal of Directors. a. The directors designated as set forth in Section 1.1 shall be elected at any annual or special meeting of shareholders (or by written consent in lieu of a meeting of shareholders) and
shall serve until his/her successor is elected and qualified or until his/her earlier resignation or removal.
b. Each of the Shareholders agrees to vote shares of capital stock of Cadus owned by such Shareholder:
(i) in favor of removal of a High River Director only if High River shall vote any of its shares of capital stock of Cadus in favor of such removal;
(ii) in favor of removal of the director designated by INVESCO only if INVESCO shall vote any of its shares of capital stock of Cadus in favor of such removal;
(iii) in favor of removal of the director designated by Bristol only if Bristol shall vote any of its shares of capital stock of Cadus in favor of such removal;
(iv) in favor of removal of the director who was at the time of designation the then-current President and Chief Executive Officer of Cadus only if such individual shall cease to be the President and Chief Executive Officer of Cadus;
(v) in favor of removal of the director designated by the Founders only if the Founders and members of the immediate family of the Founders (as defined in Item 404 of Regulation S-K of the Securities Act of 1933, as amended (the "Securities Act")) shall vote a majority of the shares of capital stock of Cadus held by the Founder and such family members in favor of the removal of such previously designated director;
and in such case, such Shareholder shall vote all of its shares of capital stock in favor of such removal.
c. Any vacancy in the office of a High River Director or of a director
specified in Section 1.1(b), (c) or (e) shall be filled as promptly as
practicable by the designation by the appropriate person specified in Section
1.1 of a new nominee and an election by the Shareholders. Pending any vote or
written consent of the Shareholders to elect a new High River Director or of a
director specified in Section 1.1(b), (c) or (e), any vacancy in the office of
such a director shall not be filled by the vote of the remaining directors;
provided, that a majority of the directors then in office may fill any such
vacancy with an individual designated by the appropriate person specified in
Section 1.1 with the prior written consent of such person.
1.3 Certain Limitations on Voting. Notwithstanding any other provision of this Agreement, the Shareholders shall not be obligated to vote their shares of capital stock of Cadus in accordance with Section 1.1 or Section 1.2, as follows:
a. If at any time High River (and its "affiliates" as defined for purposes of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall cease to be the beneficial owner (as defined in Regulation 13D-G under the Exchange Act) of at least 5,029,322 shares of capital stock of Cadus (such number to be subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification of other similar event involving a change in the capital stock of Cadus), the Shareholders shall not be obligated to vote their shares of capital stock of Cadus in accordance with Section 1.1(a) or Section 1.2(b)(i);
b. If at any time INVESCO (and its "affiliates" as defined for
purposes of the Exchange Act) shall cease to be the beneficial owner (as defined
in Regulation 13D-G under the Exchange Act) of at least 1,093,750 shares of
capital stock of Cadus (such number to be subject to equitable adjustment in the
event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification of other similar event involving a change in
the capital stock of Cadus), the Shareholders shall not be obligated to vote
their shares of capital stock of Cadus in accordance with Section 1.1(b) or
Section 1.2(b)(ii);
c. If at any time Bristol (and its "affiliates" as defined for
purposes of the Exchange Act) shall cease to be the beneficial owner (as defined
in Regulation 13D-G under the Exchange Act) of at least 1,785,714 shares of
capital stock of Cadus (such number to be subject to equitable adjustment in the
event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification of other similar event involving a change in
the capital stock of Cadus), the Shareholders shall not be obligated to vote
their shares of capital stock of Cadus in accordance with Section 1.1(c) or
Section 1.2(b)(iii);
d. If at any time the Founders and members of their immediate families (as defined in Item 404 of Regulation S-K of the Securities Act) shall cease to be the beneficial owners (as defined in Regulation 13D-G under the Exchange Act) of shares of capital stock of Cadus which, in the aggregate, are at least 50% of the shares of capital stock of Cadus owned by the Founders and members of their immediate families at the
date of this agreement (such number to be subject to equitable adjustment in the
event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification of other similar event involving a change in
the capital stock of Cadus), the Shareholders shall not be obligated to vote
their shares of capital stock of Cadus in accordance with Section 1.1(e) or
Section 1.2(b)(v)
1.4 Termination of Voting Agreement. Each of the Shareholders and Bristol will use its best efforts to cause the termination of the Voting Agreement.
1.5 Amendment to By-Laws. Each of the Shareholders and Bristol will use its best efforts to cause the amendment of Section 2.6 of the By-laws of Cadus to eliminate the requirement that there be an affirmative vote of a number of directors equal to the entire Board of Directors less one director in order to take the actions described therein.
ARTICLE II
MISCELLANEOUS
2.1 Further Assurances. From and after the date of this Agreement, upon the request of any party hereto, the other parties hereto shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
2.2 Injunctive Relief. It is acknowledged that it will be impossible to measure the damages that would be suffered if any Shareholder fails to comply with the provisions of Sections 1.1 and 1.2 of this Agreement and that in the event of any such failure, the other Shareholders will not have an adequate remedy at law. Therefore, each Shareholder shall be entitled to obtain specific performance of the other Shareholders' obligations thereunder and to obtain immediate injunctive relief. The Shareholders shall not argue, as a defense to any proceeding for such specific performance or injunctive relief, that High River has an adequate remedy at law.
2.3 Termination. This Agreement shall terminate on the earliest of (a) the date on which a written instrument to that effect is signed by all of the parties hereto, (b) the date of closing of an underwritten public offering on a firm
commitment basis pursuant to an effective registration statement filed pursuant
to the Securities Act covering the offer and sale of common stock of Cadus for
the account of Cadus in which Cadus receives gross proceeds equal to or greater
than $7,500,000 (calculated after deducting underwriters' discounts and
commissions but before deduction of expenses), and in which the price per share
of Cadus common stock equals or exceeds $1.38 (such price subject to equitable
adjustment in the event of any stock dividend, stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in Cadus common stock), (c) the date of consummation of a
consolidation or merger of Cadus with another corporation which results in more
than 50 percent of the voting power of capital stock outstanding immediately
after such consolidation or merger being held by one or more persons who were
not shareholders of Cadus immediately prior to such consolidation or merger; and
(d) the date of completion of the sale of all or substantially all of the assets
of Cadus to another person as an entirety or substantially as an entirety.
2.4 Effectiveness; Binding Effect. This Agreement shall become effective as among the parties who are signatories hereto when executed and delivered by each of Cadus and the Shareholders. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns, legal representatives and heirs.
2.5 Amendments or Waivers. This Agreement may not be amended or waived (either generally or in a particular instance and either retroactively or prospectively) except by a written instrument signed by the party against whom enforcement of such amendment, modification or waiver is sought. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
2.6 Additional Parties. a. Cadus and any Shareholders (in the case of a transfer of capital stock by such Shareholder) shall cause any person or entity who acquires shares of capital stock of Cadus owned by any Shareholder to become a party hereto as a Shareholder, unless at the time of such transfer, such person or entity was a Shareholder, in which case such person or entity shall remain a Shareholder.
b. Any person who is or becomes a holder of any shares of capital stock of Cadus may, by executing and delivering to Cadus a counterpart of this Agreement, become a party hereto as a Shareholder.
2.7 Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be delivered by hand, by telecopier, by overnight mail or mailed by first class certified or registered mail, return receipt requested, postage prepaid:
a. If to Cadus:
Cadus Pharmaceutical Corporation
777 Old Saw Mill River Road
Tarrytown, NY 10591
Attention: Dr. Jeremy Levin
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Attention: Salomon R. Sassoon, Esq.
b. If to High River or Icahn:
High River Limited Partnership
100 South Bedford Road
Mount Kisco, NY 10549
Attention: Carl C. Icahn
or
Carl C. Icahn
100 South Bedford Road
Mount Kisco, NY 10549
in each case with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, NY 10036
Attention: Marc Weitzen, Esq.
c. If to Bristol:
Bristol-Myers Squibb Company P.O. Box 4000
Route 206 and Province Line Road Princeton, New Jersey 08543-4000 Attention: Vice President and Senior Counsel, Pharmaceutical Research Institute and Worldwide Strategic Development
d. If to INVESCO:
The Global Health Sciences
Fund c/o INVESCO Trust Company
7800 E. Union Avenue,
Suite 800
Denver, CO 80237
Attention: Buck Phillips
with a copy to:
INVESCO Trust Company
7800 E. Union Avenue,
Suite 800
Denver, CO 80237
Kenneth Christoffersen, Esq.
(or at such other address or addresses as may have been furnished in writing by any party to the other parties)
2.8 Entire Agreement. This Agreement, together with the Voting Agreement, constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, whether oral or written, of any of the parties hereto concerning the subject matter hereof.
2.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
2.10 Captions. The captions of the sections, subsections and paragraphs of this Agreement have been added for convenience only and shall not be deemed to be a part of this Agreement.
2.11 Severability; Governing Law. If any provisions of this Agreement shall be determined to be illegal or unenforceable by any court of law, the remaining provisions shall be severable and enforceable to the maximum extent possible in accordance with their terms. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New York. |
IN WITNESS WHEREOF, the parties hereto have executed and
|
delivered this Agreement as an instrument as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JAMES S. RIELLY
------------------------------------
Title: Secretary/Treasurer
|
HIGH RIVER LIMITED PARTNERSHIP
By: /s/ ROBERT J. MITCHELL
------------------------------------
Title:
|
BRISTOL-MYERS SQUIBB COMPANY
By: /s/ CHARLES LINZNER
------------------------------------
Title: Vice President and Senior Counsel
|
THE GLOBAL HEALTH SCIENCES FUND
By: /s/ GLEN A. PAYNE
------------------------------------
Title: Secretary
/s/ CARL C. ICAHN
----------------------------------------
CARL C. ICAHN
|
(signature page to voting agreement among High River, Cadus, Bristol-Myers, INVESCO and Carl C. Icahn)
FIRST AMENDMENT TO VOTING AGREEMENT
FIRST AMENDMENT TO VOTING AGREEMENT, dated as of November 1, 1995, which amends the Voting Agreement (the "Agreement"), dated as of April 26, 1995, by and among Cadus Pharmaceutical Corporation ("Cadus"), High River Limited Partnership, Carl C. Icahn, The Global Health Sciences Fund and Bristol-Myers Squibb Company.
W I T N E S S E T H:
WHEREAS, Physica B.V. ("Physica") is purchasing 2,500,000 shares of Cadus's Series B Convertible Preferred Stock, $.001 par value per share, pursuant to a Preferred Stock Purchase Agreement of even date herewith; and
WHEREAS, one of the conditions to Physica's purchase of Cadus's Series B Convertible Preferred Stock is the amendment of the Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein set forth, the parties hereto hereby agree as follows:
1. Physica by executing this First Amendment to Voting Agreement agrees that it shall be deemed a "Shareholder" for purposes of the Agreement and that it shall be bound by the terms and provisions of the Agreement applicable to Shareholders.
2. Section 1.1 of the Agreement is hereby amended to read as follows:
"1.1 Election of Directors. At any time at which shareholders of Cadus will have the right to vote in the election of directors of Cadus, each of the Shareholders will vote all shares of capital stock of Cadus presently owned or hereafter acquired by such Shareholder as follows:
a. to cause and maintain the election to the Board of Directors such number of directors as will give High River 51%, rounded up to the nearest whole number, of the total number of directors of the Board of Directors, which directors will be designated by High River (each a "High River Director" and collectively the "High River Directors");
b. to cause and maintain the election to the Board of Directors of one director designated by INVESCO;
c. to cause and maintain the election to the Board of Directors of one director designated by Bristol, which director shall recuse himself from any discussion or vote with respect to
any proposed transaction between Cadus and a third party pharmaceutical or biopharmaceutical company involving research collaboration or the licensing of Cadus's technology;
d. to cause and maintain the election to the Board of Directors of the then-current President and Chief Executive Officer of Cadus;
e. to cause and maintain the election to the Board of Directors of one director designated by James R. Broach and Thomas Shenk (collectively, the "Founders"), which director shall be one of the Founders who is eligible for service on the Board of Directors in accordance with Section 1.4 hereof; and
f. to cause and maintain the election to the Board of Directors of one director designated by Physica, which director shall recuse himself from any discussion or vote with respect to any proposed transaction between Cadus and a third party pharmaceutical or biopharmaceutical company involving research collaboration or the licensing of Cadus's technology.
Cadus shall use its best efforts to cause the nomination for election to the Board of Directors of the individuals set forth above."
3. A subsection (b)(vi) shall be added to Section 1.2 of the Agreement, which shall read as follows:
"(vi) in favor of the removal of the director designated by Physica only if Physica shall vote any of its shares of capital stock of Cadus in favor of such removal."
4. Subsection 1.2(c) of the Agreement is hereby amended to read as follows:
"c. Any vacancy in the office of a High River Director or of a director specified in Section 1.1(b), (c), (e) or (f) shall be filled as promptly as practicable by the designation by the appropriate person specified in Section 1.1 of a new nominee and an election by the Shareholders. Pending any vote or written consent of the Shareholders to elect a new High River Director or of a director specified in Section 1.1(b), (c), (e) or (f), any vacancy in the office of such a director shall not be filled by the vote of the remaining directors; provided, that a majority of the directors then in office may fill any such vacancy with an individual designated by the appropriate person specified in Section 1.1 with the prior written consent of such person."
5. A subsection (e) shall be added to Section 1.3 of the Agreement, which shall read as follows:
"(e) If at any time Physica (and its "affiliates" as defined for purposes of the Exchange Act) shall cease to be the beneficial owner (as defined in Regulation 13D-G under the Exchange Act) of at least 1,250,000 shares of capital stock of Cadus (such number to be subject to equitable adjustment in the event of a stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the capital stock of Cadus), the Shareholders shall not be obligated to vote their shares of capital stock of Cadus in accordance with Section 1.1(f) or Section 1.2(b)(vi)."
6. Section 1.4 of the Agreement is hereby amended to read as follows:
"1.4. Eligibility of Founders. Notwithstanding any other provision of
this Agreement, any Founder (1) as to whom there shall be a Termination (as
defined in the Restricted Stock Agreement, dated as of May 24, 1993 between
the Company and such Founder), or (2) who together with any member of such
Founder's immediate family shall cease to be the sole beneficial owner (as
that term is defined in Regulation 13D-G under the Exchange Act) of more
than 50 percent of the shares of capital stock beneficially owned by such
Founder and such members of the immediate family of such Founder at the
date of this Agreement, thereafter shall no longer be eligible to
participate in the selection of a director for purposes of section 1.1(e),
shall no longer be eligible to serve as a director designated pursuant to
Section 1.1(e) and shall be deemed not to be a Founder for purposes of
Section 1.2(b)(v) or 1.3(d)."
7. A subsection (e) shall be added to Section 2.7 of the Agreement, which shall read as follows:
"e. If to Physica:
Physica B.V.
C. J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
Attention: President
with a copy to:
Solvay America, Inc.
3333 Richmond Avenue
Houston, Texas 77098
Attn: General Counsel"
8. Except as amended hereby, the terms and conditions of the Agreement are confirmed. The Agreement, as so amended, shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Voting Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY M. LEVIN
------------------------------------
Jeremy M. Levin, President
|
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
General Partner
By: /s/ ROBERT J. MITCHELL ------------------------------------ Name: Robert J. Mitchell Title: |
BRISTOL-MYERS SQUIBB COMPANY
By: /s/ CHARLES LINZNER
------------------------------------
Name: Charles Linzner
Title: Vice President & Senior
Counsel
|
THE GLOBAL HEALTH SCIENCES FUND
By: /s/ BARRY KUROKAWA
------------------------------------
Name: Barry Kurokawa
Title: Vice-President
/s/ CARL ICAHN
------------------------------------
Carl C. Icahn
|
PHYSICA B.V.
By: /s/ JAN VAN INGEN ------------------------------------ Name: Jan Van Ingen Title: President |
WHEREAS, the Company is issuing shares of its Convertible Preferred Stock, Series A, $.001 par value, at a price of $.457 per share (the "Series A Preferred Stock") to certain of the Stockholders pursuant to a Preferred Stock Purchase Agreement of even date herewith (the "Stock Purchase Agreement"); and
WHEREAS, one of the conditions to the investment by certain of such Stockholders is the execution of a co-sale agreement relating to certain proposed sales of capital stock of the Company by the Stockholders;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and the investment by certain of the Stockholders under the Stock Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
(a) Co-sale Right. If at any time a Stockholder (a "Selling Stockholder") desires to sell all or any part of the shares of any class of capital stock of the Company owned by such Stockholder (the "Offered Shares") to any person (the "Purchaser"), each other Stockholder who shall have notified the Selling Stockholder in accordance with Section 1.01(b) hereof (each a "Co-Selling Stockholder") shall have the right, as a condition to such sale by the Selling Stockholder, to sell to the Purchaser at the same price per share and on the same terms and conditions as involved in such sale by the Selling Stockholder, a number of shares of the same class or classes of capital stock of the Company as the Selling Stockholder proposes to sell to the Purchaser, determined by multiplying the number of Offered Shares
by a fraction, the numerator of which is the aggregate number of shares of capital stock of the Company owned by the Co-Selling Stockholder and the denominator of which is the sum of the number of shares of capital stock of the Company owned by the Selling Stockholder and all Co-Selling Stockholders. For purposes of this Section 1.01, a Stockholder shall be deemed to own all of the capital stock of the Company which a Stockholder has the right to acquire from the Company upon the conversion, exercise or exchange of any of the securities of the Company then owned by such Stockholder (as adjusted for any adjustments in the applicable conversion or exchange rate of any such securities).
(b) Notice Of Intent To Sell; Notice Of Intent To Participate. Each Stockholder who proposes to sell any shares of capital stock of the Company shall notify each other Stockholder in writing of the proposed sale. Such notice shall state the name of the Purchaser, the number and class of shares to be sold, the purchase price therefor and the proposed closing date. Each Stockholder wishing to participate in any sale under this Section 1.01 shall notify the Selling Stockholder in writing of such intention as soon as practicable after such Stockholder's receipt of such notice of sale, and in any event within 15 days after receipt of the notice of sale.
(c) Sale To Transferee. The Selling Stockholder and each Co-Selling Stockholder shall sell to the Purchaser all, or at the option of the Purchaser, any part of the Shares proposed to be sold by them at not less than the price and upon other terms and conditions, if any, not more favorable to the Purchaser than those in the notice of sale provided by the Stockholder under Section 1.01(b); provided, however, that any purchase of less than all of such Shares by the Purchaser shall be made from the Selling Stockholder and each Co-Selling Stockholder pro rata based upon the relative amount of the Shares that the Selling Stockholder and each Co-Selling Stockholder is otherwise entitled to sell pursuant to Section 1.01(a).
(d) Lapse of Restrictions. Any Shares sold by a Selling Stockholder or a Co-Selling Stockholder pursuant to this Section 1.01 shall no longer be subject to the restrictions imposed by this Agreement and shall no longer be entitled to the benefits conferred by this Agreement.
(e) Certain Transactions Excluded. Notwithstanding any other provision of this Agreement, the provisions of Section 1.01(a), (b) and (c) shall not apply to (1) any sale, transfer or other disposition by a Stockholder to a person who is an "affiliate" (as that term is defined for purposes of the Securities Exchange Act of 1934, as amended) of such Stockholder, (2) any sale, transfer or other disposition by a Stockholder that is a registered investment company or mutual fund to another
registered investment company or mutual fund which has the same investment adviser as such Stockholder, (3) any sale, transfer or other disposition by Icahn Holding Corporation, Elliott Schnall or Mark H. Rachesky, M.D. (the "Icahn Investors") one to the other or to any affiliate (as so defined) of any of them which is not a competitor of the Company, or (4) the sale, transfer or other disposition by ImClone to any one or more of the persons who is party to a Restricted Stock Agreement (as defined in the Stock Purchase Agreement) of an aggregate of up to 500,000 shares of Common Stock of the Company; provided, however, that in the case of any sale, transfer or other disposition permitted by the preceding clause (1), (2) or (3) at or before the time of such sale, transfer or disposition, such affiliate or other permitted transferee shall have executed and delivered to the Company a counterpart of this Agreement.
ARTICLE II
Section 2.1. Severability; Governing Law. If any provisions of this Agreement shall be determined to be illegal or unenforceable by any court of law, the remaining provisions shall be severable and enforceable to the maximum extent possible in accordance with their terms. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
Section 2.2. Injunctive Relief. It is acknowledged that it will be impossible to measure the damages that would be suffered if a Stockholder fails to comply with the provisions of this Agreement and that in the event of any such failure, the other Stockholders and the Company will not have an adequate remedy at law. Therefore, the Stockholders and the Company shall be entitled to obtain specific performance of the Stockholders' obligations hereunder and to obtain immediate injunctive relief. The Stockholders shall not argue, as a defense to any proceeding for such specific performance or injunctive relief, that the other Stockholders or the Company have an adequate remedy at law.
Section 2.3. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns, legal representatives and heirs.
Section 2.4. Modification or Amendment. Neither this Agreement nor any provision hereof can be modified, amended, changed, discharged or terminated except by an instrument in writing, signed by Stockholders and by the Company.
Section 2.5. Additional Parties. Any person who is or becomes a holder of any shares of capital stock of the Company may, by executing and delivering to the Company a counterpart of this Agreement, become a party hereto as a Stockholder.
Section 2.6. Counterparts. This Agreement may be executed in one or more counterparts each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument.
Section 2.7. Notices. All notices to be given or otherwise made pursuant to this Agreement shall be deemed to be sufficient if contained in a written instrument, delivered by hand or by express overnight courier service, or by electronic facsimile transmission (with a confirming copy sent by U.S. mail, registered or certified, return receipt requested), or by registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth herein or at such other address as may hereafter be designated in writing by the addressee to all the other parties hereto. All such notices shall, when mailed be effective three business days after being sent.
Section 2.8. Merger Provision. This Agreement and the Stock Purchase Agreement of even date herewith, by and between the Company and certain of the Stockholders, and the Voting Agreement of even date herewith by and among the Company and certain of the Stockholders, along with all exhibits and schedules to the various agreements, constitute the entire agreement among the parties hereto pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, whether oral or written, of any of the parties hereto concerning the subject matter hereof.
Section 2.9. Further Assurances. From and after the date of this Agreement, upon the request of any Stockholder or the Company, the Company and the Stockholders shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
Section 2.10. Termination. This Agreement shall terminate on the earliest of (a) the date which is five years after the date of this Agreement, (b) the date of closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act covering the offer and sale of Common Stock for the account of the Company in which the Company receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before deduction of expenses), and in which the price per share of Common
Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock), (c) the date of consummation of a consolidation or merger of the Company with another corporation which results in more than 50 percent of the voting power of capital stock outstanding immediately after such consolidation or merger being held by one or more persons who were not stockholders of the Company immediately prior to such consolidation or merger and (d) the date of completion of the sale of all or substantially all of the assets of the Company to another person as an entirety or substantially as an entirety.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.
CADUS PHARMACEUTICAL
CORPORATION
By /s/ JEREMY LEVIN
-----------------------------
Jeremy Levin
President and
Chief Executive Officer
|
THE GLOBAL HEALTH SCIENCES
FUND
By /s/ LESIA KORYTKO
-----------------------------
Title:
|
IMCLONE SYSTEMS INCORPORATED
By /s/ SAM WAKSAL
-----------------------------
Title: President
|
ICAHN HOLDING CORPORATION
By /s/ MARK H. RACHESKY, M.D.
-----------------------------
Title: Managing Director
/s/ M. ELLIOTT SCHNALL
-----------------------------
M. Elliott Schnall
/s/ MARK H. RACHESKY, M.D.
-----------------------------
Mark H. Rachesky, M.D.
|
Icahn Holding Corporation
100 South Bedford Road
Mt. Kisco, New York 10549
Attention: Carl C. Icahn
M. Elliott Schnall
255 Emerald Lane
Palm Beach , Florida 33480
Mark H. Rachesky, M.D.
124 West 60th Street
Apartment 49B
New York, New York 10023
ImClone Systems Incorporated
180 Varick Street
New York, New York 10014
Attention: President
The Global Health Sciences Fund
c/o INVESCO Trust Company
7800 E. Union Avenue, Suite 800
Denver, Colorado 80237
Attention: Lesia Korytko
THIS AGREEMENT, made as of the 19th day of October, 1994, between UNION CARBIDE CORPORATION, a New York corporation having offices at 39 Old Ridgebury Road, Danbury, Connecticut 06817-0001 (hereinafter called "Landlord"), and CADUS PHARMACEUTICALS CORPORATION, a New York corporation having offices at 180 Varick Street, New York, New York 10014-4606 (hereinafter called "Tenant"),
WHEREAS, by lease dated December 31, 1985, as modified by amendments dated February 28, 1986, August 1, 1986, March 21, 1988, August 1, 1988, September 25, 1990, February 28, 1991 and September 1, 1991 (said lease, as amended, being hereinafter called the "Prime Lease"), Landlord has leased from Keren Limited Partnership (hereinafter called the "Overlandlord") certain space within the real property of Overlandlord situated along Saw Mill River Road, partly in the Town of Greenburgh and partly in the Town of Mount Pleasant, County of Westchester and State of New York, as more particularly identified in the Prime Lease (hereinafter called the "Site"); and
WHEREAS, Tenant wishes to sublease from Landlord certain office and laboratory space, consisting of approximately 18,400 rentable square feet of laboratory/office space in the "Spine 215" level (hereinafter called the "Lab Space"), which units of Lab Space are more particularly outlined in Exhibit A-1 attached hereto and made a part hereof, said units of space being situated in the Spine Building located upon the Site, as more particularly identified in Exhibit A-2 attached hereto (hereinafter called the "Spine Building"); and
WHEREAS, Landlord is willing to sublease part or all of the Premises to Tenant upon the terms and conditions as set forth below;
NOW, THEREFORE, in consideration of the rents reserved hereunder and the mutual undertakings hereinafter set forth, Landlord and Tenant hereby covenant and agree as follows:
loading docks, lavatories, and other common areas of the Spine Building; and
(iii) a hallway for access from the front of the Premises to the main stairway
of the Spine Building. Any exercise of the aforesaid use rights shall be subject
to the provisions of Article 12 as though such facilities were part of the
Premises, and to any reasonable and non-discriminatory rules, regulations or
restrictions promulgated from time to time by Landlord for the safety, security,
convenience and operation of the Spine Building or the Site.
1.2 Tenant's rights to the possession, occupation and use of the Premises shall be subject to Landlord's exception and reservation from the Premises of access and other necessary rights to operate, maintain and repair any utility or building systems servicing the Spine Building, whether now existing or hereafter installed upon the Premises, including without limitation the right to maintain, repair, replace, change the size of and remove the same; provided, however, that in exercising any such rights Landlord shall not unreasonably interfere with Tenant's use of the Premises and Landlord shall repair and replace the Premises to substantially the same condition existing prior to any exercise of Landlord's rights.
1.3 Landlord represents to Tenant that the Prime Lease is in full force and effect. This lease is conditioned upon Overlandlord's delivering to Tenant its consent to this sublease and to the initial alteration work described in Exhibit B attached hereto, which consent shall be provided within thirty (30) days of the execution of this lease.
3.1 Tenant shall pay to Landlord without notice or demand, in advance on the first day of each calendar month during the term hereof, without any setoff, counterclaim or deduction for any reason whatsoever, rent in the amount of Forty Two Thousand Nine Hundred Thirty Three and 33/100ths Dollars ($42,933.33) per month. Notwithstanding the aforesaid, it is understood and agreed
by the parties hereto that the Tenant shall not be obligated to pay rent for the first four (4) months of the lease term which shall be designated as the free rent period.
3.2 Upon the execution hereof, Tenant shall deliver to Landlord the first month's rent for the fifth month of the term hereof together with an irrevocable letter of credit in favor of Landlord drawn on a reputable financial institution reasonably satisfactory to Landlord in the amount of forty thousand dollars ($40,000) as security for Tenant's full and faithful performance of its obligations under this Lease. In the event that Tenant fails to fulfill any such obligations, Landlord shall have the right to apply any or part of said irrevocable letter of credit against such obligation. Promptly upon Landlord's demand, Tenant shall furnish further security reasonably acceptable to Landlord which may be necessary in order to replenish any part of the aforesaid irrevocable letter of credit so applied by Landlord. Upon the expiration of this Agreement, and provided Tenant has fulfilled all of its obligations under this Agreement, Landlord shall return to Tenant the irrevocable letter of credit, without interest, less any deductions heretofore made hereunder.
4.2 In its occupation and use of the Premises, Tenant shall comply fully with all applicable local, State and Federal laws, ordinances, orders, directives, rules and regulations. Tenant shall not by reason of its use of the Premises at any time throughout the term of this Agreement violate or cause to be violated any laws, ordinances, orders, directives or rules or regulations of any local, State or Federal authorities having jurisdiction thereof and the reasonable rules and regulations of the carriers insuring the Premises, or the Board of Fire Underwriters or their equivalent, and such compliance and observation shall be at Tenant's sole cost and expense. Tenant shall indemnify and hold harmless Landlord from any claims, damages, loss, liability and obligation due to any violation of this Article 4.2.
4.3 Tenant shall not produce, generate, emit, treat, recycle, store or dispose of any hazardous or toxic materials, substances or wastes upon the Premises except where the generation or storage of such materials is conducted in accordance with all applicable local, State and Federal requirements; provided, however, that any hazardous wastes shall not be stored upon the Premises for more than ninety (90) days in any instance so that Tenant shall remain a ninety (90) days exempt generator. Landlord and tenant confirm that radioactive waste, commonly used in biological laboratories, may be stored on the premises for more than ninety (90) days.
4.4 Tenant shall not dispose through the Site sewage system any hazardous or toxic substances, materials or wastes, as determined pursuant to Federal, State or local statutes, ordinances, regulations or restrictions, which violate any governmental restrictions imposed upon Landlord's sewage discharge or which Landlord or Overlandlord reasonably determines to be harmful to the Site sewage system. In any event, Tenant shall not dispose of any wastes in the Site sewer system, except in accordance with the restrictions and limitations set forth in Wastewater Discharge Permit No. 3927 dated May 15, 1987, issued by the County of Westchester Department of Environmental Facilities, and any amendments, modifications and replacements thereof.
4.5 Tenant shall not produce any toxic chemicals for commercial purposes upon the Premises and shall maintain in place at all times such procedures as may be required to remove from the Premises any toxic chemicals produced thereon in a manner which complies with all applicable governmental laws, ordinances and regulations.
4.6 In its occupation and use of the Premises, Tenant shall comply at a minimum with any health, safety or operating regulations imposed by Landlord with respect to the Spine Building and other areas of the Site under Landlord's control. Tenant shall be solely and exclusively liable to obtain any and all Federal, State and local operating, use and/or business permits necessary for its use of the Premises.
4.7 Tenant shall have access to the Premises twenty-four (24) hours per day, seven (7) days a week, subject to Landlord's reserved rights (i) to require appropriate identification, including the wearing or possession of prescribed identification badges, at all times by employees, agents, contractors and invitees of Tenant upon the Premises; and (ii) to impose such other security measures as may be reasonably appropriate. Notwithstanding the aforesaid, Tenant shall remain solely and exclusively liable for the security and protection of any property, including confidential information and data, located upon the Premises and Landlord shall instruct its employees to respect the same; provided, however, that the parties shall cooperate to maintain security and confidentiality within the Spine Building.
5.2 Except with respect to any damage or destruction arising out of the negligence or willful misconduct of Tenant, its employees, agents or contractors, Landlord shall make or cause Overlandlord to make all necessary repairs to the Premises and any Site utility systems servicing the same and shall perform any necessary snow removal.
6.2 Any Alterations to the Premises performed pursuant to Article 6.1 shall become part of the Premises and shall not be removed or subsequently altered; provided, however, that Tenant shall retain title to, including the right, subject to the provisions of Article 8.2, to remove from the Premises at any time during the term hereof, any such trade fixtures or equipment installed by and used in Tenant's business which are not necessary for the structural integrity of the Spine Building or the
operation of the building utility systems. For any Alterations for which Tenant has requested Landlord's consent hereunder, at the time of granting such consent Landlord may require as a condition of such consent that such Alteration shall be removed from the Premises prior to the expiration of the Term by Tenant at Tenant's sole expense, subject to the provisions of Article 8.2.
6.3 Landlord hereby acknowledges and approves Tenant's initial alteration work as outlined in Exhibit B. The Landlord's maximum contribution toward the total cost of this work will be $130,000 which amount shall be paid to Tenant promptly following receipt of an invoice for such completed work together with satisfactory evidence of payment. No further contribution would be made by Landlord beyond $130,000.
7.2 Landlord will provide the Services solely in conjunction with the demise of the Premises and as necessary in order to permit Tenant to enjoy the full use and occupation thereof. Tenant shall not make available or resell any Services delivered hereunder to any other party (except to any permitted sublessee). The Services provided by Landlord shall not be deemed evidence that it is operating or holding itself out as a public utility or that it will make available the Services to any other party, other than a permitted sublessee of Tenant.
7.3 Landlord shall not be liable to Tenant for any claims, damages, loss or liability due to (i) Landlord's inability or failure to furnish any of the Services on account of any force majeure occurrence as described in Article 21.1, (ii) any failure of Overlandlord's utility suppliers to
provide adequate and reliable service which affects Landlord's ability to provide any of the Services, or (iii) any inability, interruption or curtailment of any of the Services due to equipment, labor or other problems which do not arise out of the gross negligence or willful misconduct of Landlord, its employees, agents or contractors. In no event shall Landlord be liable to Tenant for any special, indirect, incidental or consequential damages due to any inability, interruption or curtailment of any of the Services. Notwithstanding any other provisions contained herein, in the event any of the Services defined in Article 7.1 to be provided to the Premises are discontinued at any time during the term hereof, for a period of three (3) consecutive business days, and such discontinuance did not result from the negligence or willful acts of Tenant, its employees, agents, contractors or invitees, then Rent shall be abated for that part of the Premises rendered unusable due to such discontinuance, commencing with the date such discontinuance began until the day that the particular Service is restored and if such discontinuance shall continue for thirty (30) days, Tenant may terminate this Agreement.
7.4 Tenant shall reimburse Landlord, as they become due, for any taxes, excises or other governmental impositions payable by Landlord (other than income taxes of Landlord imposed upon Landlord's income or net income, or transfer taxes) which arise due to any payments of rent, additional rent or other amounts made hereunder.
7.5 Tenant shall pay and discharge when due all income, business, Social Security and other taxes, levies, impositions and contributions required by any Federal, State or local authority applicable to Tenant's business conducted upon the Premises. Tenant shall indemnify and hold harmless Landlord from any liability for such taxes, levies, impositions and contributions.
7.6 All payments required to be made by Tenant to Landlord under this Article 7 shall be payable as additional rent within ten (10) days after written demand therefor and shall be payable even though the term hereof (including any extensions) has expired.
8.2 Prior to the date of expiration of the Term of this Agreement or the date of termination as otherwise provided herein, Tenant shall remove all personal property and any trade fixtures or equipment belonging to Tenant which it is permitted to remove, or Alterations which it is required to remove, pursuant to Article 6.2; provided, however, that in performing such work Tenant shall not impair the structural integrity or the utility systems of the Spine Building and that in each instance Tenant repairs
any damages to the Premises due to the installation or removal of such property. Any trade fixtures, equipment or other property of Tenant remaining upon the Premises at the expiration or termination of this Agreement shall be deemed abandoned and may be removed or otherwise disposed of by Landlord without any notice or liability or obligation to Tenant, but Tenant shall remain liable to reimburse Landlord for the cost of performing any such work.
8.3 Anything to the contrary contained herein notwithstanding, upon the
expiration or other termination of this Agreement, Tenant shall remain liable at
its sole expense: (i) to make any repairs to the Premises as required hereunder,
(ii) to remove and dispose of properly any waste or other debris if and to the
extent required hereunder, and (iii) to eliminate any nuisances or dangerous,
harmful or unhealthful conditions arising out of Tenant's use of the Premises
or the removal of any property therefrom. In the event that Tenant does not
promptly perform any such work as requested by Landlord, Tenant shall be liable
to reimburse Landlord the cost of so doing.
8.4 Upon the termination of this Agreement, Tenant shall deliver to Landlord a certificate executed by Tenant's chief executive officer confirming that Tenant has performed all necessary or appropriate decontamination procedures upon the Premises pursuant to the requirements of any and all Federal, State and local governmental entities having jurisdiction over the Premises, so that it will be fit for general use and occupancy without any exposure to conditions which could constitute a danger, threat or hazard of bodily injury, sickness or disease; provided, however, that during the term of this Agreement and after the termination hereof, Tenant shall not be held liable for any environmental conditions in the Premises that are not in compliance with the requirements of any and all Federal, State or local governmental entities that did not arise from the acts, omissions or negligence of Tenant or its employees, contractors, agents, licensees or invitees.
8.5 The preceding provisions of this Article 8 shall be of no effect and Tenant shall have no obligation thereunder or under Article 6.2 if Tenant continues in occupancy following the expiration or termination of this Agreement, pursuant to a lease with Overlandlord.
9.2 In no event shall Landlord be liable for any loss, theft, or destruction of any property located upon the Premises or any bodily injury, death, sickness or disease of any employees, agents, contractors or invitees of Tenant from any cause whatsoever, including without limitation, the leakage or escape of any steam, electricity, gas, water, sewage, compressed air or other utility service, the state of repair of the Site, the Spine Building or the Premises or any latent defect therein; and Tenant shall release and indemnify and hold harmless Landlord from all claims, damages, losses and liability of Tenant and its employees, agents, contractors and invitees on account of such matters, unless such matters are due to the unlawful act or gross negligence of Landlord.
10.2 Landlord, on behalf of itself and Overlandlord, reserves the right at any time upon reasonable prior notice (and without notice in the event of emergency) to enter upon the Premises and to make any necessary repairs thereto, including without limitation any repairs to steam or utility lines, to maintain a fire watch for insurance purposes or to take any other actions as may be necessary or appropriate to eliminate any nuisances or any dangerous, harmful or unhealthful conditions existing thereon. The reservation of such rights shall not be deemed to be an acknowledgment of or imply any duty or obligation on the part of Landlord to perform any such actions, except where the obligation to do so is otherwise specifically set forth herein. Tenant shall be solely responsible for the maintenance and upkeep of the Premises.
11.2 Notwithstanding the provisions of Article 11.1, Tenant shall have the right, without Landlord's consent, to assign or sublet all or part of its interest in this Sublease Agreement to any
entity that acquires all or substantially all of the assets of Tenant as a result of a consolidation or merger or sale of assets or sale or exchange of stock, or to any affiliate of Tenant, provided that such entity shall assume in writing all of Tenant's obligations under this Lease Agreement. Notwithstanding any such assignment or sublease to any such entity, Tenant shall not be released from, and shall continue to perform, all obligations imposed upon Tenant under this Lease Agreement.
12.2 It is understood that Tenant shall be responsible for obtaining or maintaining insurance coverage for any personal property or fixtures maintained upon the Premises. Tenant shall release and indemnify and hold harmless Landlord and Overlandlord from any claims, damages, loss or liability arising as a result of damage or destruction to such property or fixtures in the event of a fire or other occurrence or any other condition now existing or hereafter arising upon the Premises. Landlord and Tenant shall obtain from its insurance carriers a waiver of the right of subrogation against the other party for any loss or damage by fire or any other cause within the scope of said fire and extended coverage insurance policies. If after using its best efforts, either party is unable to obtain a waiver of subrogation from any of its insurers, it shall give written notice thereof to the other and shall have no further obligation with respect to obtaining a waiver of subrogation with respect to the applicable insurance policy until it is replaced.
12.3 At its sole cost and expense, Tenant shall maintain and keep in effect
throughout the term of this Agreement, insurance against claims for bodily
injury (including sickness, disease and death) and property damage occurring
upon, in or about the Premises and the adjoining streets, access roads, parking
areas and passageways, under policies of comprehensive public liability
insurance, including broad form contractual liability and automobile insurance,
with limits of not less than THREE MILLION DOLLARS ($3,000,000) per occurrence
for one (1) person, THREE MILLION DOLLARS ($3,000,000) per occurrence for two
(2) or more persons, and THREE MILLION DOLLARS ($3,000,000) for property
damage. The aforesaid minimum insurance limits shall in no way limit or diminish
Tenant's liability to Landlord pursuant to Article 12.1.
12.4 At its sole cost and expense, Tenant shall maintain and keep in effect during the term hereof worker's compensation and employer's liability insurance in the minimum amounts as required by law.
12.5 Upon the execution hereof, Tenant shall furnish to Landlord certificates of insurance as evidence of the insurance coverage required under Articles 12.2, 12.3 and 12.4, and each such policy of insurance shall provide that it shall not be amended, modified or canceled, except upon thirty (30) days' prior written notice to Landlord.
12.6 In no event shall either party be liable to the other for any special, indirect, incidental or consequential damages on account of any default by it under this Agreement or any claims, damages or losses arising out of the possession, occupation, operation or use of the Premises.
(a) (i) filing of a petition for adjudication as a bankrupt, or for reorganization, which is not dismissed within ninety (90) days or for an arrangement under any Federal or State statute;
(ii) dissolution or liquidation of Tenant, without the transfer to and assumption by a financially responsible third-party of this Agreement;
(iii) appointment of a permanent or temporary receiver or a permanent or temporary trustee of all or substantially all the property of Tenant;
(iv) taking possession of the property of Tenant by a governmental officer or agency pursuant to statutory authority for dissolution, rehabilitation, reorganization or liquidation; and
(v) making by Tenant of an assignment for the benefit of creditors. If any event mentioned in this subdivision (a) shall occur, Landlord may thereupon or at any time thereafter elect to cancel this Agreement upon twenty (20) days' prior written notice to Tenant and this Agreement shall terminate on the day in such notice specified with the same force and effect as if that date were the date herein fixed for the expiration of the term of this Agreement.
(b) (i) Default in the payment of the rent or additional rent herein reserved or any part thereof for a period of five (5) days after receipt of written notice concerning such default.
(ii) Default in the performance of any other covenant or condition of this Agreement on the part of Tenant to be performed for a period of twenty (20) days after written notice from Landlord specifying the nature of such default. For purposes of this subdivision (b)(ii), no default on the part of Tenant in performance of work required to be performed or acts to be done shall be
deemed to exist if after receipt of the aforesaid notice Tenant diligently takes action to rectify the same and prosecutes such action to completion with reasonable diligence, subject, however, to unavoidable delays.
13.2 In case of any such default under Article 13.1(b) and at any time thereafter following the expiration of the respective grace periods above-mentioned, Landlord may serve a notice upon the Tenant electing to terminate this Agreement upon a specified date not less than ten (10) days after the date of serving such notice and this Agreement shall expire on the date so specified as if that date had been originally fixed as the expiration date of the term herein granted and all rent and additional rent applicable to the balance of the term hereof shall thereupon become due and payable subject to reimbursement of the amount of rent collected by Landlord net of reletting costs and expenses during the balance of the term from a subsequent tenant pursuant to Article 13.3. However, a default under Article 13.l(b) shall be deemed waived if such default is cured before the date specified for termination in the notice of termination served on Tenant pursuant to this Article 13.2.
13.3 In the event this Agreement shall be terminated pursuant to this Article 13, or by summary proceedings or otherwise, Landlord shall use reasonable efforts to relet the whole or any portion of the Premises, for any period equal to or greater or less than the remainder of the then current term for any sum which it may deem reasonable, to any tenant which it may deem suitable and satisfactory, and for any use and purpose which it may deem appropriate, and in connection with any such lease Landlord may make such changes in the character of the improvements on the Premises as Landlord may determine to be appropriate or helpful in effecting such lease and may grant concessions or free rent. However, in no event shall Landlord be under any obligation to pay Tenant any surplus of any sums received by Landlord on a reletting of the Premises in excess of the rent reserved in this Agreement.
13.4 All remedies specified in this Article 13 shall be non-exclusive and Landlord's reliance upon such remedies shall not preclude it from availing itself of any other rights or remedies which it may have at law or in equity.
in the conduct of its business, from the date of such destruction until the completion of such repairs and reconstruction.
14.2 In the event of any fire or other casualty which damages or destroys more than fifty percent (50%) of the usable area of the Premises, or which renders the Premises untenable, inaccessible or unfit for occupancy by Tenant in the conduct of its business, then (i) upon the receipt of insurance proceeds by Overlandlord or the denial of liability by its insurance carrier, Landlord shall seek to have Overlandlord promptly repair and restore the damage, and (ii) if Overlandlord fails or refuses to perform such work, Landlord or Tenant shall have the right to cancel and terminate this Agreement by written notice given to the other party within sixty (60) days after such casualty. If neither Landlord nor Tenant duly exercises such termination right, Landlord and Tenant shall cooperate in good faith to repair and restore such damage or destruction, including, without limitation, obtaining Overlandlord's approval for any repair or restoration work.
14.3 In the event that any repair or restoration work undertaken pursuant to Article 14.1 or 14.2 cannot be completed within ninety (90) days after the applicable casualty, and provided that (i) the Premises have been rendered substantially untenantable by such casualty, and (ii) said casualty has not arisen out of the willful act or negligence of Tenant, its employees, agents or contractors, then Tenant shall have the right to cancel and terminate this Agreement by written notice given to Landlord within ten (10) days after the expiration of the aforesaid ninety (90) day period.
14.4 Except as otherwise specifically provided in this Article 14, in no event shall Landlord have any liability or obligation to Tenant with respect to the repair or restoration of the Premises or any other property of Tenant located upon the Premises due to any fire or other occurrence, nor shall any damage to or destruction of the Premises or the Spine Building cause any reduction or abatement of rent or additional rent. In the event this Agreement is canceled pursuant to Article 14.2 or 14.3, then Tenant shall remain obligated promptly to remove or eliminate any nuisance or dangerous, harmful or unhealthful condition then existing on or about the Premises due to its use thereof.
notice to the other within forty-five (45) days after Landlord and Tenant receive notice of such taking. Rent and additional rent shall be apportioned to the date title vests in the taking authority.
15.2 In the event of any partial taking which does not cause a termination of this Agreement pursuant to Article 15.1, then the rent and additional rent shall abate in the same proportion that the area of the Premises taken bears to the area of the Premises prior to such condemnation.
15.3 Subject to the rights of the holder of any first mortgage then encumbering the Spine Building and the cooperation of Overlandlord, Landlord and Tenant shall be entitled to share any separate condemnation award for relocation and moving costs in the same proportion which the respective space taken controlled by each bears to the total rentable area of the Spine Building.
if to Landlord:
Union Carbide Corporation
39 Old Ridgebury Road
Danbury, CT 06817-0001
Attn: Director, Corporate Real Estate
with a copy to:
Union Carbide Corporation 777 Old Saw Mill River Road Tarrytown, NY 10591 Attn: Site Administrator
if to Tenant prior to the Commitment Date:
Cadus Pharmaceutical Corporation
180 Varick Street
New York, NY 10014-4606
Attn: President
if to Tenant after the Commitment Date:
Cadus Pharmaceutical Corporation
777 Old Saw Mill River Road
Tarrytown, NY 10591
Attn: President
Either party may change the persons or addresses to which notice or other communications are to be sent to it by giving written notice of any such changes in the manner provided herein for giving notice.
18.2 This Agreement shall be subject and subordinate to the Prime Lease and all mortgages, now or hereafter affecting the Spine Building or the underlying land (such lease and all of such mortgages being hereinafter collectively referred to as "Superior Mortgages"). Tenant shall execute and deliver any instrument confirming such subordination which Landlord or the holders of any Superior Mortgages reasonably request. Upon any termination of the Prime Lease, Tenant shall attorn to and recognize Overlandlord as landlord hereunder in accordance with the Non-Disturbance and Attornment Agreement executed by Overlandlord and Tenant attached hereto as Exhibit C.
benches and wall cabinets existing on the date hereof and Landlord shall not remove any of same at the termination of the lease.
19.2 Except as otherwise specifically set forth herein, LANDLORD MAKES NO REPRESENTATIONS, WARRANTIES OR GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO THE PREMISES OR ANY PROPERTY OR FIXTURES OF LANDLORD LOCATED THEREON. NO WARRANTY OR GUARANTEE SHALL BE IMPLIED OR OTHERWISE CREATED UNDER THE UNIFORM COMMERCIAL CODE (OTHER THAN THE WARRANTY OF TITLE AS PROVIDED UNDER THE UNIFORM COMMERCIAL CODE) OR OTHERWISE AS TO THE PREMISES OR ANY PROPERTY OR FIXTURES OF LANDLORD LOCATED UPON THE PREMISES, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
19.3 Tenant hereby ratifies and confirms that (i) the Spine Building contains asbestos as more particularly disclosed in Exhibit D attached hereto, and (ii) it is willing to accept and assume any risk of exposure to asbestos by its employees, agents, contractors, customers and invitees while they are in the Premises and/or the Spine Building. Tenant shall have the right to cancel and terminate this Agreement within thirty (30) days from the date hereof upon presentation to Landlord of a certification from a duly qualified consultant that conditions within the Premises or the Building are not within the permissible exposure limits to asbestos of the Federal Occupational Health and Safety Administration.
from performing any act required to be performed under this Agreement by reason of fire, flood, hurricanes, strikes, lock-outs or other industrial disturbances, explosions, civil commotion, acts of God or the public enemy, government prohibitions or preemptions, embargoes, inability to obtain material or labor, the act of default of the other party, or other events beyond the reasonable control of Landlord or Tenant, as the case may be, and which event makes performance hereunder commercially impracticable, shall be added to the time for performance of such act.
27.2. Landlord shall provide to Tenant and its employees, as applicable, those services as set forth in Exhibit E attached hereto (hereinafter called the "Miscellaneous Services"). Within ten (10) days after the presentation of an invoice therefor, Tenant shall reimburse Landlord for the Miscellaneous Services based upon the rates and charges set forth in Exhibit E, but excluding additional commissions or fees. Landlord shall have no liability to Tenant or its employees with respect to the Miscellaneous Services furnished pursuant hereto and Tenant shall indemnify and hold harmless Landlord from any claims or damages of Tenant's employees arising out of their use of any of the Miscellaneous Services. Landlord reserves the right to cancel or terminate any of the Miscellaneous Services at any time upon thirty (30) days' prior written notice, and in such event Landlord shall not be liable to Tenant for any claims of default, partial or constructive eviction or otherwise.
27.3. Landlord shall not be liable to Tenant for interruption or curtailment of any services to be furnished by Landlord under this Agreement, resulting partly or wholly from any cause beyond Landlord's reasonable control or by reason of repairs to or changes in the Spine Building which Landlord is required to make or deems necessary.
this Agreement shall be effective unless it is contained in a written agreement executed by authorized representatives of both parties.
29.2 The covenants, conditions and agreements contained in this Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be executed by their duly authorized representatives as of the day and year first above written.
UNION CARBIDE CORPORATION
/s/ J.N. BARTON ------------------------- J.N. Barton Director, General Services |
CADUS PHARMACEUTICALS CORPORATION
By /s/JEREMY M. LEVIN ------------------------------- Title: President |
LANDMARK AT EASTVIEW
CADUS FLOOR SPACE
DETAILED IN FLOOR PLAN
UNION CARBIDE CHEMICALS & PLASTICS CO., INC.
EXHIBIT A-2
SITE PLAN
EXHIBIT B
THE LANDMARK AT EASTVIEW
Landlord's Installation for Cadus Pharmaceutical Corporation
Except as may be otherwise specifically provided, Keren Limited Partnership agrees to and will furnish, install and provide in the demised promises the items of work hereinafter set forth, as per drawing SK-11-15-94. Total cost of the work including labor and materials before any contribution from Keren or Union Carbide shall not exceed $632,000. Keren and Tenant will make a good faith effort to insure that the work will substantially completed by May 1, 1995.
1. INTERIOR DEMOLITION & REMOVALS BY KEREN
Includes demolition of cinder block walls on outside (window to window).
2. INTERIOR PARTITIONS DRYWALL
Keren will provide 1734 linear feet of drywall partition as noted on drawing. Metal studs will be 16" on center and 5/8" sheet rock taped and spackled on both sides. All partitions to be finished with 4" base, either cover or straight. 50 Linear feet of masonry wall will be provided as noted on drawing Attachment A.
3. DOORS, FRAMES AND HARDWARE
All lab doors will be of metal construction, hung metal frames. Office doors will be solid core wood, hung in metal frames. All doors will have latch set, two (2) pair of hinges, one (1) floor or wall stop and silencers. Hardware to be brushed chrome "Best Locking Systems" or equal. Entry door will be glass with aluminum frame and have master-key lock set and surface mounted closer. All doors will be 3'0" x full-height unless otherwise noted on drawings. Dark Room shall receive revolving door as noted. See Attachment B.
4. PAINTINGS
All walls will be painted in semi-gloss paint for better cleanability. All trim, columns, doors and bunks will be painted with semi-gloss enamel. Selection will be from pre-mixed Building Standard color chart.
5. CEILINGS
16,000 Square feet of mechanically suspended acoustical tile ceilings with 24"x40" lay-in panels, will be installed. Ceiling heights of 9 ft or as high as utilities allow.
6. FLOORING
All office areas to receive 400 sq yards of Building Standard carpet. All lab areas to receive 12,400 sq ft of VCT tiles. Selections will be made from Building Standards.
EXHIBIT B
7. LIGHTING
(250) 2'x4' Fluorescent light fixtures with Prismatic light lenses shall be supplied with ceiling system noted above.
8. ELECTRICAL OUTLETS AND SWITCHES
Furnish and install duplex electric wall receptacles in a ratio of one per 150 usable square feet. One light switch will be provided in each room or area as required by code. No computer cable or conduits are to be provided by Landlord. Tenant shall make arrangement for installation. 460V 3-Phase service and 220V service will be installed for Tenant's equipment in all labs. Outlet strips will be installed above all lab bunches. 5 Duplex outlets per 16 ft. Bench minimum. Dedicated GFI 3 bar sinks. Minimum of two duplex outlets per private office or equivalent of two per 150 usable sq ft. Dedicated circuit for Xerox machine, computer network server, coffee maker.
9. TELEPHONE OUTLETS
No telephone outlets or conduits are to be provided by Keren. Tenant shall contact telephone company and make arrangements directly to provide the installation required.
10. WINDOW TREATMENT
(45) Riviera by Lavelor (or equal 1" slat) slimline tapeless blinds will be provided at all exterior windows in a uniform color throughout the building. No substitution from Building Standard will be permitted.
11. HEATING, VENTILATION AND AIR CONDITIONING
Keren shall furnish and install a complete heating, ventilation and air conditioning system with standard appropriate to a first class office building. HVAC system will maintain negative pressure in all labs with twelve (12) air changes per hour. All exhaust hoods will be installed and vented as shown on drawing.
12. PLUMBING
Each 16 ft bunch has 2 gas ports and 1 vacuum port. Restroom should be handicap accessible. Water is hot/cold. Keren shall be responsible for the installation and arrangement of all piping according to drawing, including all necessary utilities required for bench top operations, autoclaves and glass washing equipment. Total of 16 sinks shall be supplied and installed including 1 water closet in rest room, 1 darkroom type sink, 3 barsinks, safety showers/eyewash, DI water at lab sinks.
13. FIRE ALARM
An Edwards Fire Alarm System will be installed. This system will tie into Owner's Security Office for 24 hour a day monitoring. System shall include pull station at each exit door, smoke detectors and emergency lights throughout area, per Fire Code. Exit signs, fire extinguishers as required by code.
EXHIBIT B
14. CASEWORK
532 Linear feet of casework shall be installed according to drawing. 583 Linear feet of plastic laminate bench tops will be provided throughout lab area. 63 ft of soapstone tops will be installed only in the chemistry area. 646 Linear feet of shelving will be supplied and installed as noted. A total of 7 chemical hoods will be installed and vented to outdoors. Casework painted. Sinks are deep flat bottomed lab sinks. Bar sinks are stainless steel.
15. ENVIRONMENTAL ROOMS
2 Cold rooms will be supplied by Tenant and installed by Keren including all equipment for proper operation (plumbing and electric).
16. GLASS WINDOW WALLS
A total of 200 sq ft of viewing windows will be provide by Keren as noted on drawing. 1/4" safety laminated glass is minimum standard.
17. EXTERIOR AND PUBLIC AREAS
To the extent that the exterior of the building, the public areas thereof, via lobby, elevator, corridors, grounds parking area and walkways have been finished. Keren will maintain at Site standards.
18. SUBSTITUTIONS
Tenant may, at its option, specify a substitution of any Building Standard item (except air conditioning or venetian blinds) for work provided for (a) such substituted item is available; (b) no delay results from such substitution; and (c) substitute item shall be of a like nature and of equal or lesser cost and same quality than that for which it is substituted. Tenant shall pay Keren the charges for such substitute items which is in excess of such items included in Keren's work. The cost to Tenant for such substitution shall be Keren's charge for the substituted item less a credit for which such as made, based on Keren's field supervision and field overhead in the handling of the substitution.
Tenant may also request Keren to omit the installation of any item not theretofore installed provided such omission shall not delay Keren's work; Keren shall not thereafter be obligated to install the same. Tenant shall not be entitled to any credit for any such Building Standard items not utilized against any additional item or any additional item or any item of a different kind of character. There shall be no cash credits.
19. ASBESTOS
Any asbestos removal required by this construction will be handled by Keren and the cost is included.
EXHIBIT B
ATTACHMENT
A. All laboratories and CEO office to have full height partitions. Include acoustic insulation and perimeter acoustic sealant at CEO offices and board room. Include blocking as required for support of wall cabinets and wall-hung shelving standards. Include drywall partitions at exterior wall beneath strip windows; provide a typical detail for this condition.
B. Provide mortise type locksets; lever handles as required by ADA. Provide fire labels on doors and frames as required by Code. Provide closets at all labeled doors, and as required by Cadus. Include closets on main entry doors. I would suggest closer on lab doors as well (active leafs only; provide flush bolts for inactive doors).
Light tight seals on darkroom door.
Special door pair at main entrance. Glass doors.
Door at entrance to lab from office should be 1-1/2 glass door.
Doors at entrance to specific laboratories should be 1-1/2 metal w/windows.
Double metal doors at freight elevators.
Doors to private offices should have locksets.
EXHIBIT B
BLOCKWALL (MASONRY WALL) 50 LINEAR FEET
DRYWALL 1734 " "
BENCH 530 " "
COUNTER TOP 646 " " (583' OF PLASTIC
LAMINATE 63' SOAPSTONE)
SHELVING 646 " "
CEILING 16,000 SQ FEET 2X4 ACOUSTICAL
LIGHTING 250 2X4 FIXTURES
DOORS 13 WOOD DOORS W/FRAME
16 METAL " "
14 DOUBLE " "
1 DARKROOM
1 ENTRANCE GLASS
1 1/2 GLASS DOOR
LOCKS 18 KEYED
26 PASSAGE
SINKS 16 SINKS
HOODS 7 HOODS CHEMICAL
HANDICAP TOILET 1 REQ'D S/SINK
ENVIRONMENTAL ROOMS 2 REQUIRED
FLOORING VINYL COMPOSITION TILE
12,400 SQ FT REQ'D
CARPET 400 SQ YDS REQ'D
GLASS WINDOW WALLS 200 SQ FT
SMOKE DETECTORS AS REQUIRED BY CODE
EMERGENCY LIGHTS " "
FIRE ALARMS " "
EXIT LIGHTS " "
|
EXHIBIT B
LANDLORD:
KEREN LIMITED PARTNERSHIP
By: Keren Management Limited Partnership
By: Keren Developments Inc.
By: /s/ James F. Brierley
-------------------------------
Name: James F. Brierley
Title: Executive Vice President
|
TENANT:
CADUS PHARMACEUTICALS, INC.
By: /s/ Philip N. Sussman
----------------------------------
Name: Philip N. Sussman
Title: Vice President of Corporate
Development
|
EXHIBIT C
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made and entered into as of this _____ day of _________, _________, by and among Keren Limited Partnership, a Delaware limited partnership, having offices at 777 Old Saw Mill River Road, Tarrytown, NY 10591 ("Overlandlord"), and Cadus Pharmaceuticals Corporation, a New York corporation, having offices at 777 Old Saw Mill River Road, Tarrytown, NY 10591 ("Tenant").
WITNESSETH:
WHEREAS, Overlandlord is the owner of certain real property and improvements thereon described in Schedule A attached hereto (the "Property") which has been leased to Union Carbide Corporation, a New York Corporation ("Landlord") pursuant to a certain lease, dated December 31, 1985, as modified, which expires 31, 1997 (the "Prime Lease"); and
WHEREAS, Landlord and Tenant entered into that certain lease agreement dated as of October 19, 1994 (the "Lease"), with respect to certain premises (the "Premises") which are part of the Property, all as more particularly set forth in said Lease, a true and complete copy of which Lease has been delivered to the Overlandlord; and
WHEREAS, the Prime Lease is prior in lien to the estate created by the Lease and prior to all right, title and interest of Tenant thereto and thereunder; and
WHEREAS, Tenant has requested that Overlandlord give certain assurances that Tenant's possession of the Premises will not, subject to the terms and conditions of this Agreement, be disturbed by reason of termination of the Prime Lease and/or eviction of Landlord from the Property; and
WHEREAS, Overlandlord is willing to provide such assurances to Tenant upon and subject to the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the premises, the mutual covenant of the parties hereto and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do mutually covenant and agree as follows:
1. The Lease is and shall at all times hereafter be subject and subordinate in all respects to the Prime Lease and to all amendments, renewals, modifications, substitutions, consolidations and extensions thereof.
2. So long as Tenant is not in default, beyond any applicable notice, grace or cure period in the payment of rent, additional rent or other charges, or in the performance of any of the material terms, covenants or conditions of the Lease.
(a) Tenant shall not be joined as a party defendant in any action (unless required by applicable law) that may be commenced by Overlandlord in the event of default under the Prime Lease;
(b) Tenant shall not be evicted from the Premises;
(c) Tenant's leasehold estate under the Lease shall not be terminated or disturbed; and
(d) none of Tenant's rights under the Lease shall be diminished, nor shall any of Tenant's obligations under the Lease be increased by reason of the subordination of the Lease to the Prime Lease.
3. If Overlandlord (or any successor or assign in interest to Overlandlord) shall succeed to the rights of the Landlord under the Lease, whether through possession, surrender, assignment, judicial action, eviction action or otherwise, Tenant will attorn to and recognize such successor as Tenant's landlord. Provided Tenant is not in default in the payment of rent, additional rent, or other charges or in the performance of any of the material terms, covenants, or conditions of the Lease, after the expiration of any notice, grace or cure period provided in the Lease, the successor landlord will, from and after succeeding to the rights of the Landlord, assume the obligations of the Landlord under the Lease, subject to the provisions of paragraph 4 hereof, and accept such attornment and recognize Tenant's rights of possession and use of the Premises in accordance with the provisions of the Lease, and, such assumption and attornment shall be self-operative without further evidence of such attornment and acceptance, and Tenant shall be bound by and shall comply with all the terms, provisions, covenants and obligations contained in the Lease on Tenant's part to be performed.
4. In addition to and not in lieu of all provisions of this Agreement, Overlandlord (except as successor landlord) shall:
(a) have no liability for any default by Landlord under the Lease prior to date that the Overlandlord (or such successor, assignee, or purchaser) shall have succeeded to the rights of Landlord under the Lease;
(b) not be subject to any offsets or defenses which Tenant might have against Landlord; and
(c) not be bound by any payment of rent for more than one month in advance which Tenant has made to Landlord.
5. Tenant, in order to induce Overlandlord to enter into this Agreement, hereby affirms that:
(a) the Lease is in full force and effect and has not been modified or amended;
(b) to the best knowledge of Tenant, Landlord is not in default under any of the Landlord's obligations under the Lease;
(c) Tenant has no present right or offset or defense against any rent due or to become due under the Lease;
(d) the Lease was duly authorized and entered into and constitutes the valid and binding obligation of Tenant enforceable in accordance with its provisions; and
(e) Tenant has not prepaid any sums payable by Tenant under the Lease in excess of one month's rent.
6. All notices, demands or requests, and responses thereto, required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be deemed to have been sufficiently given or served for all purposes when sent
by certified or registered mail, postage prepaid, return receipt requested, or
nationwide overnight commercial courier service, and addressed to the party as
provided above or at such other place as such party may from time to time
designate in a notice to the other parties. Any notice shall be effective three
(3) business days after the letter transmitting such notice is certified or
registered and deposited in the United States Mail, or, if delivery is by
nationwide commercial courier service, one (1) business day after the letter
transmitting such notice is delivered to such commercial courier service.
Rejection or other refusal to accept or inability to deliver because of changed
address of which no notice has been given shall constitute receipt of the
notice, demand or request sent.
7. This Agreement shall be binding upon and inure to the parties, their respective legal representatives and permitted successors and assigns.
8. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
9. This Agreement may not be changed, amended or modified in any manner other than by an agreement in writing specifically referring to this Agreement executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
(Overlandlord)
_____________________________ KEREN LIMITED PARTNERSHIP
_____________________________ By __________________________________
(Print name)
Title:
(Tenant)
_____________________________ CADUS PHARMACEUTICALS CORP.
_____________________________ By /s/ Jeremy Levin
-----------------------------
(Print name) Jeremy Levin
Title: President
STATE OF )
) ss.
COUNTY OF )
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Personally appeared, Keren Limited Partnership, acting herein by ______________________, its _____________, signer and sealer of the foregoing and acknowledged same to be his free act and deed and the free act and deed of said partnership before me.
Notary Public
STATE OF )
) ss.
COUNTY OF )
|
Personally appeared, Cadus Pharmaceuticals Corporation, acting herein by Jeremy M. Levin, its President & CEO, signer and sealer of the foregoing and acknowledged same to be his free act and deed and the free act and deed of said partnership before me.
JAMES S. REILLY /s/ J. S. Reilly
Notary public, State of New York -----------------------------
No. 5004215 Notary Public
Qualified in Suffolk County
Commission Expires November 14, 1996
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EXHIBIT D
Asbestos Disclosure
Spine Building:
Steam and hot water pipes are, in some locations, asbestos covered and pipes are encapsulated. The structural steel in the bridge portion of the building is sprayed with asbestos insulation and not encapsulated, with some overspraying on concrete surface. In addition, in the Spine Building many of the offices have a dropped ceiling consisting of one foot squares using styletone BHAF ceiling tiles. These ceiling tiles are solid but may have asbestos.
EXHIBIT E
Miscellaneous Services
SERVICE CHARGES
Cafeteria (Breakfast and Lunch) Published rates based on usage.
Porter and Maintenance Published rates based on usage.
Conference Dining Published rates based on usage.
Lobby Receptionist Published rates based on usage.
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KEREN LIMITED PARTNERSHIP,
Landlord
and
CADUS PHARMACEUTICAL CORPORATION,
Tenant
LEASE
The Landmark at Eastview Towns of Greenburgh and Mount Pleasant Westchester County, New York
TABLE OF CONTENTS
Article Page
- ------- ----
1 - Demise and Rent and Definitions ....................................... 1
2 - Use ................................................................... 5
3 - Condition of Premises ................................................. 5
4 - Tax Payments .......................................................... 6
5 - Operating Expense Payments ............................................ 8
6 - Subordination, Notice to Superior
Lessors and Superior Mortgagees ..................................... 12
7 - Quiet Enjoyment ....................................................... 14
8 - Assignment, Subletting and Mortgaging ................................. 14
9 - Compliance With Legal and Insurance Requirements ...................... 22
10 - Insurance ............................................................ 24
11 - Rules and Regulations ................................................ 26
12 - Alterations .......................................................... 26
13 - Landlord's and Tenant's Property ..................................... 28
14 - Repairs and Maintenance .............................................. 29
15 - Electric Energy ...................................................... 30
16 - Heat, Ventilation and Air-Conditioning ............................... 33
17 - Other Services; Service Interruption ................................. 33
18 - Access and Name of Project ........................................... 35
19 - Notice of Occurrences ................................................ 36
20 - Non-Liability and Indemnification .................................... 37
21 - Damage or Destruction ................................................ 38
22 - Eminent Domain ....................................................... 40
23 - Surrender and Holding Over ........................................... 41
24 - Default .............................................................. 42
25 - Re-entry by Landlord ................................................. 44
26 - Damages .............................................................. 45
27 - Affirmative Waivers .................................................. 47
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Article Page - ------- ---- 28 - No Waivers ........................................................... 48 29 - Curing Tenant's Defaults ............................................. 48 30 - Broker ............................................................... 48 31 - Notices .............................................................. 49 32 - Estoppel Certificates ................................................ 49 33 - Execution and Delivery of Lease ...................................... 50 34 - Recording of Lease ................................................... 50 35 - Parking .............................................................. 50 36 - Environmental Compliance ............................................. 50 37 - Signs ................................................................ 51 38 - Approval Contingency ................................................. 51 39 - Relocation of Premises ............................................... 51 40 - Partnership or Multi-Person Tenant ................................... 53 41 - Miscellaneous ........................................................ 53 |
EXHIBITS
Exhibit A - Plan of Premises
Exhibit B - Schedule of Fixed Rent
Exhibit C - Rules and Regulations
Exhibit D - Parking Area
Exhibit 1 - Description of Asbestos
Exhibit 2 - Description of Keren's Equipment
Exhibit 3 - Cleaning Schedule
Exhibit 4 - Description of First Offer Space
LEASE, dated as of _________ __, 1995, between KEREN LIMITED PARTNERSHIP, a Delaware limited partnership having an office at 777 Old Saw Mill River Road, Tarrytown, New York 10591-6705 (herein called "Landlord") and CADUS PHARMACEUTICAL CORPORATION, a New York corporation having an office at 180 Varick Street, New York, New York 10014 (herein called "Tenant").
W I T N E S S E T H :
ARTICLE 1 - Demise and Rent and Definitions
1.01. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises (as defined in Section 1.02) in the building known as The Spine Building and identified as such on the plan attached hereto as Exhibit A (herein called the "Building") on Landlord's land (herein called "Land") located along Old Saw Mill River Road, partly in the Town of Greenburgh and partly in the Town of Mount Pleasant, in the County of Westchester and State of New York and called "The Landmark at Eastview." Landlord intends to and shall have the right at any time to cause part or parts of the Land to become a separate tax lot or separate tax lots in connection with future development thereof. If Landlord does so, any separate tax lots that do not include the Premises shall be excluded from the Land and "Land" shall mean only the land in the tax lot of which the Premises are a part. The Land and all of the buildings and other improvements presently and hereafter located thereon are herein collectively called the "Project." The buildings and other improvements presently and hereafter located on the Land are herein collectively called the "Improvements."
1.02. The premises (herein called the "Premises") leased to Tenant consist of approximately 18,400 rentable square feet of office and research space (the "Main Space") and approximately 1,265 square feet of storage space (the "Storage Space"), and are shown on Exhibit A. Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use in common with others, subject to the terms and conditions of this Lease, including the Rules and Regulations (as hereinafter defined): (a) the common lobbies, corridors, stairways and elevators of the Building, if any, and (b) if the Premises includes less than the rentable floor area of any floor, the common toilets, corridors and lobby, if any, of such floor.
1.03. The term of this Lease (herein called the "Term") shall commence on January 1, 1998 (herein called the "Commencement Date") and shall end at 11:59 p.m. on December 31, 2007, or on such earlier date upon which the Term shall expire or be canceled or terminated pursuant to any of the conditions or covenants of this Lease or pursuant to law. If for any reason the Commencement Date shall be other than the specific date set forth above, then, promptly following the Commencement Date the parties hereto shall enter into an agreement in form and substance satisfactory to Landlord setting forth the Commencement Date. If this Lease contains any renewal option or options, then upon the valid exercise of any renewal option, the word "Term" shall be deemed to include the renewal period for which said option or options was or were exercised.
1.04. The rents shall be and consist of (a) fixed rent (herein called the "Fixed Rent") at the rate or rates per annum set forth on Exhibit B which shall be payable in equal monthly installments in advance on the first day of each and every calendar month during the Term, and (b) additional charges (herein called the "Additional Charges") consisting of all other sums of money as shall become due from and payable by Tenant to Landlord hereunder; all the Fixed Rent and Additional Charges shall be paid in lawful money of the
United States to Landlord at its office c/o Keren Developments Inc., 777 Old Saw Mill River Road, Tarrytown, New York 10591-6705, Attention: Accounts Receivable, or such other place, or to Landlord's agent and at such other place, as Landlord shall designate by notice to Tenant.
1.05. Tenant shall pay the Fixed Rent and Additional Charges promptly when due without notice or demand therefor and without any abatement, deduction or setoff for any reason whatsoever, except as may be expressly provided for in this Lease or by law. If the Commencement Date occurs on a day other than the first day of a calendar month, the Fixed Rent for the partial calendar month at the commencement of the Term shall be prorated.
1.06. No payment by Tenant or receipt or acceptance by Landlord of a lesser amount than the correct Fixed Rent or Additional Charges shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance or pursue any other remedy in this Lease or provided at law.
1.07. Tenant shall pay the Fixed Rent and Additional Charges as above and as herein provided, by good and sufficient check (subject to collection) drawn on a New York City bank which is a member of the New York Clearing House or a successor thereto.
1.08. If Tenant fails to make any payment of Fixed Rent or Additional Charges on or before the due date thereof, Tenant shall pay to Landlord a late charge of 5% of the amount of such payment and, in addition, such unpaid amount shall bear interest at a rate (herein called the "Lease Interest Rate") equal to the lesser of (a) the rate announced by Citibank, N.A. or its successor from time to time as its prime or base rate, plus 4%, or (b) the maximum applicable legal rate, if any, from the date such amount became due and payable to the date of payment thereof by Tenant. Such late charge and interest shall be due and payable on demand.
1.09. If any of the Fixed Rent or Additional Charges shall be or become uncollectible, reduced or required to be refunded because of any Legal Requirements (as defined in Section 1.10(i)), Tenant shall enter into such agreement(s) and take such other steps (without additional expense to Tenant) as Landlord may request and as may be legally permissible to permit Landlord to collect the maximum rents which from time to time during the continuance of such legal rent restriction may be legally permissible (and not in excess of the amounts reserved therefor under this Lease). Upon the termination of such legal rent restriction, (a) the rent shall become and thereafter be payable in accordance with the amounts reserved herein for the periods following such termination and (b) Tenant shall pay to Landlord, to the maximum extent legally permissible, an amount equal to (i) the rent which would have been paid pursuant to this Lease but for such legal rent restriction, less (ii) the rent actually paid by Tenant during the period such legal rent restriction was in effect.
1.10. The following terms, whenever used in this Lease, shall have the meanings indicated:
(a) The term "and/or" when applied to two or more matters or things shall be construed to apply to any one or more or all thereof as the circumstances warrant at the time in question.
(b) The term "Business Days" shall mean all days except Saturdays, Sundays and days observed by the Federal or the state governments as legal holidays.
(c) The term "Business Hours" shall mean 9:00 a.m. to 6:00 p.m.
(d) The term "Guarantor" shall mean any person guaranteeing the obligations of Tenant under this Lease.
(e) The terms "herein" and "hereunder," and words of similar import, shall be construed to refer to this Lease as a whole, and not to any particular Article or Section, unless expressly so stated.
(f) The term "Insurance Requirements" shall mean the rules, regulations, orders and requirements of the New York Board of Underwriters and/or the New York Fire Insurance Rating Organization and/or any other similar body performing the same or similar functions and having jurisdiction or cognizance over the Building and/or the Premises, whether now or hereafter in force, and the requirements of any insurance policy maintained by Landlord.
(g) The term "Landlord" shall mean only the owner at the time in question of the Building or of a lease of the Building, so that in the event of any transfer or transfers of title to the Building or of Landlord's interest in a lease of the Building, the transferor shall be and hereby is relieved and freed of all obligations of Landlord under this Lease accruing after such transfer, and it shall be deemed, without further agreement that such transferee has assumed and agreed to perform and observe all obligations of Landlord herein during the period it is the holder of Landlord's interest under this Lease.
(h) The term "Lease Year" shall mean the 12-month period beginning on the Commencement Date or commencing on any anniversary of the Commencement Date.
(i) The term "Legal Requirements" shall mean laws and ordinances of any or all of the federal, state, city, town, county, borough and village governments and rules, regulations, orders and directives of any and all departments, subdivisions, bureaus, agencies or offices thereof, and of any other governmental, public or quasi-public authorities having jurisdiction over the Building and/or the Premises, and the direction of any public officer pursuant to law, whether now or hereafter in force.
(j) The term "person" shall mean any natural person or persons, a partnership, a corporation, and any other form of business or legal association or entity.
(k) The term "Tenant" shall mean the Tenant herein named or any assignee or other successor in interest (immediate or remote) of the Tenant herein named, which at the time in question is the owner of the Tenant's estate and interest granted by this Lease; but the foregoing provisions of this subsection shall not be construed to permit any assignment of this Lease or to relieve the Tenant herein named or any assignee or other successor in interest (whether immediate or remote) of the Tenant herein named from the full and
prompt payment, performance and observance of the covenants, obligations and conditions to be paid, performed and observed by Tenant under this Lease.
ARTICLE 2 - Use
2.01. Tenant shall use and occupy the Premises for offices and a pharmaceutical research facility with respect to the Main Space and for storage with respect to the Storage Space, and for no other purpose.
2.02. If any governmental license or permit shall be required
for the proper and lawful conduct of Tenant's business in the Premises or any
part thereof (other than the present certificate of occupancy for the Premises
or for the Building), Tenant, at its expense, shall duly procure and thereafter
maintain such license or permit and submit the same to Landlord for inspection.
Tenant shall at all times comply with the terms and conditions of each such
license or permit. Tenant shall not at any time use or occupy, or suffer or
permit anyone to use or occupy, the Premises, or any part thereof, in any manner
(a) which violates the certificate of occupancy for the Premises or for the
Building or any other permit or license issued pursuant to any Legal
Requirements; (b) which causes or is liable to cause injury to the Building or
any equipment, facilities or systems therein; (c) which constitutes a violation
of the Legal Requirements or Insurance Requirements; (d) which impairs or tends
to impair the character, reputation or appearance of the Building as a first
class office building; (e) which impairs or tends to impair the proper and
economic maintenance, operation and repair of the Building and/or its equipment,
facilities or systems; or (f) which annoys or inconveniences or tends to annoy
or inconvenience other tenants or occupants of the Project. Tenant shall not at
any time use or occupy, or suffer or permit anyone to use or occupy, the
Premises, or any part thereof, for (i) the production or disposal of any toxic
chemicals, (ii) a banking, trust company, or safe deposit business, or
(iii) a restaurant and/or bar.
ARTICLE 3 - Condition of Premises
3.01. Tenant is leasing the Premises "as is" on the date hereof, except for reasonable wear and tear and the rights of the present occupant(s) of the Premises to remove its or their trade fixtures and other property from the Premises; and the taking of possession by Tenant of the Premises shall be conclusive evidence as against Tenant that the Premises and the Building were in good and satisfactory condition at the time such possession was taken.
3.02. If Landlord is unable to give possession of the Premises on the Commencement Date, because of the holding over or retention of possession by any tenant, undertenant or occupant, or because of the fact that a temporary or permanent certificate of occupancy has not been procured, or for any other reason (including, but not limited to, the occurrence of any of the events described in Section 41.04), Landlord shall not be subject to any liability for failure to give possession on the Commencement Date and the validity of this Lease shall not be impaired under such circumstances, nor shall the same be construed in any way to extend the Term, but the Fixed Rent and Additional Charges payable hereunder shall be abated (provided Tenant is not responsible for the inability to obtain possession) until Landlord tenders possession to Tenant. If Landlord gives Tenant permission to enter into the possession of the Premises prior to the Commencement Date, such possession or
occupancy shall be deemed to be upon all the terms, covenants, conditions and
provisions of this Lease, including, without limitation, the payment of the
Fixed Rent and Additional Charges. Tenant hereby waives the provisions of
Section 223-a of the Real Property Law of the State of New York, and agrees that
the provisions of this Article are intended to constitute "an express provision
to the contrary" within the meaning of said Section 223- a.
ARTICLE 4 - Tax Payments
4.01. For the purposes of this Article 4 and other provisions of this Lease:
(a) The term "Taxes" shall mean (i) the real estate taxes, assessments and special assessments imposed upon the Project by any federal, state, municipal or other governments or governmental bodies or authorities, and (ii) any expenses incurred by Landlord or any other tenant in contesting such taxes or assessments and/or the assessed value of the Improvements and/or the Land, which expenses shall be allocated to the Tax Year to which such expenses relate. If at any time during the Term the methods of taxation prevailing on the date hereof shall be altered so that in lieu of, or as an addition to or as a substitute for, the whole or any part of such real estate taxes, assessments and special assessments now imposed on real estate there shall be levied, assessed or imposed (x) a tax, assessment, levy, imposition, license fee or charge wholly or partially as a capital levy or otherwise on the rents received therefrom, or (y) any other such additional or substitute tax, assessment, levy, imposition or charge, then all such taxes, assessments, levies, impositions, fees or charges or the part thereof so measured or based shall be deemed to be included within the term "Taxes" for the purposes hereof.
(b) The term "Tax Year" shall mean the period of 12 calendar months beginning on January 1 of the year in which the Term commences, and each succeeding 12-month period thereafter.
(c) The term "Tenant's Proportionate Share" shall mean 2.66%, subject to change as provided in Section 4.06 and subject to change as provided below in this subdivision (c). If any building or buildings is or are enlarged, demolished or removed from the Land or any new building or buildings is or are erected on the Land, the term "Tenant's Proportionate Share" shall mean the percentage that represents a fraction the numerator of which is the number of square feet of gross rentable area in the Premises and the denominator of which is the aggregate number of square feet of gross rentable area of all the buildings on the Land, subject to change as provided in Section 4.06.
4.02. Any Taxes for a real estate fiscal tax year, a part of which is included within a particular Tax Year and a part of which is not so included, shall be apportioned on the basis of the number of days in the real estate fiscal tax year included in the particular Tax Year for the purpose of making the computations under Section 4.03.
4.03. For each Tax Year, any part of which shall occur during the Term, Tenant shall pay to Landlord an amount (prorated to the extent provided in Section 4.05, if applicable) (herein called the "Tax Payment") equal to Tenant's Proportionate Share of the Taxes for such Tax Year. The Tax Payment for each Tax Year shall be due and payable in installments in
the same manner and at the same time that the Taxes for such Tax Year are first due and payable to the appropriate taxing authority. Landlord shall bill Tenant for any Tax Payment installment(s) payable by Tenant pursuant to this Article, such bill to set forth in reasonable detail the computation of the Tax Payment and the particular installment(s) thereof being billed. In the event of any increase or decrease in the Taxes for any Tax Year, whether during or after such Tax Year, the Tax Payment for such Tax Year shall be appropriately adjusted and paid or refunded, as the case may be, in accordance therewith.
4.04. If Landlord shall receive a refund of the Taxes for any Tax Year, Landlord shall either pay to Tenant, or permit Tenant to credit against subsequent payments under this Lease, Tenant's Proportionate Share of the net refund (after deducting from such total refund the costs and expenses, including, but not limited to, appraisal, accounting and legal fees of obtaining the same, to the extent that such costs and expenses were not included in the Taxes for such Tax Year); provided, however, such payment or credit to Tenant shall in no event exceed Tenant's Tax Payment paid for such Tax Year.
4.05. If a Tax Year begins prior to the commencement of the Term or ends after the expiration or termination of the Term, the Tax Payment therefor shall be prorated to correspond to that portion of such Tax Year occurring within the Term.
4.06. If Landlord causes part or parts of the Land to become a separate tax lot or separate tax lots, then the term "Tenant's Proportionate Share" shall be the percentage that represents a fraction, the numerator of which is the number of square feet of gross rentable area in the Premises and the denominator of which is the aggregate number of square feet of gross rentable area of all the buildings in the separate tax lot of which the Premises are a part.
ARTICLE 5 - Operating Expense Payments
5.01. For the purposes of this Article 5 and other provisions of this Lease:
(a) The term "Operating Expenses" shall mean all expenses
paid or incurred by Landlord or on Landlord's behalf in respect of the
repair, maintenance and operation of the Project, including, without
limitation, all expenses paid or incurred as a result of Landlord
complying with its obligations under this Lease. Operating Expenses
shall include, without limitation, (i) salaries, wages, medical,
surgical, union and general welfare benefits (including, without
limitation, group life insurance and pension and welfare payments and
contributions and all other fringe benefits paid to, for or with
respect to all persons (whether employees of Landlord or its managing
agent) engaged in the repair, operation and maintenance of the Project;
(ii) payroll taxes, workers' compensation, uniforms, dry cleaning, and
related expenses for such persons; (iii) the cost of all charges for
gas, steam, electricity, heat, ventilation, air-conditioning, water and
other utilities furnished to the buildings within the Project
(including, without limitation, the common areas thereof) together with
any taxes on such utilities (excluding however, the cost of
electricity, heat, ventilating and air-conditioning described in
clauses (9) and (10) of this definition); (iv) the cost of painting;
(v) the cost of building and cleaning supplies and equipment, cost of
replacements for tools and equipment used in the
operation, maintenance, and repair of the Property and charges for
telephone service for the Property; (vi) financial expenses incurred in
connection with the operation of the Project, such as insurance
premiums (including, without limitation, liability insurance, fire and
casualty insurance, rent insurance and any other insurance), attorneys'
fees and disbursements (exclusive of any such fees and disbursements
incurred in applying for any reduction of Taxes or in connection with
the leasing of space in the Project or the enforcement of leases),
auditing and other professional fees and expenses, association dues and
any other ordinary and customary financial expenses incurred in
connection with the operation of the Project; (vii) the cost or rentals
of all supplies (including, without limitation, cleaning supplies),
tools, materials and equipment, and sales and other taxes thereon;
(viii) cost of hand tools and other movable equipment used in the
repair, maintenance or operation of the Project; (ix) the cost of all
charges for window and other cleaning and janitorial and security
services; (x) charges of independent contractors; (xi) the cost of
repairs and replacements made by Landlord; (xii) the cost of
alterations and improvements to the Project made by reason of Legal
Requirements or Insurance Requirements; (xiii) payments under service
contracts; (xiv) management fees or, if no managing agent is employed
by Landlord, a sum in lieu thereof which is not in excess of the then
prevailing rates for management fees of similar properties in
Westchester County (but not less than 3-1/2% of the rents and
additional charges); (xv) all other charges properly allocable to the
repair, operation and maintenance of the Project in accordance with
generally accepted accounting principles; and (xvi) 15% of all of the
foregoing expenses to cover Landlord's administrative supervision,
overhead and general conditions; excluding, however, (1) depreciation,
(2) interest on and amortization of debts, (3) ground rent, (4)
leasehold improvements made for existing or future tenants of the
Project, (5) brokerage commissions, (6) refinancing costs, (7) costs
and expenses in connection with the construction of new buildings, (8)
Taxes, (9) the cost of Basic Electric and HVAC Electric (as such terms
are defined in Section 15.01) furnished to the Premises or to other
tenants of the Project and (10) the cost of producing and furnishing
steam and chilled water to provide heat, ventilating and
air-conditioning furnished to the Premises or to other tenants of the
Project. The cost of any capital improvement (excluding any new
buildings) or machinery or equipment shall be included in Operating
Expenses for the Operating Year in which such improvement was made or
machinery or equipment was purchased, provided that to the extent the
cost of such capital improvement or machinery or equipment is required
to be capitalized for federal income tax purposes, such cost shall be
amortized on a straight-line basis over the useful life thereof
utilized for federal income tax purposes, and the annual amortization
of such capital improvement or machinery or equipment, together with
interest on the unamortized balance of such cost at the Lease Interest
Rate, shall be included in Operating Expenses. Any cost or expense
shall be included in Operating Expenses for any Operating Year no more
than once, notwithstanding that such cost or expense may fall under
more than one of the categories listed above. Landlord may use related
or affiliated entities to provide services or furnish materials for the
Project provided that the rates or fees charged by such entities are
competitive with those charged by unrelated or unaffiliated entities
for the same services or materials. If during any Operating Year the
tenant or occupant of any space in the Project undertook to perform
work or services therein in lieu of having
Landlord perform the same and the cost thereof would have been included in Operating Expenses if done by Landlord, then, in any such event(s), the Operating Expenses for such Operating Year shall include the amount that would have been incurred if Landlord had performed such work or services, as the case may be. Operating Expenses shall be calculated on the accrual basis of accounting.
(b) The term "Operating Year" shall mean the calendar year beginning on January 1 of the year in which the Term commences, and each succeeding calendar year thereafter.
(c) The term "Operating Statement" shall mean a written statement prepared by Landlord or its agent, setting forth Landlord's computation of the sum payable by Tenant under this Article for a specified Operating Year.
5.02. For each Operating Year, any part of which occurs during the Term, Tenant shall pay to Landlord an amount (prorated to the extent provided in Section 5.06, if applicable) (herein called the "Operating Payment") equal to the greater of (a) Tenant's Proportionate Share of the Operating Expenses for such Operating Year, or (b) the Operating Payment for the prior Operating Year. Said payments shall be made as provided in Section 5.03.
5.03. Landlord shall furnish to Tenant, prior to the
commencement of each Operating Year (or, in the case of the Operating Year in
which the Term commences, prior to the Commencement Date), a written statement
setting forth Landlord's estimate of the Operating Payment for such Operating
Year. Tenant shall pay to Landlord on the first day of each month during such
Operating Year (or the portion thereof subsequent to the Commencement Date, as
the case may be) an amount equal to one-twelfth of Landlord's estimate of the
Operating Payment for such Operating Year. If, however, Landlord shall furnish
any such estimate for an Operating Year subsequent to the commencement thereof,
then (a) until the first day of the month following the month in which such
estimate is furnished to Tenant, Tenant shall pay to Landlord on the first day
of each month an amount equal to the monthly sum payable by Tenant to Landlord
under this Section in respect of the last month of the preceding Operating Year;
(b) after such estimate is furnished to Tenant or included in or together with
such estimate, Landlord shall give notice to Tenant stating whether the
installments of the Operating Payment previously made for such Operating Year
were greater or less than the installments of the Operating Payment to be made
for such Operating Year in accordance with such estimate, and (i) if there shall
be a deficiency, Tenant shall pay to Landlord the amount thereof within 10 days
after demand therefor, or (ii) if there shall have been an overpayment, Landlord
shall promptly either refund to Tenant the amount thereof or permit Tenant to
credit the amount thereof against subsequent payments under this Article or
Article 4; and (c) on the first day of the month following the month in which
such estimate is furnished to Tenant, and monthly thereafter throughout the
remainder of such Operating Year, Tenant shall pay to Landlord an amount equal
to one-twelfth of the Operating Payment shown on such estimate. Landlord may, at
any time during each Operating Year, furnish to Tenant a revised statement of
Landlord's estimate of the Operating Payment for such Operating Year; and in
such case, the Operating Payment for such Operating Year shall be adjusted and
paid or refunded, as the case may be, substantially in the same manner as
provided in the preceding sentence.
5.04. Within 120 days after the end of each Operating Year Landlord shall furnish to Tenant an Operating Statement for such Operating Year. If the Operating Statement shows that the sums paid by Tenant under Section 5.03 exceeded the Operating Payment to be paid by Tenant for such Operating Year, Landlord shall promptly either refund to Tenant the amount of such excess or permit Tenant to credit the amount of such excess against subsequent payments under this Article or Article 4; and if the Operating Statement for such Operating Year shows that the sums so paid by Tenant were less than the Operating Payment to be paid by Tenant for such Operating Year, Tenant shall pay to Landlord the amount of such deficiency within 10 days after demand therefor.
5.05. Tenant, upon notice given within 60 days of the receipt of such Operating Statement, may elect to have Tenant's designated (in such notice) certified public accountant (who may be an employee of Tenant) examine such of Landlord's books and records as are directly relevant to the Operating Statement in question. (If Tenant shall not give such notice within such 60-day period, then the Operating Statement as furnished by Landlord shall be conclusive and binding upon Tenant.) Tenant, pending the resolution of any contest shall continue to pay all sums as determined to be due in the first instance by Landlord's Operating Statement and upon the resolution of such contest, suitable adjustment shall be made in accordance therewith with appropriate refund to be made by Landlord to Tenant (or credit allowed Tenant against the Fixed Rent and Additional Charges becoming due).
5.06. If the Commencement Date shall occur other than on the first day of an Operating Year or an Operating Year ends after the expiration or termination of this Lease, any Additional Charges in respect thereof payable under this Article shall be equitably prorated to correspond to that portion of the Operating Year occurring within the Term.
ARTICLE 6 - Subordination, Notice to Superior Lessors and Superior Mortgagees
6.01. The holder of any mortgage which may now or hereafter affect the Land and/or the Building and/or any Superior Lease (as hereinafter defined) may elect that this Lease and all rights of Tenant hereunder shall have priority over such mortgage and, upon notification by such holder to Tenant, this Lease shall be deemed to have priority over such mortgage, whether this Lease is dated prior to or subsequent to the date of such mortgage. Except for any mortgage where the holder gave the aforesaid notification that this Lease shall have priority over such mortgage, this Lease, and all rights of Tenant hereunder, are and shall be subject and subordinate to all ground leases, overriding leases and underlying leases of the Land and/or the Improvements now or hereafter existing and to all mortgages which may now or hereafter affect the Land and/or the Improvements and/or any of such leases, including, without limitation, that certain Mortgage Consolidation, Modification, Extension and Spreader Agreement dated as of September 30, 1987, between Landlord, as Mortgagor, and Swiss Bank Corporation, New York Branch (herein called "Swiss Bank"), as Mortgagee, and that certain Restated Mortgage dated as of September 30, 1987, between Landlord, as Mortgagor, and Union Carbide Corporation (now known as Union Carbide Chemicals and Plastics Company Inc.) (herein called "Carbide"), as Mortgagee, whether or not such mortgages shall also cover other lands and/or buildings and/or leases, to each and every advance made or hereafter to be made under such mortgages, and to all renewals, modifications, replacements and extensions of such leases and such mortgages and spreaders and consolidations of such
mortgages. This Section shall be self-operative and no further instrument of subordination or priority (as described in the first sentence of this Section) shall be required. In confirmation of such subordination or priority (as described in the first sentence of this Section), Tenant shall promptly execute, acknowledge and deliver any instrument that Landlord, the lessor under any such lease or the holder of any such mortgage or any of their respective successors in interest may reasonably request to evidence such subordination or priority; and if Tenant fails to execute, acknowledge or deliver any such instruments within 10 days after request therefor, Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute and deliver any such instruments for and on behalf of Tenant. Any lease to which this Lease is, at the time referred to, subject and subordinate is herein called a "Superior Lease," and the lessor of a Superior Lease or its successor in interest, at the time referred to, is herein called a "Superior Lessor" and any mortgage (a) to which this Lease is, at the time referred to, subject and subordinate or (b) to which this Lease shall have priority due to the effect of the first sentence of this Section is herein called a "Superior Mortgage" and the holder of a Superior Mortgage is herein called a "Superior Mortgagee."
6.02. If any act or omission of Landlord would give Tenant the right, immediately or after lapse of a period of time, to cancel or terminate this Lease, or to claim a partial or total eviction, Tenant shall not exercise such right (a) until it has given written notice of such act or omission to Landlord and each Superior Mortgagee and each Superior Lessor whose name and address shall previously have been furnished to Tenant, and (b) until a reasonable period for remedying such act or omission shall have elapsed following the giving of such notice and following the time when such Superior Mortgagee or Superior Lessor shall have become entitled under such Superior Mortgage or Superior Lease, as the case may be, to remedy the same (which reasonable period shall in no event be less than the longer of 180 days or the period to which Landlord would be entitled under this Lease or otherwise, after similar notice, to effect such remedy), provided such Superior Mortgagee or Superior Lessor shall with due diligence give Tenant notice of intention to, and commence and continue to, remedy such act or omission. The current address of Swiss Bank, a Superior Mortgagee, is Swiss Bank Tower, 15th Floor, 10 East 50th Street, New York, New York 10022, Attention of Real Estate Department, Mr. Roy Chin, Director, Restructuring. The current address of Carbide, a Superior Mortgagee, is 39 Old Ridgebury Road, Danbury, Connecticut 06817- 0001, Attention of Mr. James N. Barton, Director of General Services.
6.03. If any Superior Mortgagee or Superior Lessor shall succeed to the rights of Landlord under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then at the request of such party so succeeding to Landlord's rights (herein called a "Successor Landlord") and upon such Successor Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn to and recognize such Successor Landlord as Tenant's landlord under this Lease and shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to evidence such attornment. Upon such attornment this Lease shall continue in full force and effect as a direct lease between the Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this Lease except that the Successor Landlord shall not (a) be liable for any previous act or omission of Landlord under this Lease; (b) be subject to any offset, not expressly provided for in this Lease, which theretofore shall have accrued to Tenant against Landlord; (c) be obligated to complete any work to prepare the
Premises for Tenant's occupancy; (d) be obligated to make any payment to or on behalf of Tenant; (e) be required to account for any security deposit other than any actually delivered to the Successor Landlord; or (f) be bound by any previous modification of this Lease or by any previous prepayment of more than one month's Fixed Rent, unless such modification or prepayment shall have been expressly approved in writing by the lessor of the Superior Lease or the holder of the Superior Mortgage through or by reason of which the Successor Landlord shall have succeeded to the rights of Landlord under this Lease.
6.04. If any prospective or actual Superior Mortgagee or Superior Lessor requires any modification of this Lease, Tenant shall, upon notice thereof from Landlord, promptly execute and deliver to Landlord the instrument accompanying said notice from Landlord to effect such modification if such instrument does not adversely affect in any material respect any of Tenant's rights under this Lease and does not increase in any material respect any of Tenant's obligations under this Lease.
ARTICLE 7 - Quiet Enjoyment
7.01. So long as Tenant pays all of the Fixed Rent and Additional Charges and performs all of Tenant's other obligations hereunder, Tenant shall peaceably and quietly have, hold and enjoy the Premises without hindrance, ejection or molestation by Landlord or any person lawfully claiming through or under Landlord, subject, nevertheless, to the provisions of this Lease and to any Superior Leases and Superior Mortgages. This covenant shall be construed as a covenant running with the Land, and is not, nor shall it be construed as, a personal covenant of Landlord, except to the extent of Landlord's interest in this Lease and only so long as such interest shall continue, and thereafter this covenant shall be binding only upon subsequent successors in interest of Landlord's interest in this Lease, to the extent of their respective interests, as and when they shall acquire the same, and so long as they shall retain such interest.
ARTICLE 8 - Assignment, Subletting and Mortgaging
8.01. Tenant shall not, whether voluntarily, involuntarily, or by operation of law or otherwise (a) assign or otherwise transfer this Lease, or offer or advertise to do so, (b) sublet the Premises or any part thereof, or offer or advertise to do so, or allow the same to be used, occupied or utilized by anyone other than Tenant, or (c) mortgage, pledge, encumber or otherwise hypothecate this Lease or the Premises or any part thereof in any manner whatsoever, without in each instance obtaining the prior consent of Landlord and all Superior Mortgagees.
8.02. If and so long as Tenant is a corporation or a partnership, the following shall be deemed to be an assignment of this Lease under Section 8.01 prohibited by said Section unless Tenant obtains the prior consent of Landlord and all Superior Mortgagees: one or more sales or transfers of stock or partnership interests, voluntarily, involuntarily, by operation of law or otherwise, or the issuance of new stock or partnership interests, by which an aggregate of more than 50% of Tenant's stock or partnership interests shall be vested in a party or parties who are not stockholders or partners as of the date hereof. This Section shall not apply to transactions with a corporation or partnership into or with which Tenant is merged or consolidated or to which substantially all of Tenant's assets are transferred or to any corporation or partnership which controls or is controlled by Tenant or is under common
control with Tenant if (a) the successor to Tenant has a tangible net worth computed in accordance with generally accepted accounting principles at least equal to the greater of (i) the tangible net worth of Tenant immediately prior to such merger, consolidation or transfer, or (ii) the tangible net worth on the date of this Lease of the original Tenant herein named, and (b) proof satisfactory to Landlord of such tangible net worth is delivered to Landlord at least 10 days prior to the effective date of any such transaction. The provisions of this Section shall not apply to any corporation all the outstanding voting stock of which is listed on a national securities exchange (as defined in the Securities Exchange Act of 1934, as amended) or is traded in the over-the-counter market with quotations reported by the National Association of Securities Dealers through its automated system for reporting quotations.
8.03. If this Lease is assigned, whether or not in violation of the provisions of this Lease, Landlord may collect rent from the assignee. If the Premises or any part thereof are sublet or used or occupied by anybody other than Tenant, whether or not in violation of this Lease, Landlord may, after default by Tenant, and expiration of Tenant's time to cure such default, collect rent from the subtenant or occupant. In either event, Landlord may apply the net amount collected to the Fixed Rent and Additional Charges herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of any of the provisions of Section 8.01, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the performance by Tenant of Tenant's obligations under this Lease. The consent by Landlord and any Superior Mortgagee to assignment, mortgaging, subletting or use or occupancy by others shall not in any way be considered to relieve Tenant from obtaining the consent of Landlord and all Superior Mortgagees to any other or further assignment, mortgaging, subletting or use or occupancy by others not expressly permitted by this Article. References in this Lease to use or occupancy by others (that is, anyone other than Tenant) shall not be construed as limited to subtenants and those claiming under or through subtenants but as including also licensees and others claiming under or through Tenant, immediately or remotely.
8.04. Any assignment or transfer, whether made with Landlord's
and all Superior Mortgagees' consent pursuant to Section 8.01 or without the
requirement of Landlord's and all Superior Mortgagees' consent pursuant to
Section 8.02, shall be made only if, and shall not be effective until, the
assignee shall execute, acknowledge and deliver to Landlord an agreement in form
and substance reasonably satisfactory to Landlord and all Superior Mortgagees
whereby the assignee shall assume the obligations of this Lease on the part of
Tenant to be performed or observed and whereby the assignee shall agree that the
provisions in Section 8.01 shall, notwithstanding such assignment or transfer,
continue to be binding upon it in respect of all future assignments and
transfers. Notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance of
the Fixed Rent or Additional Charges by Landlord from an assignee, transferee,
or any other party, the original named Tenant shall remain fully liable for the
payment of the Fixed Rent and Additional Charges and for the other obligations
of this Lease on the part of Tenant to be performed or observed.
8.05. The liability of Tenant and any immediate or remote successor in interest of Tenant and the due performance of the obligations of this Lease on Tenant's part to be performed or observed shall not be discharged, released or impaired in any respect by any agreement or stipulation made by Landlord with the then Tenant extending the time of, or
modifying any of the obligations of, this Lease, or by any waiver or failure of Landlord to enforce any of the obligations of this Lease.
8.06. Neither the listing of any name other than that of Tenant, whether on the door of the Premises or on any directory, or otherwise, nor the acceptance by Landlord of any check not drawn by Tenant in payment of Fixed Rent or Additional Charges, shall operate to vest any right or interest in this Lease or in the Premises, nor shall it be deemed to be the consent of Landlord to any assignment or transfer of this Lease or to any sublease of the Premises or to the use or occupancy thereof by others.
8.07. Except as specifically provided to the contrary in this Article 8, if Tenant shall at any time or times during the Term desire to assign this Lease or sublet all or any part of the Premises, Tenant shall give notice thereof to Landlord and all Superior Mortgagees, which notice shall be accompanied by (a) a conformed or photostatic copy of the proposed assignment or sublease, the effective or commencement date of which shall be at least 60 days after the giving of such notice, (b) a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its proposed use of the Premises, and (c) current financial information with respect to the proposed assignee or subtenant, including, without limitation, its most recent financial report. Such notice shall be deemed an offer from Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option, (i) sublease such space from Tenant upon the terms and conditions hereinafter set forth or (ii) terminate this Lease (if the proposed transaction is an assignment or a sublease of all or substantially all of the Premises). Said options may be exercised by Landlord by notice to Tenant at any time within 60 days after such notice has been given by Tenant to Landlord; and during such 60- day period Tenant shall not assign this Lease or sublet such space to any person.
8.08. If Landlord exercises its option to terminate this Lease in the case where Tenant desires either to assign this Lease or sublet all or substantially all of the Premises, then this Lease shall end and expire on the date that such assignment or sublet was to be effective or commence, as the case may be, and the Fixed Rent and Additional Charges shall be paid and apportioned to such date.
8.09. If Landlord exercises its option to sublet the Premises
which Tenant desires to sublet, such sublease to Landlord or its designee (as
subtenant) shall be at the lower of (i) the rental rate per rentable square foot
of the Fixed Rent and Additional Charges then payable pursuant to this Lease or
(ii) the rentals set forth in the proposed sublease, and shall be for the same
term as that of the proposed subletting, and:
(a) the sublease shall be expressly subject to all of the covenants, agreements, terms, provisions and conditions of this Lease except such as are irrelevant or inapplicable, and except as otherwise expressly set forth to the contrary in this Section;
(b) such sublease shall be upon the same terms and conditions as those contained in the proposed sublease, except such as are irrelevant or inapplicable and except as otherwise expressly set forth to the contrary in this Section;
(c) such sublease shall give the sublessee the unqualified and unrestricted right, without Tenant's permission, to
assign such sublease or any interest therein and/or to further sublet the Premises or any part or parts thereof and to make any and all changes, alterations, and improvements in the Premises;
(d) such sublease shall provide that any assignee or further subtenant of Landlord or its designee may, at the election of Landlord, be permitted to make alterations, decorations and installations in such space or any part thereof and shall also provide in substance that any such alterations, decorations and installations in such space therein made by any assignee or subtenant of Landlord or its designee may be removed, in whole or in part, by such assignee or subtenant, at its option, prior to or upon the expiration or other termination of such sublease provided that such assignee or subtenant, at its expense, shall repair any damage and injury to such space so sublet caused by such removal; and
(e) such sublease shall provide that (i) the parties to such sublease expressly negate any intention that any estate created under such sublease be merged with any other estate held by either of said parties, (ii) any assignment or further subletting by Landlord or its designee (as the sublessor) may be for any purpose or purposes that Landlord, in Landlord's uncontrolled discretion, shall deem suitable or appropriate, and (iii) at the expiration of the term of such sublease, Tenant will accept the space covered by such sublease in its then existing condition, subject to the obligations of the subtenant to make such repairs thereto as may be necessary to preserve the premises demised by such sublease in good order and condition, ordinary wear and tear and damage by fire or other casualty excepted.
8.10. If Landlord does not exercise its options pursuant to
Section 8.07 to so sublet the Premises or terminate this Lease and providing
that Tenant is not in default of any of Tenant's obligations under this Lease,
Landlord's consent (which shall be in form reasonably satisfactory to Landlord)
to the proposed assignment or sublease shall not be unreasonably withheld,
provided and upon condition that:
(a) Tenant shall have complied with the provisions of
Section 8.07 and Landlord shall not have exercised any of its options
under said Section 8.07 within the time permitted therefor;
(b) in Landlord's judgment the proposed assignee or
subtenant is engaged in a business and the Premises will be used in a
manner which (i) is in keeping with the then standards of the Building,
(ii) is limited to the use expressly permitted under Section 2.01, and
(iii) will not violate any negative covenant as to use contained in any
other lease of space in the Project;
(c) the proposed assignee or subtenant is a reputable person of good character and with sufficient financial worth considering the responsibility involved, and Landlord has been furnished with reasonable proof thereof;
(d) neither (i) the proposed assignee or sublessee nor (ii) any person which, directly or indirectly, controls, is controlled by, or is under common control with, the proposed assignee or sublessee or any person who controls the proposed assignee or sublessee, is then an occupant of any part of the Project or any other building in the County of Westchester owned or operated under a ground or underlying lease by Landlord or any person which, directly or
indirectly, controls, is controlled by, or is under common control with Landlord or any person who controls Landlord;
(e) the proposed assignee or sublessee is not a person with whom Landlord is then negotiating or in the prior six-month period was negotiating to lease space in the Project;
(f) the form of the proposed sublease (if Tenant proposes to sublease all of the Premises) shall be in form reasonably satisfactory to Landlord and shall comply with the applicable provisions of this Article; and
(g) the consent of any Superior Mortgagee whose Superior Mortgage requires the consent of the Superior Mortgagee shall have been obtained.
8.11. Tenant shall reimburse Landlord on demand for any costs that may be incurred by Landlord in connection with any proposed assignment or sublease, whether consented to by Landlord or not, including, without limitation, the costs of making investigations as to the acceptability of the proposed assignee or subtenant, and legal costs incurred in connection with the granting of any requested consent.
8.12. The amount of the aggregate rent per rentable square foot to be paid by a proposed subtenant under a proposed sublease shall not be less than the then current market rent per rentable square foot for the Premises as though the Premises were vacant. The rental and other terms and conditions of any actual sublease shall be the same as those contained in the proposed sublease furnished to Landlord pursuant to Section 8.07. Tenant shall not (a) advertise or publicize in any way the availability of the Premises without prior notice to and approval by Landlord, or (b) list the Premises for subletting, whether through a broker, agent, representative or otherwise at a rental rate less than the Fixed Rent and Additional Charges at which Landlord is then offering to lease comparable space in the Project.
8.13. Except for any subletting by Tenant to Landlord or its designee pursuant to the provisions of this Article, each subletting pursuant to this Article shall be subject to all of the covenants, agreements, terms, provisions and conditions contained in this Lease. Notwithstanding any such subletting to Landlord or any such subletting to any other subtenant and/or acceptance of rent or additional rent by Landlord from any subtenant, Tenant shall and will remain fully liable for the payment of the Fixed Rent and Additional Charges due and to become due hereunder and for the performance of all the covenants, agreements, terms, provisions and conditions contained in this Lease on the part of Tenant to be performed and all acts and omissions of any licensee or subtenant or anyone claiming under or through any subtenant which shall be in violation of any of the obligations of this Lease, and any such violation shall be deemed to be a violation by Tenant. Tenant further agrees that notwithstanding any such subletting, no other and further subletting of the Premises by Tenant or any person claiming through or under Tenant (except as provided in Section 8.09) shall or will be made except upon compliance with and subject to the provisions of this Article. If Landlord shall decline to give its consent to any proposed assignment or sublease, or if Landlord shall exercise any of its options under Section 8.07, Tenant shall indemnify, defend and hold harmless Landlord against and from any and all loss, liability, damages, costs and expenses (including reasonable counsel fees) resulting from any claims that may be made against Landlord by the
proposed assignee or sublessee or by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease.
8.14. If (a) Landlord fails to exercise all of its options under Section 8.07 and Landlord consents to a proposed assignment or sublease, and (b) Tenant fails to execute and deliver the assignment or sublease to which Landlord consented within 45 days after the giving of such consent, then Tenant shall again comply with all of the provisions and conditions of Section 8.07 before assigning this Lease or subletting all or any part of the Premises.
8.15. With respect to each and every sublease or subletting authorized by Landlord under the provisions of this Lease, it is further agreed that:
(a) no subletting shall be for a term ending later than one day prior to the expiration date of this Lease;
(b) no sublease shall be valid, and no subtenant shall take possession of the Premises or any part thereof, until an executed counterpart of such sublease has been delivered to Landlord; and
(c) each sublease shall provide that it is subject
and subordinate to this Lease and to the matters to which this Lease is
or shall be subordinate, and that in the event of termination, reentry
or dispossess by Landlord under this Lease Landlord may, at its option,
take over all of the right, title and interest of Tenant, as sublessor,
under such sublease, and such subtenant shall, at Landlord's option,
attorn to Landlord pursuant to the then executory provisions of such
sublease, except that Landlord shall not (i) be liable for any previous
act or omission of Tenant under such sublease, (ii) be subject to any
offset which theretofore accrued to such subtenant against Tenant, or
(iii) be bound by any previous modification of such sublease or by any
previous prepayment of more than one month's rent.
8.16. If Landlord gives its consent to any assignment of this Lease or to any sublease, Tenant shall, in consideration therefor, pay to Landlord, as Additional Charges:
(a) in the case of an assignment, an amount equal to all sums and other considerations paid to Tenant by the assignee for or by reason of such assignment (including, without limitation, sums paid for the sale of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, less the then net unamortized or undepreciated cost thereof determined on the basis of Tenant's federal income tax returns); and
(b) in the case of a sublease, any rents, additional charges or other consideration payable under the sublease to Tenant by the subtenant which is in excess of the Fixed Rent and Additional Charges accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof (including, without limitation, sums paid for the sale or rental of Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, less, in the case of the sale thereof, the then net unamortized or undepreciated cost thereof determined on the basis of
Tenant's federal income tax returns, which net unamortized or undepreciated cost shall be deducted from the sums paid in connection with such sale in equal monthly installments over the balance of the term of the sublease). The sums payable under this subdivision (b) shall be paid to Landlord as and when paid by the subtenant to Tenant.
ARTICLE 9 - Compliance With Legal and Insurance Requirements
9.01. Tenant shall give prompt notice to Landlord of any
notice it receives of the violation of any Legal Requirements or Insurance
Requirements with respect to the Premises or the use or occupation thereof.
Tenant shall, at Tenant's expense, comply with all Legal Requirements and
Insurance Requirements which shall, in respect of the Premises or the use and
occupation thereof, or the abatement of any nuisance in, on or about the
Premises, impose any violation, order or duty on Landlord or Tenant, arising
from (a) Tenant's use of the Premises, (b) the manner of conduct of Tenant's
business or operation of its installations, equipment or other property therein,
(c) any cause or condition created by or at the instance of Tenant, or (d)
breach of any of Tenant's obligations hereunder, and Tenant shall pay all the
costs, expenses, fines, penalties and damages which may be imposed upon Landlord
or any Superior Lessor or Superior Mortgagee by reason of or arising out of
Tenant's failure to fully and promptly comply with and observe the provisions of
this Section. However, Tenant need not comply with any such Legal Requirements
and Insurance Requirements so long as Tenant is contesting the validity thereof,
or the applicability thereof to the Premises, in accordance with Section 9.02.
Subject to the provisions of Section 9.03, Landlord, at its expense, shall
comply with all other Legal Requirements and Insurance Requirements as shall
affect the Premises, but may similarly defer compliance so long as Landlord
shall be contesting the validity or applicability thereof.
9.02. Tenant, at its expense, after notice to Landlord, may contest, by appropriate proceedings prosecuted diligently and in good faith, the validity, or applicability to the Premises, of any Legal Requirements and Insurance Requirements, provided that (a) neither Landlord nor any Superior Mortgagee or Superior Lessor shall be subject to criminal penalty or to prosecution for a crime, nor shall the Premises or any part thereof be subject to being condemned or vacated, by reason of noncompliance or otherwise by reason of such contest; (b) before the commencement of such contest, Tenant shall furnish to Landlord such security as shall be satisfactory to Landlord and all Superior Mortgagees, and Tenant shall indemnify Landlord and any Superior Mortgagees and Superior Lessors against the cost thereof and against all liability for damages, interest, penalties and expenses (including reasonable attorneys' fees and expenses), resulting from or incurred in connection with such contest or noncompliance; (c) such noncompliance or contest shall not constitute or result in any violation of any Superior Lease or Superior Mortgage, or if any such Superior Lease Superior Mortgage shall permit such noncompliance or contest on condition of the taking of action or furnishing of security by Landlord, such action shall be taken and such security shall be furnished at the expense of Tenant; and (d) Tenant shall keep Landlord advised as to the status of such proceedings. Without limiting the application of the above, Landlord and/or a Superior Mortgagee and/or Superior Lessor shall be deemed subject to prosecution for a crime if Landlord or the Superior Mortgagee or Superior Lessor or any managing agent for the Project, or any officer, director, partner, shareholder or employee of Landlord or a Superior Mortgagee or Superior Lessor or any managing agent for the Project, as an individual, is charged with a crime of any kind or degree whatever, whether by service of a summons or otherwise,
unless such charge is withdrawn before Landlord or the Superior Mortgagee or Superior Lessor or any managing agent for the Project, or such officer, director, partner, shareholder or employee of Landlord or the Superior Mortgagee or Superior Lessor or any managing agent for the Project (as the case may be) is required to plead or answer thereto.
9.03. If Landlord or any Superior Mortgagee or Superior Lessor
is required under this Lease or pursuant to law to comply with any Legal
Requirements or Insurance Requirements affecting the Premises, Landlord may, at
its option, elect to terminate this Lease by giving not less than 30 days'
notice thereof to Tenant. If Tenant gives notice to Landlord, within 15 days
after the giving by Landlord of such notice of termination, that Tenant shall
cause the required repairs or alterations to be made at Tenant's expense, then
(a) such notice of termination shall be ineffective, and (b) Tenant shall, at
Tenant's expense, promptly and diligently cause such repairs or alterations to
be performed and shall indemnify and hold harmless Landlord and the Superior
Mortgagees and Superior Lessors from any and all costs, expenses, penalties
and/or liabilities in connection therewith. The provisions of Article 12 hereof,
to the extent applicable, shall apply to the work (and the plans and
specifications therefor) which Tenant shall be required to perform or cause to
be performed under this Section.
ARTICLE 10 - Insurance
10.01. Tenant shall not violate, or permit the violation of, any Insurance Requirements and shall not do, or permit anything to be done, or keep or permit anything to be kept in the Premises which would subject Landlord or any Superior Mortgagee or Superior Lessor to any liability or responsibility for bodily injury or death or property damage, or which would increase any insurance rate in respect of insurance maintained by or for the benefit of Landlord over the rate which would otherwise then be in effect or which would result in insurance companies of good standing refusing to insure all or any part of the Project or any contents thereof in amounts reasonably satisfactory to Landlord, or which would result in the cancellation of or the assertion of any defense by the insurer in whole or in part to claims under any policy of insurance in respect of the Project.
10.02. If, by reason of any failure of Tenant to comply with the provisions of Section 9.01 or Section 10.01, the premiums on insurance maintained by or for the benefit of Landlord shall be higher than they otherwise would be, Tenant shall reimburse Landlord, on demand, for that part of such premiums attributable to such failure on the part of Tenant. A schedule or "make up" of rates for insurance maintained by or for the benefit of Landlord issued by the New York Fire Insurance Rating Organization or other similar body making rates for such insurance shall be conclusive evidence of the facts therein stated and of the several items and charges in the insurance rate then applicable to such insurance.
10.03. Tenant, at its expense, shall maintain at all times during the Term (a) "all risk" property insurance covering the Tenant's Property (hereinafter defined) with a limit of not less than 80% of the replacement cost thereof, and (b) commercial general liability insurance, including a contractual liability endorsement, in respect of the Premises and the conduct or operation of business therein, with Landlord and its managing agent, if any, and any Superior Lessors and Superior Mortgagees, including, without limitation, Swiss Bank and Carbide, whose names and addresses shall have been furnished to Tenant, as additional insureds, with
limits of not less than $5,000,000 combined single limit bodily injury and property damage liability. The limits of such insurance shall not limit the liability of Tenant hereunder. Tenant shall deliver to Landlord and any additional insureds certificates and copies of the binders for such insurance in form reasonably satisfactory to Landlord issued by the insurance company or its authorized agent no later than 10 days before the Commencement Date and prior to the commencement of any work by Tenant. Tenant shall procure and pay for renewals of such insurance from time to time before the expiration thereof, and Tenant shall deliver to Landlord and any additional insureds certificates and copies of the binders for such renewal policy issued by the insurance company or its authorized agent at least 30 days before the expiration of any existing policy. All such policies shall be issued by companies licensed to do business in New York State and reasonably satisfactory to Landlord. All such policies shall be noncancellable in respect of Landlord and any additional insureds unless 30 days' prior written notice is given to Landlord and all additional insureds and all such policies shall provide that no act or omission of Tenant shall affect or limit the obligations of the insurer in respect of Landlord and the additional insureds.
10.04. Each party agrees to have included in each of its insurance policies (insuring the Building and Landlord's property therein in the case of Landlord, and insuring the Tenant's Property in the Premises in the case of Tenant, against loss, damage or destruction by fire or other casualty) a waiver of the insurer's right of subrogation against the other party during the Term or, if such waiver is unobtainable or unenforceable, (a) an express agreement that such policy shall not be invalidated if the insured waives the right of recovery against any party responsible for a casualty covered by the policy before the casualty, or (b) any other form of permission for the release of the other party. If such waiver, agreement or permission shall not be, or shall cease to be, obtainable from either party's then current insurance company, the insured party shall so notify the other party promptly after learning thereof, and shall use its best efforts to obtain the same from another insurance company described in Section 10.03. If such waiver, agreement or permission is obtainable only by payment of an additional charge, the insured party shall so notify the other party promptly after learning thereof, and the insured party shall not be required to obtain said waiver, agreement or permission unless the other party pays the additional charge therefor. Each party hereby releases the other, in respect of any claim (including a claim for negligence) which it might otherwise have against the other for loss, damage or destruction in respect of its property occurring during the Term to the extent to which it is insured under a policy or policies containing a waiver of subrogation or permission to release liability, as provided in the preceding sentences of this Section. Nothing contained in this Section shall be deemed to relieve either party of any duty imposed elsewhere in this Lease to repair, restore or rebuild or to nullify any abatement of rents provided for elsewhere in this Lease.
10.05. Landlord may from time to time, but not more frequently than once every year, require that the amount of commercial general liability insurance to be maintained by Tenant under Section 10.03 be reasonably increased, so that the amount thereof adequately protects Landlord's interest.
ARTICLE 11 - Rules and Regulations
11.01. Tenant and its employees and agents shall faithfully observe and comply with the rules and regulations attached hereto as Exhibit C, and such reasonable changes therein (whether by modification, elimination or addition) as Landlord at any time or times hereafter makes and communicates to Tenant, which, in Landlord's reasonable judgment, shall be necessary for the reputation, safety, care and appearance of the Project, or the preservation of good order therein, or the operation or maintenance of the Project or its equipment and fixtures, and which do not unreasonably affect the conduct of Tenant's business in the Premises (such rules and regulations as changed from time to time being herein called the "Rules and Regulations"); provided, however, that in case of any conflict or inconsistency between the provisions of this Lease and any of the Rules and Regulations, the provisions of this Lease shall control.
11.02. Nothing in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations against any other tenant or any employees or agents of any other tenant, and Landlord shall not be liable to Tenant for violation of the Rules and Regulations by any other tenant or its employees, agents, invitees or licensees.
ARTICLE 12 - Alterations
12.01. Tenant may from time to time, at its expense, make alterations (herein called the "Alterations") in and to the Premises, excluding structural changes, provided and upon condition that: (a) the outside appearance of the Building shall not be affected; (b) the Alterations are nonstructural and the strength of the Building shall not be affected; (c) the Alterations are to the interior of the Premises and no part of the Building outside of the Premises shall be affected; (d) the proper functioning of the mechanical, electrical, sanitary and other service systems of the Building shall not be adversely affected and the usage of such systems by Tenant shall not be increased; (e) before proceeding with any Alteration, Tenant shall submit to Landlord for Landlord's approval (which shall not be unreasonably withheld if the approval of all Superior Mortgagees whose Superior Mortgages require the approval of the Superior Mortgagee shall have been obtained) two sets of plans and specifications for the work to be done, and Tenant shall not proceed with such work until it obtains such approval; (f) Tenant shall pay to Landlord upon demand the reasonable cost and expense of Landlord in (i) reviewing said plans and specifications and (ii) inspecting the Alterations to determine whether the same are being performed in accordance with the approved plans and specifications and all Legal Requirements and Insurance Requirements, including, without limitation, the fees or cost of any architect, engineer or draftsman, including the cost, based upon the actual salaries and fringe benefits of architects, engineers or draftsmen who are employees of Landlord, for such purposes; (g) before proceeding with any Alteration which will cost more than $50,000 (exclusive of the costs of decorating work and items constituting the Tenant's Property), as estimated, at Tenant's expense, by a reputable contractor reasonably satisfactory to Landlord and all Superior Mortgagees, Tenant shall obtain and deliver to Landlord such security as shall be satisfactory to Landlord and all Superior Mortgagees; and (h) Tenant shall fully and promptly comply with and observe the Rules and Regulations of Landlord then in force with respect to the making of the Alterations. Tenant agrees that any review or approval by Landlord of any plans and/or specifications with respect to any Alterations is solely for Landlord's benefit, and without any representation or warranty whatsoever to Tenant with respect to the adequacy, correctness or efficiency thereof or otherwise.
12.02. Tenant, at its expense, shall obtain all necessary governmental permits and certificates for the commencement and prosecution of the Alterations and for final approval thereof upon completion, and shall cause the Alterations to be performed in compliance therewith and with all applicable Legal Requirements and Insurance Requirements. The Alterations shall be diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to the original installations. The Alterations shall be performed by contractors first approved by Landlord under the supervision of a licensed architect. The Alterations shall be performed in such a manner as not to violate union contracts affecting the Project, or create any work stoppage, picketing, labor disruption or dispute or any interference with the business of Landlord or any tenant of the Project. In addition, the Alterations shall be performed in such a manner as not to otherwise unreasonably interfere with or delay and as not to impose any additional expense upon Landlord in the construction, maintenance, repair, operation or cleaning of the Project, and if any such additional expense shall be incurred by Landlord as a result of Tenant's performance of the Alterations, Tenant shall pay such additional expense to Landlord on demand. Throughout the performance of the Alterations, Tenant shall carry, or cause its contractors to carry, workers' compensation insurance in statutory limits, "Builder's Risk" insurance reasonably satisfactory to Landlord, and commercial general liability insurance, with completed operation endorsement, for any occurrence in or about the Project, under which Landlord and its managing agent and any Superior Lessors and Superior Mortgagees, whose names and addresses were furnished to Tenant shall be named as additional insureds, in such limits as Landlord may reasonably require, with insurers reasonably satisfactory to Landlord. Tenant shall furnish Landlord with reasonably satisfactory evidence that such insurance is in effect before the commencement of the Alterations and, on request, at reasonable intervals during the continuance of the Alterations. If any Alterations involve the removal of any fixtures, equipment or other property in the Premises which are not Tenant's Property, such fixtures, equipment or other property shall be replaced prior to the end of the Term at Tenant's expense with new fixtures, equipment or other property of like utility and at least equal value. Upon completion of any Alterations (other than mere decorations) Tenant shall deliver to Landlord scaled and dimensioned reproducible mylars of "as-built" plans for such Alteration.
12.03. Tenant, at its expense, and with diligence and dispatch, shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with the Alterations, or any other work, labor, services or materials done for or supplied to Tenant, or any person claiming through or under Tenant, which shall be issued by the County of Westchester or the Town of Greenburgh or the Town of Mount Pleasant or any other public authority having or asserting jurisdiction. Tenant shall indemnify and save harmless Landlord and any Superior Mortgagees and Superior Lessors from and against any and all mechanics' and other liens and encumbrances filed in connection with the Alterations, or any other work, labor, services or materials done for or supplied to Tenant, or any person claiming through or under Tenant, including, without limitation, security interests in any materials, fixtures or articles so installed in and constituting part of the Premises and against all costs, expenses and liabilities incurred in connection with any such lien or encumbrance or any action or proceeding brought thereon. Tenant, at its expense, shall procure the satisfaction or discharge of record of all such liens and encumbrances within 10 days after the filing thereof. However, nothing herein contained shall prevent Tenant from contesting, in good
faith and at its own expense, any notice of violation, provided that Tenant shall comply with the provisions of Section 9.02.
ARTICLE 13 - Landlord's and Tenant's Property
13.01. All fixtures, equipment, improvements and appurtenances, including, without limitation, utility lines and equipment, attached to or built into the Premises at the commencement of or during the Term, whether or not by or at the expense of Tenant, shall be and remain a part of the Premises, shall be deemed the property of Landlord and shall not be removed by Tenant, except as provided in Section 13.02. Further, any carpeting or other personal property in the Premises on the Commencement Date, unless installed and paid for by Tenant, shall be and shall remain Landlord's property and shall not be removed by Tenant.
13.02. All movable partitions, business and trade fixtures, machinery and equipment, communications equipment and office equipment, whether or not attached to or built into the Premises, which are installed in the Premises by or for the account of Tenant without expense to Landlord and can be removed without structural damage to the Building, and all furniture, furnishings and other articles of movable personal property owned by Tenant and located in the Premises (herein collectively called the "Tenant's Property") shall be and shall remain the property of Tenant and may be removed by Tenant at any time during the Term; provided that if any of the Tenant's Property is removed, Tenant shall repair or pay the cost of repairing any damage to the Premises or to the Building resulting from the installation and/or removal thereof. Any equipment or other property for which Landlord shall have granted any allowance or credit to Tenant shall not be deemed to have been installed by or for the account of Tenant without expense to Landlord, shall not be considered the Tenant's Property, and shall be deemed the property of Landlord.
13.03. At or before the expiration date of this Lease, or within 15 days after the date of any earlier termination of this Lease, Tenant, at its expense, shall remove from the Premises all of the Tenant's Property, and Tenant shall repair any damage to the Premises or the Building resulting from any installation and/or removal of the Tenant's Property. Any other items of the Tenant's Property which shall remain in the Premises after the expiration date of this Lease, or after a period of 15 days following an earlier termination date, may, at the option of Landlord, be deemed to have been abandoned, and in such case such items may be retained by Landlord as its property or disposed of by Landlord, without accountability, in such manner as Landlord shall determine at Tenant's expense.
ARTICLE 14 - Repairs and Maintenance
14.01. Tenant shall, at its expense, throughout the Term, take good care of the Premises, the fixtures and appurtenances therein and the Tenant's Property. Tenant shall be responsible for all repairs and replacements, interior and exterior, structural and nonstructural, ordinary and extraordinary, in and to the Premises and the Building and the facilities and systems thereof, the need for which arises out of (a) the performance or existence of any work by Tenant or Alterations, (b) the installation, use or operation of the Tenant's Property in the Premises, (c) the moving of the Tenant's Property in or out of the Premises or the Building, or (d) the act, omission, misuse or neglect of Tenant or any of its subtenants or its or their employees, agents, contractors or invitees. Tenant, at its expense,
shall promptly repair or replace all scratched, damaged or broken doors and glass in and about the Premises and shall be responsible for all repairs, painting, maintenance and replacement of wall and floor coverings in the Premises and for the repair and maintenance of all sanitary and electrical fixtures and equipment therein. Tenant shall promptly make, at Tenant's expense, all repairs in or to the Premises for which Tenant is responsible. Any repairs required to be made by Tenant to the mechanical, electrical, sanitary, heating, ventilating, air-conditioning or other systems of the Building shall be performed only by contractor(s) approved by Landlord. Any other repairs in or to the Building and the facilities and systems thereof for which Tenant is responsible, may be performed by Landlord at Tenant's expense.
14.02. Landlord shall make all repairs and replacements, structural and otherwise, interior and exterior, as and when needed in or about the Premises, except for those repairs and replacements for which Tenant is responsible pursuant to any of the provisions of this Lease.
14.03. Except as otherwise expressly provided in this Lease, Landlord shall have no liability to Tenant, nor shall Tenant's covenants and obligations under this Lease be reduced or abated in any manner whatsoever, by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted by this Lease, or required by law, to make in or to any portion of the Building or the Premises, or in or to the fixtures, equipment or appurtenances of the Building or the Premises.
ARTICLE 15 - Electric Energy
15.01. Subject to the provisions of this Article, Landlord shall furnish the electric energy that Tenant shall reasonably require in the Premises for the purposes permitted under this Lease. Except for electric energy required to operate motors on the air handlers providing heat, ventilating and conditioning to the Premises ("HVAC Electric"), such electric energy may, at Landlord's option, be furnished through a meter or meters and related equipment, installed and maintained by Landlord at Tenant's expense, measuring the amount of electric energy furnished to the Premises. Tenant shall pay Landlord for such electric energy as Additional Charges, within ten days after Landlord bills Tenant therefor, which bills shall be rendered not more often than monthly. The amount of such Additional Charges (a) for HVAC Electric shall be 110% of Landlord's cost and (b) for other electric energy furnished to the Premises ("Basic Electric") shall be based upon rates equal to 110% of the rates that would be applicable if such electric energy were supplied directly to Tenant through a meter or meters on a direct meter basis by the public utility company then supplying electric energy to the area of Westchester County in which the Premises are located (even if such electric energy is not generated by such public utility company but is privately generated); provided that such Additional Charges for Basic Electric shall in no event be based on rates that are less than 110% of the average of the rates at which Landlord purchases electric energy for the Project directly from such public utility company; including in each case, without limitation, those charges applicable to or computed on the basis of electric consumption, demand and hours of use, any sales or other taxes regularly passed on to or collected from similar consumers by such public utility company, fuel rate adjustments and surcharges, and weighted in each case to reflect differences in consumption or demand applicable to each rate level. Tenant and its authorized representatives may have access to such meter or meters (if any) on at least three days' notice to Landlord, for the purposes of
verifying Landlord's meter readings (if any). From time to time during the Term of this lease, Landlord may, in its sole discretion, install or eliminate, or increase or reduce the number of, such meters or vary the portions of the Premises which they serve or replace any or all of such meters.
15.02. If pursuant to any Legal Requirements, the charges to Tenant pursuant to Section 15.01 shall be reduced below that to which Landlord is entitled under such Section, the deficiency shall be paid by Tenant within 10 days after being billed therefor, as additional rent for the use and maintenance of the electric distribution system of the Building.
15.03. Landlord shall not be liable in any event to Tenant for any failure or defect in the supply or character of electric energy furnished to the Premises by reason of any requirement, act or omission of the public utility serving the Building with electric energy or for any other reason not attributable solely to Landlord's willful misconduct or gross negligence.
15.04. Landlord shall furnish and install all replacement lighting tubes, lamps, bulbs and ballasts required in the Premises, and Tenant shall pay to Landlord or its
designated contractor upon demand the then established charges therefor of Landlord or its designated contractor, as the case may be.
15.05. Tenant's use of electric energy in the Premises shall not at any time exceed the capacity of any of the electrical conductors and equipment in or otherwise serving the Premises. In order to insure that such capacity is not exceeded and to avert possible adverse effect upon the Building's distribution of electricity via the Building's electric system, Tenant shall not, without Landlord's prior consent in each instance (which shall not be unreasonably withheld, based upon availability of electric energy in the Building as allocated by Landlord to various areas of the Building) connect any fixtures, appliances or equipment (other than normal business machines which do not materially increase Tenant's electrical consumption) to the Building's electric system or make any alterations or additions to the electric system of the Premises existing on the Commencement Date. Should Landlord grant such consent, all additional risers or other equipment required therefor shall be provided by Landlord and the cost thereof shall be paid by Tenant to Landlord on demand. Landlord shall have the right to require Tenant to pay sums on account of such cost prior to the installation of any such risers or equipment.
15.06. If required by any Legal Requirements, Landlord, upon at least sixty days' notice to Tenant, may discontinue Landlord's provision of electric energy (or either HVAC Electric or Basic Electric, as the case may be) hereunder. If Landlord discontinues provision of electric energy pursuant to this Section, Tenant shall not be released from any liability under this Lease, except that as of the date of such discontinuance, Tenant's obligation to pay Landlord Additional Charges under Section 15.01 for electric energy (or either HVAC Electric or Basic Electric, as the case may be) thereafter supplied to the Premises shall cease. As of such date, Landlord shall permit Tenant to receive electric energy directly from the public utility company supplying electric energy to the Project, and Tenant shall pay all costs and expenses of obtaining such direct electrical service. Such electric energy may be furnished to Tenant by means of the then existing Building system feeders, risers and wiring to the extent that the same are available, suitable and safe for such purpose. All meters and additional panel boards, feeders, risers, wiring and other conductors and equipment which may be required to obtain electric energy directly from such public utility company shall be furnished and installed by Landlord at Landlord's expense (which shall constitute an Operating Expense, amortized on a straight line basis over the useful life of the items in question, as reasonably determined by Landlord).
ARTICLE 16 - Heat, Ventilation and Air-Conditioning
16.01. Landlord shall maintain and operate the heating, ventilating and air-conditioning systems serving the Premises, and shall furnish heat, ventilating and air-conditioning in the Premises as may be reasonably required (except as otherwise provided in this Lease and except for any special requirements of Tenant arising from its particular use of the Premises) for reasonably comfortable occupancy of the Premises during Business Hours of Business Days. If Tenant shall require heat or air-conditioning service at any other time, Landlord shall furnish such service for such times ("Overtime Hours") upon not less than 48 hours advance notice from Tenant. Tenant shall pay Landlord for heat, ventilating and air-conditioning as Additional Charges, within ten days after Landlord bills Tenant therefor, which bills shall be rendered not more often than monthly. The amount of such Additional Charges for a given period of time shall be equal to 110% of the total cost to Landlord of delivering steam
and chilled water for the Premises for the Business Hours and Overtime Hours of Tenant in such period.
16.02. The performance by Landlord of its obligations under
Section 16.01 is subject to Tenant's compliance with the conditions of occupancy
and connected load established by Landlord. Use of the Premises, or any part
thereof, in a manner exceeding the heating, ventilating and/or air-conditioning
design conditions (including occupancy and connected electrical load), or
rearrangement of partitioning which interferes with normal operation of the
heating, ventilating and/or air-conditioning in the Premises, or the use of
computer or data processing machines or other machines or equipment, may require
changes in the heating, ventilating and/or air-conditioning systems servicing
the Premises, in order to provide comfortable occupancy. Such changes, so
occasioned, shall be made by Tenant, at its expense, as Alterations in
accordance with the provisions of Article 12, but only to the extent permitted
and upon the conditions set forth in that Article.
ARTICLE 17 - Other Services; Service Interruption
17.01. Landlord shall furnish adequate hot and cold water to the Premises for drinking, lavatory and cleaning purposes. If Tenant uses water for any other purpose (such as laboratory purpose), Landlord may install and maintain, at Tenant's expense, meters to measure Tenant's consumption of cold water and/or hot water for such other purposes. Tenant shall reimburse Landlord for the quantities of cold water and hot water shown on such meters on demand.
17.02. Landlord shall cause the Premises, including the exterior and the interior of the windows thereof but excluding any laboratory space, to be cleaned in a manner standard to the Building. Tenant shall pay to Landlord on demand the costs incurred by Landlord for (a) extra cleaning work in the Premises required because of (i) misuse or neglect on the part of Tenant or its subtenants or its or their employees or visitors, (ii) the use of portions of the Premises for special purposes requiring greater or more difficult cleaning work than office areas, (iii) interior glass partitions or unusual quantity of interior glass surfaces, and (iv) special materials or finishes on items installed by Tenant or its subtenants or its or their employees or visitors or at its or their request; (b) removal from the Premises and the Building of any refuse or rubbish of Tenant in excess of that ordinarily accumulated in business office occupancy or at times other than Landlord's standard cleaning times; and (c) the use of the Premises by Tenant or its subtenants or its or their employees or visitors other than during Business Hours on Business Days.
17.03. Landlord, its cleaning contractor and their employees shall have access to the Premises after 5:30 p.m. and before 8:00 a.m. and shall have the right to use, without charge therefor, all light, power and water in the Premises reasonably required to clean the Premises as required under Section 17.02.
17.04. If Landlord shall furnish either gas or steam to the Premises, Landlord shall not be liable in any event to Tenant for any failure or defect in the supply or character of the gas or steam furnished to the Premises by reason of any requirement, act or omission of the public utility serving the Building with steam or for any other reason not attributable solely to Landlord's willful misconduct or gross negligence. Tenant's use of gas or steam in the Premises shall not at any time exceed
the capacity of any of the gas lines and equipment or steam lines and equipment in or otherwise then serving the Premises.
17.05. Landlord reserves the right, without any liability to Tenant and without affecting Tenant's covenants and obligations hereunder, to stop or interrupt or reduce service of any of the heating, ventilating, air-conditioning, electric, sanitary, elevator, gas, steam, water or other Building systems serving the Premises, or to stop or interrupt or reduce any other services required of Landlord under this Lease (whether or not specified in Article 16 or this Article 17), whenever and for so long as may be necessary, by reason of (a) accidents, emergencies, strikes or the occurrence of any of the other events described in Section 41.04, (b) the making of repairs or changes which Landlord is required or is permitted by this Lease or by law to make or in good faith deems necessary, (c) difficulty in securing proper supplies of fuel, gas, steam, water, electricity, labor or supplies, or (d) any other cause beyond Landlord's reasonable control, whether similar or dissimilar.
ARTICLE 18 - Access and Name of Project
18.01. Except for the space within the inside surfaces of all walls, hung ceilings, floors, windows and doors bounding the Premises, all of the Building, including, without limitation, exterior Building walls, core corridor walls and doors and any core corridor entrances, any terraces or roofs adjacent to the Premises and any space in or adjacent to the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other Building facilities, and the use thereof, as well as reasonable access thereto through the Premises for the purposes of operation, maintenance, decoration and repair, are reserved to Landlord.
18.02. Landlord reserves the right, and Tenant shall permit Landlord, to install, erect, use and maintain pipes, ducts and conduits in and through the Premises.
18.03. Landlord and its agents shall have the right to enter
and/or pass through the Premises at any time or times (a) to examine the
Premises and to show them to actual and prospective Superior Lessors, Superior
Mortgagees, or prospective purchasers, mortgagees or lessees of the Building and
(b) to make such repairs, alterations, additions and improvements in or to the
Premises and/or in or to the Building or its facilities and equipment as
Landlord is required or desires to make. Landlord shall be allowed to take all
materials into and on the Premises that may be required in connection therewith,
without any liability to Tenant and without any reduction of Tenant's covenants
and obligations hereunder.
18.04. If at any time any windows of the Premises are temporarily darkened or obstructed by reason of any repairs, improvements, maintenance and/or cleaning in or about the Building, or if any part of the Building, other than the Premises, is temporarily or permanently closed or inoperable, the same shall be without any reduction or diminution of Tenant's obligations under this Lease.
18.05. During the period of 18 months prior to the expiration date of this Lease, Landlord and its agents may exhibit the Premises to prospective tenants.
18.06. If, during the last month of the Term, Tenant has removed all or substantially all of the Tenant's Property from the Premises, Landlord may, without notice to Tenant, immediately enter the Premises and alter, renovate and decorate the same, without reducing or diminishing Tenant's obligations under this Lease.
18.07. Landlord reserves the right, at any time, without incurring any liability to Tenant therefor, and without affecting or reducing or diminishing any of Tenant's obligations hereunder, to make such changes, alterations, additions and improvements in or to the Building and the fixtures and equipment thereof, as well as in or to the entrances, doors, halls, passages, elevators, escalators and stairways thereof, and other public parts of the Building, as Landlord shall deem necessary or desirable.
18.08. Landlord may adopt any name for the Project. Landlord reserves the right to change the name and/or address of the Project at any time.
18.09. Landlord and its agents shall have the right to permit access to the Premises at any time, whether or not Tenant shall be present, (a) by any receiver, trustee, sheriff, marshal or other public official entitled to, or purporting to be entitled to, such access (i) for the purpose of taking possession of or removing any property of Tenant or of any other occupant of the Premises, or (ii) for any other lawful purpose, or (b) by any representative of the fire, police, building, sanitation or other department or instrumentality of any town, county, city, state or federal government. Nothing contained in, nor any action taken by Landlord under this Section, shall be deemed to constitute recognition by Landlord that any person other than Tenant has any right or interest in this Lease or the Premises.
18.10. If Tenant is not present when for any reason entry into the Premises is necessary or permissible, Landlord or Landlord's agents may enter same by a master key, or may forcibly enter same, without rendering Landlord or such agents liable therefor (if during such entry Landlord or such agents accord reasonable care to the Tenant's Property), and such entry shall not be deemed an actual or constructive eviction and shall have no effect upon Tenant's obligations under this Lease.
ARTICLE 19 - Notice of Occurrences
19.01. Tenant shall give prompt notice to Landlord of (a) any occurrence in or about the Premises for which Landlord might be liable, (b) any fire or other casualty in the Premises, (c) any damage to or defect in the Premises, including the fixtures, equipment and appurtenances thereof, for the repair of which Landlord might be responsible, and (d) any damage to or defect in any part or appurtenance of the Building's sanitary, electrical, heating, ventilating, air-conditioning, elevator or other systems located in or passing through the Premises or any part thereof.
ARTICLE 20 - Non-Liability and Indemnification
20.01. Neither Landlord nor any Superior Lessor or Superior Mortgagee shall be liable to Tenant for any loss, injury or damage to Tenant or to any other person, or to its or their property, irrespective of the cause of such injury, damage or loss, unless caused by or resulting from the gross negligence or willful misconduct of Landlord or the Superior Lessor or Superior Mortgagee, in the operation or maintenance of the
Premises or the Project without contributory negligence on the part of Tenant, any subtenant or licensee of Tenant or their respective employees, agents, contractors or invitees. Neither Landlord nor any Superior Lessor or Superior Mortgagee shall be liable (a) for any damage caused by other tenants or persons in, on or about the Project, or (b) even if resulting from negligence or willful misconduct, for consequential damages of Tenant or any subtenant or licensee of Tenant.
20.02. Notwithstanding any provision to the contrary, Tenant shall look solely to the estate and property of Landlord in and to the Project in the event of any claim against Landlord or any partner, director, officer, agent or employee of Landlord arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant's use of the Premises, and the liability of Landlord arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant's use of the Premises, shall be limited to such estate and property of Landlord. No other properties or assets of Landlord or any partner, director, officer, agent or employee of Landlord shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) or for the satisfaction of any other remedy of Tenant arising out of or in connection with this Lease, the relationship of Landlord and Tenant or Tenant's use of the Premises, and if Tenant acquires a lien on or interest in any other properties or assets by judgment or otherwise, Tenant shall promptly release such lien on or interest in such other properties and assets by executing, acknowledging and delivering to Landlord an instrument to that effect prepared by Landlord's attorneys. Tenant hereby waives the right of specific performance and any other remedy allowed in equity if specific performance or such other remedy could result in any liability of Landlord for the payment of money to Tenant or any court or governmental authority (by way of fines or otherwise) for Landlord's failure or refusal to perform or observe a judicial decree or determination.
20.03. Tenant shall indemnify and hold harmless Landlord and all Superior Lessors and all Superior Mortgagees, including, without limitation, Swiss Bank and Carbide, and its and their respective partners, directors, officers, agents and employees from and against any and all claims arising from or in connection with (a) the conduct or management of the Premises or of any business therein, or any work or thing whatsoever done, or any condition created (other than by Landlord) in or about the Premises during the Term or during the period of time, if any, prior to the Commencement Date that Tenant may have been given access to the Premises; (b) any act, omission or negligence of Tenant or any of its subtenants or licensees or its or their employees or contractors; (c) any accident, injury or damage whatever (unless caused by Landlord's negligence or willful misconduct) occurring in, at or upon the Premises; (d) any breach or default by Tenant in the full and prompt payment and performance of Tenant's obligations under this Lease; and (e) the failure of Tenant or any of its subtenants or licensees or its or their employees or contractors to comply with all Legal Requirements and Insurance Requirements; together with all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon, including, without limitation, all attorneys' fees and expenses. In case any action or proceeding is brought against Landlord and/or any Superior Lessor or Superior Mortgagee and/or its or their partners, directors, officers, agents and/or employees by reason of any such claim, Tenant, upon notice from Landlord or such Superior Lessor or Superior Mortgagee, shall resist and defend such action or proceeding (by counsel reasonably satisfactory to Landlord).
ARTICLE 21 - DAMAGE OR DESTRUCTION
21.01. If the Building or the Premises shall be partially or totally damaged or destroyed by fire or other casualty (and if this Lease shall not be terminated as provided in this Article) Landlord shall repair the damage and restore and rebuild the Building and/or the Premises (except for the Tenant's Property) with reasonable dispatch after notice to it of the damage or destruction and the collection of the insurance proceeds attributable to such damage.
21.02. Subject to the provisions of Section 21.05, if all or part of the Premises is damaged or destroyed or rendered completely or partially untenantable on account of fire or other casualty, the Fixed Rent and Additional Charges under Article 4 and Article 5 shall be reduced in the proportion that the untenantable area of the Premises bears to the total area of the Premises, for the period from the date of the damage or destruction to (a) the date the damage to the Premises is substantially repaired, or (b) if the Building and not the Premises is so damaged or destroyed, the date on which the Premises is made tenantable; provided, however, should Tenant reoccupy a portion of the Premises during the period the repair work is taking place and prior to the date the Premises are substantially repaired or made tenantable the Fixed Rent and Additional Charges under Article 4 and Article 5 allocable to such reoccupied portion, based upon the proportion which the area of the reoccupied portion of the Premises bears to the total area of the Premises, shall be payable by Tenant from the date of such occupancy.
21.03. If the Premises shall be materially (i.e. 30% or more) damaged or destroyed by fire or other casualty, or if the Building shall be so damaged or destroyed by fire or other casualty (whether or not the Premises are damaged or destroyed) that its repair or restoration requires the expenditure (as estimated by a reputable contractor or architect designated by Landlord) of more than 20% of the full insurable value of the Building immediately prior to the casualty, then in either such case Landlord may terminate this Lease by giving Tenant notice to such effect within 180 days after the date of the fire or other casualty and the Fixed Rent and Additional Charges shall be prorated and adjusted as of the date of termination.
21.04. Tenant shall not be entitled to terminate this Lease and no damages, compensation or claim shall be payable by Landlord for inconvenience, loss of business or annoyance arising from any repair or restoration of any portion of the Premises or of the Building pursuant to this Article. Landlord shall use its best efforts to make such repair or restoration promptly and in such manner as not unreasonably to interfere with Tenant's use and occupancy of the Premises, but Landlord shall not be required to do such repair or restoration work except during Business Hours on Business Days.
21.05. Notwithstanding any of the foregoing provisions of this Article, if by reason of some act or omission on the part of Tenant or any of its subtenants or its or their partners, directors, officers, servants, employees, agents or contractors, Landlord or any Superior Lessor or any Superior Mortgagee shall be unable to collect all or substantially all of the insurance proceeds (including, without limitation, rent insurance proceeds) applicable to damage or destruction of the Premises or the Building by fire or other casualty, then, without prejudice to any other remedies which may be available against Tenant, there shall be no reduction of the Fixed Rent or Additional Charges.
21.06. Landlord will not carry insurance of any kind on the Tenant's Property and shall not be obligated to repair any damage to or replace the Tenant's Property.
21.07. The provisions of this Article shall be deemed an express agreement governing any case of damage or destruction of the Premises by fire or other casualty, and Section 227 of the Real Property Law of the State of New York, providing for such a contingency in the absence of an express agreement, and any other law of like import, now or hereafter in force, shall have no application in such case.
ARTICLE 22 - Eminent Domain
22.01. Except as otherwise provided in Section 22.05, if the whole of the Building or the Premises shall be taken by condemnation or in any other manner for any public or quasi-public use or purpose, this Lease shall terminate as of the date of vesting of title on such taking (herein called the "Date of the Taking"), and the Fixed Rent and Additional Charges shall be prorated and adjusted as of such date.
22.02. Except as otherwise provided in Section 22.05, if any part of the Building or the Land shall be so taken, this Lease shall be unaffected by such taking, except that (a) Landlord may, at its option, terminate this Lease by giving Tenant notice to that effect within 90 days after the Date of the Taking, and (b) if 20% or more of the Premises shall be so taken and the remaining area of the Premises shall not be reasonably sufficient for Tenant to continue feasible operation of its business, Tenant may terminate this Lease by giving Landlord notice to that effect within 90 days after the Date of the Taking. This Lease shall terminate on the date that such notice from Landlord or Tenant to the other shall be given, and the Fixed Rent and Additional Charges shall be prorated and adjusted as of such termination date. Upon such partial taking and this Lease continuing in force as to any part of the Premises, the Fixed Rent and Additional Charges shall be adjusted according to the rentable area remaining.
22.03. Except as otherwise provided in Section 22.05, Landlord shall be entitled to receive the entire award or payment in connection with any taking without deduction therefrom for any estate vested in Tenant by this Lease and Tenant shall receive no part of such award. Tenant hereby expressly assigns to Landlord all of its right, title and interest in and to every such award or payment.
22.04. Except as otherwise provided in Section 22.05, in the event of any taking of less than the whole of the Building and/or the Land which does not result in termination of this Lease, Landlord, at its expense, and whether or not any award or awards shall be sufficient for the purpose, shall proceed with reasonable diligence to repair the remaining parts of the Building and the Premises (other than those parts of the Premises which are the Tenant's Property) to substantially their former condition to the extent that the same may be feasible (subject to reasonable changes which Landlord shall deem desirable) and so as to constitute complete and tenantable the Building and the Premises.
22.05. If the temporary use or occupancy of all or any part of the Premises is taken by condemnation or in any other manner for any public or quasi-public use or purpose, this Lease and the Term shall remain unaffected by such taking and Tenant shall continue to be responsible for all of its obligations under this Lease (except to the extent prevented
from so doing by reason of such taking). In such event Tenant shall be entitled to claim, prove and receive the entire award unless the period of temporary use or occupancy extends beyond the expiration date of this Lease, in which event Landlord shall be entitled to claim, prove and receive that portion of the award attributable to the restoration of the Premises, and the balance of such award shall be apportioned between Landlord and Tenant as of the expiration date of this Lease. If such temporary use or occupancy terminates prior to the expiration date of this Lease, Tenant, at its own expense, shall restore the Premises as nearly as possible to its condition prior to the taking.
ARTICLE 23 - Surrender and Holding Over
23.01. On the last day of the Term, or upon any earlier termination of this Lease, or upon any reentry by Landlord upon the Premises, Tenant shall quit and surrender the Premises to Landlord "broom-clean" and in good order, condition and repair, except for ordinary wear and tear and such damage or destruction as Landlord is required to repair or restore under this Lease, and Tenant shall remove all of the Tenant's Property therefrom except as otherwise expressly provided in this Lease. No act or thing done by Landlord or its agents shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord.
23.02. If Tenant remains in possession of the Premises after
the termination of this Lease without the execution of a new lease, Tenant, at
the option of Landlord, shall be deemed to be occupying the Premises as a tenant
from month to month, subject to all of the other terms and conditions of this
Lease insofar as the same are applicable to a month-to-month tenancy, but at a
monthly rental equal to the greater of (a) two times the monthly Fixed Rent last
payable by Tenant hereunder, plus all Additional Charges payable hereunder, and
(b) Landlord's then asking price, on a monthly basis, for comparable space in
the Building (or, if Landlord has no asking price, the monthly rental equal to
the prevailing rate for comparable space in comparable buildings in the vicinity
of the Building). Nothing contained in this Section shall (i) imply any right of
Tenant to remain in the Premises after the termination of this Lease without the
execution of a new lease, (ii) imply any obligation of Landlord to grant a new
lease or (iii) be construed to limit any right or remedy that Landlord has
against Tenant as a holdover tenant or trespasser.
23.03. Tenant expressly waives, for itself and for any person claiming through or under Tenant, any rights which Tenant or any such person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any similar or successor law of same import then in force, in connection with any holdover proceedings which Landlord may institute to enforce the terms and conditions of this Lease.
ARTICLE 24 - Default
24.01. This Lease and the Term are subject to the limitation that whenever Tenant, or any Guarantor, makes an assignment for the benefit of creditors, or files a voluntary petition under any bankruptcy or insolvency law, or an involuntary petition alleging an act of bankruptcy or insolvency is filed against Tenant or such Guarantor under any bankruptcy or insolvency law, or whenever a petition is filed by or against Tenant or such Guarantor under the reorganization provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a petition is filed by Tenant or such Guarantor under the
arrangement provisions of the United States Bankruptcy Act or under the provisions of any law of like import, or whenever a permanent receiver of Tenant or such Guarantor, or of or for the property of Tenant or such Guarantor is appointed, then Landlord (a) if such event occurs without the acquiescence of Tenant or such Guarantor, as the case may be, at any time after the event continues for 60 days, or (b) in any other case at any time after the occurrence of any such event, may give Tenant a notice of intention to end the Term at the expiration of five days from the date of service of such notice of intention, and upon the expiration of said five-day period this Lease, whether or not the Term shall theretofore have commenced, shall terminate with the same effect as if that day were the expiration date of this Lease, but Tenant shall remain liable for damages as provided in Article 26.
24.02. This Lease is subject to the further limitations that:
(a) if Tenant defaults in the payment of any Fixed Rent or Additional Charges, and such default continues for five days, or
(b) if Tenant, whether by action or inaction, is in default of any of its obligations under this Lease (other than a default in the payment of Fixed Rent or Additional Charges) and such default continues and is not remedied within 15 days after Landlord gives to Tenant a notice specifying the same, or, in the case of a default which cannot with due diligence be cured within a period of 15 days and the continuance of which for the period required for cure will not (i) subject Landlord or any Superior Lessor or Superior Mortgagee to prosecution for a crime (as more particularly described in Section 9.02) or (ii) result in the termination of any Superior Lease or foreclosure of any Superior Mortgage, if Tenant does not, (1) within said 15-day period advise Landlord of Tenant's intention to take all steps necessary to remedy such default, (2) duly commence within said 15-day period, and thereafter diligently prosecute to completion all steps necessary to remedy the default and (3) complete such remedy within a reasonable time after the date of said notice of Landlord, or
(c) if any event occurs or any contingency arises whereby this Lease or the estate hereby granted or the unexpired balance of the Term would, by operation of law or otherwise, devolve upon or pass to any person, firm or corporation other than Tenant, except as expressly permitted by Article 8, or
(d) if Tenant vacates or abandons the Premises, or
(e) if Tenant (or any person which, directly or indirectly, controls, is controlled by, or is under common control with Tenant) defaults under any other lease with Landlord (or any person which, directly or indirectly, controls, is controlled by, or is under common control with Landlord) and such default is not remedied within the applicable grace period, if any, provided therefor under such other lease
then in any of said cases Landlord may give to Tenant a notice of intention to end the Term at the expiration of five days from the date of the service of such notice of intention, and upon the expiration of said five days this Lease, whether or not the Term theretofore had commenced, shall terminate with the same effect as if that day were the expiration date of this Lease, but Tenant shall remain liable for damages as provided in Article 26.
ARTICLE 25 - Re-entry by Landlord
25.01. If Tenant defaults in the payment of any Fixed Rent or Additional Charges, and such default continues for five days, or if this Lease terminates as provided in Article 24, Landlord or Landlord's agents and employees may immediately or at any time thereafter re-enter the Premises, or any part thereof, either by summary dispossess proceedings or by any suitable action or proceeding at law, or by force or otherwise, without being liable to indictment, prosecution or damages therefor, and may repossess the same, and may remove any person therefrom, to the end that Landlord may have, hold and enjoy the Premises. The word "re-enter," as used herein, is not restricted to its technical legal meaning. If this Lease is terminated under the provisions of Article 24, or if Landlord re-enters the Premises under the provisions of this Article 25, or in the event of the termination of this Lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Tenant shall thereupon pay to Landlord the Fixed Rent and Additional Charges payable up to the time of such termination of this Lease, or of such recovery of possession of the Premises by Landlord, as the case may be, and shall also pay to Landlord damages as provided in Article 26.
25.02. In the event of a breach or threatened breach by Tenant of any of its obligations under this Lease, Landlord shall also have the right of injunction. The special remedies to which Landlord may resort hereunder are cumulative and are not intended to be exclusive of any other remedies to which Landlord may lawfully be entitled at any time and Landlord may invoke any remedy allowed at law or in equity as if specific remedies were not provided for herein.
25.03. If this Lease terminates under the provisions of Article 24, or if Landlord re-enters the Premises under the provisions of this Article, or in the event of the termination of this Lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Landlord shall be entitled to retain all monies, if any, paid by Tenant to Landlord, whether as advance rent, security or otherwise, but such monies shall be credited by Landlord against any Fixed Rent or Additional Charges due from Tenant at the time of such termination or re-entry or, at Landlord's option, against any damages payable by Tenant under Article 26 or pursuant to law.
ARTICLE 26 - Damages
26.01. If this Lease is terminated under the provisions of Article 24, or if Landlord re-enters the Premises under the provisions of Article 25, or in the event of the termination of this Lease, or of re-entry, by or under any summary dispossess or other proceeding or action or any provision of law by reason of default hereunder on the part of Tenant, Tenant shall pay to Landlord as damages, at the election of Landlord, either:
(a) a sum which at the time of such termination of this Lease or at the time of any such re-entry by Landlord, as the case may be, represents the then value of the excess, if any, of (i) the aggregate amount of the Fixed Rent and the Additional Charges under Article 4 and Article 5 which would have been payable by Tenant (conclusively presuming the average monthly Additional Charges under Article 4 and Article 5 to be the same as were payable for the year,
or if less than 365 days have then elapsed since the Commencement Date, the partial year, immediately preceding such termination or re-entry) for the period commencing with such earlier termination of this Lease or the date of any such re-entry, as the case may be, and ending with the date contemplated as the expiration date hereof if this Lease had not so terminated or if Landlord had not so re-entered the Premises, over (ii) the aggregate rental value of the Premises for the same period, or
(b) sums equal to the Fixed Rent and the Additional Charges which would have been payable by Tenant had this Lease not so terminated, or had Landlord not so re-entered the Premises, payable upon the due dates therefor specified herein following such termination or such re-entry and until the date contemplated as the expiration date hereof if this Lease had not so terminated or if Landlord had not so re-entered the Premises, provided, however, that if Landlord shall relet the Premises during said period, landlord shall credit Tenant with the net rents received by Landlord from such reletting, such net rents to be determined by first deducting from the gross rents as and when received by Landlord from such reletting the expenses incurred or paid by Landlord in terminating this Lease or in re-entering the Premises and in securing possession thereof, as well as the expenses of reletting, including, without limitation, altering and preparing the Premises for new tenants, brokers' commissions, legal fees, and all other expenses properly chargeable against the Premises and the rental therefrom, it being understood that any such reletting may be for a period shorter or longer than what would have been the remaining Term, but in no event shall Tenant be entitled to receive any excess of such net rents over the sums payable by Tenant to Landlord hereunder, nor shall Tenant be entitled in any suit for the collection of damages pursuant to this subdivision to a credit in respect of any net rents from a reletting, except to the extent that such net rents are actually received by Landlord. If the Premises or any part thereof should be relet in combination with other space, then proper apportionment on a square foot basis shall be made of the rent received from such reletting and of the expenses of reletting.
If the Premises or any part thereof is or are relet by Landlord for what would have been the unexpired portion of the Term, or any part thereof, before presentation of proof of such damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall, prima facie, be the fair and reasonable rental value for the Premises, or part thereof, so relet during the term of the reletting. Landlord shall not be liable in any way whatsoever for its failure or refusal to relet the Premises or any part thereof, or if the Premises or any part thereof are relet, for its failure to collect the rent under such reletting, and no such refusal or failure to relet or failure to collect rent shall release or affect Tenant's liability for damages or otherwise under this Lease.
26.02. Suit or suits for the recovery of such damages, or any installments thereof, may be brought by Landlord from time to time at its election, and nothing contained herein shall be deemed to require Landlord to postpone suit until the date when the Term would have expired if it had not been so terminated under the provisions of Article 24, or under any provisions of law, or had Landlord not re-entered the Premises. Nothing herein contained shall be construed to limit or preclude recovery by Landlord against Tenant of any sums or damages to which, in addition to the damages particularly provided above, Landlord may lawfully be entitled by reason of any default hereunder on the part of Tenant. Nothing herein
contained shall be construed to limit or prejudice the right of Landlord to prove for and obtain as damages by reason of the termination of this Lease or re-entry on the Premises for the default of Tenant under this Lease an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved whether or not such amount be greater than, equal to, or less than any of the sums referred to in Section 26.01.
26.03. In addition, if this Lease is terminated under the provisions of Article 24, or if Landlord re-enters the Premises under the provisions of Article 25, Tenant agrees that:
(a) the Premises then shall be in the same condition as that in which Tenant has agreed to surrender the same to Landlord at the expiration of the Term;
(b) Tenant shall have performed prior to any such termination any covenant of Tenant contained in this Lease for the making of any Alteration or for restoring or rebuilding the Premises or the Building, or any part thereof; and
(c) for the breach of any covenant of Tenant set forth above in this Section 26.03, Landlord shall be entitled immediately, without notice or other action by Landlord, to recover, and Tenant shall pay, as and for liquidated damages therefor, the reasonable cost of performing such covenant (as estimated by an independent contractor selected by Landlord).
ARTICLE 27 - Affirmative Waivers
27.01. Tenant, on behalf of itself and any and all persons claiming through or under Tenant, does hereby waive and surrender all right and privilege which it, they or any of them might have under or by reason of any present or future law, to redeem the Premises or to have a continuance of this Lease after being dispossessed or ejected therefrom by process of law or under the terms of this Lease or after the termination of this Lease as provided in this Lease.
27.02. If Tenant is in arrears in payment of Fixed Rent or Additional Charges, Tenant waives Tenant's right, if any, to designate the items to which any payments made by Tenant are to be credited, and Landlord may apply any payments made by Tenant to such items as Landlord sees fit, irrespective of and notwithstanding any designation or request by Tenant as to the items to which any such payments shall be credited.
27.03. Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises, including, without limitation, any claim of injury or damage, and any emergency and other statutory remedy with respect thereto.
27.04. Tenant shall not interpose any counterclaim of any kind in any summary proceeding commenced by Landlord to recover possession of the Premises and shall not seek to consolidate such proceeding with any action which may have been or will be brought by Tenant or any other person.
ARTICLE 28 - No Waivers
28.01. The failure of either party to insist in any one or more instances upon the strict performance of any one or more of the obligations of this Lease, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease or of the right to exercise such election, but the same shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. The receipt by Landlord of Fixed Rent or Additional Charges with knowledge of breach by Tenant of any obligation of this Lease shall not be deemed a waiver of such breach.
ARTICLE 29 - Curing Tenant's Defaults
29.01. If Tenant defaults in the performance of any of Tenant's obligations under this Lease, Landlord, without thereby waiving such default, may (but shall not be obligated to) perform the same for the account and at the expense of Tenant, without notice in a case of emergency, and in any other case only if such default continues after the expiration of 15 days from the date Landlord gives Tenant notice of the default.
29.02. Bills for any expenses incurred by Landlord in connection with any such performance by it for the account of Tenant, and bills for all costs, expenses and disbursements, including reasonable counsel fees, involved in collecting or endeavoring to collect the Fixed Rent or Additional Charges or enforcing or endeavoring to enforce any rights against Tenant or Tenant's obligations hereunder, including any cost, expense and disbursement involved in instituting and prosecuting summary proceedings or in recovering possession of the Premises after default by Tenant or upon the expiration or sooner termination of this Lease, and interest on all sums advanced by Landlord under this Section and/or Section 29.01 at the Lease Interest Rate may be sent by Landlord to Tenant monthly, and such amounts shall be due and payable in accordance with the terms of such bills.
ARTICLE 30 - Broker
30.01. Tenant represents that no broker except The Edward S. Gordon Company (herein called the "Broker") was instrumental in bringing about or consummating this Lease and that Tenant had no conversations or negotiations with any broker except the Broker concerning the leasing of the Premises. Tenant shall indemnify and hold harmless Landlord against and from any claims for any brokerage commissions and all costs, expenses and liabilities in connection therewith, including, without limitation, attorneys' fees and expenses, arising out of any conversations or negotiations had by Tenant with any broker other than the Broker. Landlord shall pay any brokerage commissions due the Broker as per a separate agreement between Landlord and the Broker.
ARTICLE 31 - Notices
31.01. Any notice, consent, approval or other communication
required or permitted to be given, rendered or made by either party to the other
shall be in writing (whether or not so stated elsewhere in this Lease) and shall
be deemed to have been properly given, rendered or made only if either (a) sent
by registered or certified mail, return receipt requested, posted in a United
States post office station or letter box in the continental United States, or
(b) hand delivered, in either event
addressed to the other party at the address hereinabove set forth (except that after the Commencement Date, Tenant's address, unless Tenant shall give notice to the contrary, shall be the Premises), and shall be deemed to have been given, rendered or made either (i) on the first day after the day so mailed, unless mailed outside of the State of New York, in which case it shall be deemed to have been given, rendered or made on the third business day after the day so mailed, or (ii) on the day received if so hand delivered. Either party may, by notice as aforesaid, designate a different address or addresses for notices, statements, demands, consents, approvals or other communications intended for it. A duplicate original of any notice given to Landlord shall be simultaneously and similarly sent by Tenant to the attention of Executive Vice President, Keren Developments, Inc., 777 Old Saw Mill River Road, Tarrytown, New York 10591- 6705.
ARTICLE 32 - Estoppel Certificates
32.01. Each party shall, at any time and from time to time, if requested by the other party with not less than 10 days' prior notice, execute and deliver to the other a statement 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), certifying the dates to which the Fixed Rent and Additional Charges have been paid, stating whether or not, to the best knowledge of the signer, the other party is in default in performance of any of its obligations under this Lease, and, if so, specifying each such default of which the signer shall have knowledge, and stating whether or not, to the best knowledge of the signer, any event has occurred which with the giving of notice or passage of time, or both, would constitute such a default, and, if so, specifying each such event, it being intended that any such statement delivered pursuant hereto shall be deemed a representation and warranty to be relied upon by the party requesting the certificate and by others with whom such party may be dealing, regardless of independent investigation. Tenant also shall include in any such statement such other information concerning this Lease as Landlord may reasonably request.
ARTICLE 33 - Execution and Delivery of Lease
33.01. Submission by Landlord of the within Lease for review and execution by Tenant shall confer no rights nor impose any obligations on either party unless and until both Landlord and Tenant shall have executed this Lease and duplicate originals thereof shall have been delivered to the respective parties.
ARTICLE 34 - Recording of Lease
34.01. At the request of Landlord, Tenant shall promptly
execute, acknowledge and deliver to Landlord a memorandum in respect of this
Lease and/or any amendment or modification of this Lease sufficient for
recording, setting forth only the matters required to be set forth pursuant to
Section 291-c of the New York Real Property Law. Such memorandum shall not in
any circumstance be deemed to change or otherwise affect any of the terms of
this Lease. Tenant shall not record this Lease or said memorandum or any other
document related hereto.
ARTICLE 35 - Parking
35.01. Landlord shall, without charge to Tenant (except as consequence of the cost thereof being included in Operating Expenses), provide and maintain, for the non-exclusive use of Tenant's employees and
invitees, parking areas sufficient to accommodate at least 54 standard size automobiles in the area(s) shown as "parking" on the plan attached hereto as Exhibit D. In the event Landlord utilizes such parking areas for Landlord's development purposes, Landlord will provide Tenant with substantially equivalent parking facilities.
ARTICLE 36 - Environmental Compliance
36.01. Tenant assumes sole and full responsibility for compliance with all applicable Federal, state and local environmental statutes, regulations and ordinances (including licensing and permitting) (herein called the "Environmental Laws") in respect of the Premises and agrees to indemnify, defend, save and hold harmless Landlord and all Superior Lessors and Superior Mortgagees, and its and their respective partners, directors, officers, agents and employees from and against any and all claims, demands, losses and liability (including reasonable attorneys' fees) resulting from any alleged or actual violation thereof by Tenant or any of its subtenants or licensees or its or their employees or contractors. Tenant assumes sole and full responsibility for all present and future acts or omissions of Tenant or any of its subtenants or licensees or its or their employees or contractors while at, near or on the Project and covenants and agrees to indemnify, defend, save and hold harmless Landlord and all Superior Lessors and Superior Mortgagees, and its and their respective partners, directors, officers, agents and employees, from and against any and all claims, demands, losses, and liability (including reasonable attorneys' fees) resulting from any alleged or actual violation thereof, including, but not limited to, personal injury (and death resulting therefrom), property damage, damage to natural resources, and strict liability under Environmental Laws. The provisions of this Section 36.01 shall survive the expiration or termination of this Lease.
ARTICLE 37 - Signs
37.01. Tenant may not place signs anywhere in the Project, including on the exterior of the Building, without the prior written consent of Landlord.
ARTICLE 38 - Approval Contingency
38.01. This Lease shall not be effective until and unless approved in writing by Swiss Bank and Carbide. If Swiss Bank or Carbide disapproves this Lease, then this Lease shall be deemed null and void and of no effect. Any such approval in accordance with the provisions of this Article 38 shall be deemed retroactive to the Commencement Date. Notwithstanding any provision to the contrary, if Tenant occupies the Premises or causes any work to be performed thereon prior to receipt of Swiss Bank's or Carbide's approval or disapproval, then as between Tenant and Landlord the provisions of this Lease shall be applicable and enforceable. If either Swiss Bank or Carbide does not give its approval or disapproval within 60 days after the date hereof, either party may give notice of cancellation of this Lease to the other after said 60-day period but prior to the giving of said approval, and if either party gives such cancellation notice timely, this Lease shall be deemed null and void and of no effect.
ARTICLE 39 - Relocation of Premises
39.01. Landlord may, at its option, before or after the Commencement Date, elect by notice to Tenant to substitute for the Premises
other equivalent space in the Project (herein called the "Substitute Premises") designated by Landlord, provided that the Substitute Premises contains at least the same usable square foot area as the Premises. Landlord's notice shall be accompanied by a plan of the Substitute Premises, and such notice or the plan shall set forth the usable square foot area of the Substitute Premises. Tenant shall vacate and surrender the Premises and shall occupy the Substitute Premises promptly (and, in any event, not later than 15 days) after Landlord has substantially completed the work to be performed by Landlord in the Substitute Premises pursuant to Section 39.02. Tenant shall pay the same Fixed Rent and Additional Charges under Article 4 and Article 5 with respect to the Substitute Premises as were payable with respect to the Premises, without regard to the usable square foot area of the Substitute Premises.
39.02. Tenant shall not be entitled to any compensation for
any inconvenience or interference with Tenant's business, nor to any abatement
or reduction of Fixed Rent or Additional Charges, but Landlord shall, at
Landlord's expense, do the following: (a) furnish and install in the Substitute
Premises fixtures, equipment, improvements and appurtenances at least equal in
kind and quality to those contained in the Premises at the time such notice of
substitution is given by Landlord, (b) provide to Tenant personnel to perform
under Tenant's direction the moving of Tenant's Property from the Premises to
the Substitute Premises, (c) promptly reimburse Tenant for Tenant's actual and
reasonable out-of-pocket costs incurred by Tenant in connection with the
relocation of any telephone or other communications equipment from the Premises
to the Substitute Premises, and (d) promptly reimburse Tenant for any other
actual and reasonable out-of-pocket costs incurred by Tenant in connection with
the Tenant's move from the Premises to the Substitute Premises provided such
costs are approved by Landlord in advance, which approval shall not be
unreasonably withheld or delayed. Tenant shall cooperate with Landlord so as to
facilitate the prompt completion by Landlord of its obligations under this
Section and the prompt surrender by Tenant of the Premises. Without limiting the
generality of the preceding sentence, Tenant shall provide to Landlord promptly
any approvals or instructions, and any plans and specifications or any other
information reasonably requested by Landlord.
39.03. From and after the date that Tenant actually vacates and surrenders the Premises to Landlord, this Lease (a) shall no longer apply to the Premises, except in respect of obligations which accrued on or prior to such surrender date, and (b) shall apply to the Substitute Premises as if the Substitute Premises had been the space originally demised under this Lease.
ARTICLE 40 - Partnership or Multi-Person Tenant
40.01. If the original Tenant herein named is a partnership (or is comprised of two or more persons, individually or as co-partners of a partnership) or if Tenant's interest in this Lease is assigned to a partnership (or to two or more persons, individually or as co-partners of a partnership), the following provisions shall apply: (a) the liability of each of the persons at any time comprising Tenant shall be joint and several, (b) each of the persons at any time comprising Tenant shall be bound by (i) any written instrument executed by Tenant or any successor Tenant changing, modifying, extending or discharging this Lease, in whole or in part, or surrendering all or any part of the Premises to Landlord, (ii) any Notices given by Tenant or by any of the persons comprising Tenant, and (iii) any statement executed by Tenant or any of the persons comprising Tenant, pursuant to Section 32.01, (c) any notices given to
Tenant or to any of such persons shall be binding on Tenant and all such
persons, (d) if Tenant admits new partners, all of such new partners shall, by
their admission to Tenant, be deemed to have assumed joint and several liability
for the performance of all of Tenant's obligations under this Lease, (e) Tenant
shall give prompt notice to Landlord of the admission of any such new partners,
and on demand of Landlord shall cause each such new partner to execute and
deliver to Landlord an agreement in form satisfactory to Landlord wherein each
such new partner assumes joint and several liability for the performance of all
of Tenant's obligations under this Lease (but neither Landlord's failure to
request any such agreement nor the failure of any such new partner to execute or
deliver any such agreement to Landlord shall vitiate the provisions of clause
(d) of this Section), and (f) the death, adjudication of incompetency or
withdrawal of an individual comprising Tenant or of an individual partner shall
not relieve him or his personal representatives of any liability for the
performance of Tenant's obligations under this Lease.
ARTICLE 41 - Miscellaneous
41.01. Tenant expressly acknowledges and agrees that Landlord has not made and is not making, and Tenant, in executing and delivering this Lease, is not relying upon, any warranties, representations, promises or statements, except to the extent that the same are expressly set forth in this Lease or in any other written agreement which may be made between the parties concurrently with the execution and delivery of this Lease and which expressly refer to this Lease. All understandings and agreements heretofore had between the parties are merged in this Lease and any other written agreements made concurrently herewith, which alone fully and completely express the agreement of the parties and which are entered into after full investigation, neither party relying upon any statement or representation not embodied in this Lease or any other written agreements made concurrently herewith.
41.02. No agreement shall be effective to change, modify, waive, release, discharge, terminate or effect an abandonment of this Lease, in whole or in part, unless such agreement is in writing, refers expressly to this Lease and is signed by the party against whom enforcement of the change, modification, waiver, release, discharge, termination or effectuation of the abandonment is sought. If Tenant shall at any time request Landlord to relet the Premises for Tenant's account, Landlord or its agent is authorized to receive keys for such purpose without releasing Tenant from any of its obligations under this Lease, and Tenant hereby releases Landlord of any liability for loss or damage to any of the Tenant's Property in connection with such reletting.
41.03. Except as otherwise expressly provided in this Lease, the obligations of this Lease shall bind and benefit the successors and assigns of the parties hereto with the same effect as if mentioned in each instance where a party is named or referred to; provided, however, that (a) no violation of the provisions of Article 8 shall operate to vest any rights in any successor or assignee of Tenant and (b) the provisions of this Article shall not be construed as modifying the conditions of limitation contained in Article 24. No provision in this Lease shall be construed for the benefit of any third party except as expressly provided herein.
41.04. The obligations of Tenant hereunder shall not be affected, impaired or excused, nor shall Landlord have any liability to Tenant, because (a) Landlord is unable to fulfill, or is delayed in
fulfilling, any of its obligations under this Lease by reason of strike, other labor trouble, governmental preemption of priorities or other controls in connection with a national or other public emergency, or shortage of fuel, supplies or labor, or any other cause, whether similar or dissimilar, beyond Landlord's reasonable control; or (b) of any failure or defect in the supply, quantity or character of electricity, steam, oil, gas or water furnished to the Premises, by reason of any requirement, act or omission of the public utility or other entity serving the Building with electric energy, steam, oil, gas or water, or for any other reason whether similar or dissimilar, beyond Landlord's reasonable control.
41.05. All references in this Lease to the consent or approval of Landlord shall be deemed to mean only the written consent or approval of Landlord and no consent or approval of Landlord shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord. If Tenant requests Landlord's consent and Landlord fails or refuses to give such consent, Tenant shall not be entitled to any damages for any withholding by Landlord of its consent, it being intended that Tenant's sole remedy shall be an action for specific performance or injunction, and that such remedy shall be available only in those cases where this Lease provides that Landlord may not unreasonably withhold its consent or where as a matter of law Landlord may not unreasonably withhold its consent.
41.06. If an excavation is made upon land adjacent to or under the Building, or is authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter the Premises for the purpose of performing such work as said person shall deem necessary or desirable to preserve and protect the Building from injury or damage and to support the same by proper foundations, without any claim for damages or liability against Landlord and without reducing or otherwise affecting Tenant's obligations under this Lease.
41.07. Tenant agrees that the exercise of its rights pursuant to the provisions of Article 12 or of any other provisions of this Lease or the Exhibits hereto shall not be done in a manner which would violate Landlord's union contracts affecting the Project, nor create any work stoppage, picketing, labor disruption or dispute or any interference with the business of Landlord or any tenant or occupant of the Project.
41.08. Irrespective of the place of execution or performance, this Lease shall be governed by and construed in accordance with the laws of the State of New York. If any provision of this Lease or the application thereof to any person or circumstances shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Lease and the application of that provision to other persons or circumstances shall not be affected but rather shall be enforced to the extent permitted by law. The table of contents, captions, headings and titles in this Lease are solely for convenience of reference and shall not affect its interpretation. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. Each covenant, agreement, obligation or other provision of this Lease on Tenant's part to be performed, shall be deemed and construed as a separate and independent covenant of Tenant, not dependent on any other provision of this Lease. All terms and words used
in this Lease, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the day and year first above written.
LANDLORD:
KEREN LIMITED PARTNERSHIP
By: Keren Management Limited
Partnership, General Partner
By: Keren Developments Inc.
By: /s/ JAMES F. KAY
-----------------------------
Name: James F. Kay
Title: President
|
TENANT:
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
--------------------------------
Name: Jeremy Levin
Title: President
|
Tenant's Federal Identification Number
State of New York )
: ss.:
County of Westchester )
|
On the 20th day of June, 1995, before me personally came James F. Kay to me known, who, being by me duly sworn, did depose and say that he resides at Toronto, Canada; that he is the President of Keren Developments Inc. which corporation is the general partner of Keren Management Limited Partnership, which limited partnership is the general partner of KEREN LIMITED PARTNERSHIP, the partnership described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation (Keren Developments Inc.) as general partner of Keren Management Limited Partnership, as general partner of Keren Limited Partnership.
/s/ MARY C. LANNIE -------------------------- Notary Public |
STATE OF NEW YORK )
: ss.:
COUNTY OF )
|
On the 15th day of June, 1995, before me personally came Jeremy Levin, to me known, who, being by me duly sworn, did depose and say that he resides at_______________________________, ________________________________________; that he is the President of Cadus Pharmaceutical Corporation, the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation.
/s/ JAMES S. RIELLY -------------------------- Notary Public |
PLAN OF PREMISES
EXHIBIT A
SCHEDULE OF FIXED RENT
FIXED RENT
PER RENTABLE FIXED RENT PER
SQUARE FOOT RENTABLE SQUARE TOTAL FIXED
OF MAIN SPACE FOOT OF STORAGE RENT PER
LEASE YEAR PER ANNUM SPACE PER ANNUM ANNUM
- ---------- ------------- --------------- -----------
1998 $20 11 381,915
1999 20 11 381,915
2000 20 11 381,915
2001 20 11 381,915
2002 20 11 381,915
2003 21 12 401,580
2004 21 12 401,580
2005 21 12 401,580
2006 21 12 401,580
2007 21 12 401,580
|
EXHIBIT B
RULES AND REGULATIONS
1. The rights of each tenant in the entrances, corridors and elevators servicing the Building are limited to ingress to and egress from such tenant's premises for the tenant and its employees, licensees and invitees, and no tenant shall use, or permit the use of, the entrances, corridors or elevators for any other purpose. No tenant shall invite to the tenant's premises, or permit the visit of, persons in such numbers or under such conditions as to interfere with the use and enjoyment of any of the plazas, entrances, corridor, elevators and other facilities of the Building by any other tenants. Fire exits and stairways are for emergency use only, and they shall not be used for any other purpose by the tenants, their employees, licensees or invitees. No tenant shall encumber or obstruct, or permit the encumbrance or obstruction of any of the sidewalks, plazas, entrances, corridors, elevators, fire exits or stairways of the Building. Landlord reserves the right to control and operate the public portions of the Building and the public facilities, as well as facilities furnished for the common use of the tenants, in such manner as it in its reasonable judgment deems best for the benefit of the tenants generally.
2. Landlord may refuse admission to the Building outside of Business Hours on Business Days (as such terms are defined in the lease to which this Exhibit is attached) to any person not known to the watchman in charge or not having a pass issued by Landlord or the tenant whose premises are to be entered or not otherwise properly identified, and Landlord may require all persons admitted to or leaving the Building outside of Business Hours on Business Days to provide appropriate identification. Landlord will supply identification cards and be reimbursed by Tenant at Landlord's cost plus 5%. Tenant shall be responsible for all persons for whom it issues any such pass and shall be liable to Landlord for all acts or omissions of such persons. Tenant shall promptly notify Landlord in writing of any lost identification cards and will reimburse Landlord at cost plus 5% for replacement of identification cards. Any person whose presence in the Building at any time shall, in the judgment of Landlord, be prejudicial to the safety, character or reputation of the Building or of its tenants may be denied access to the Building or may be ejected therefrom. During any invasion, riot, public excitement or other commotion, Landlord may prevent all access to the Building by closing the doors or otherwise for the safety of the tenants and protection of property in the Building.
3. No tenant shall obtain or accept for use in its premises towel, barbering, bootblacking, floor polishing, cleaning or other similar services from any persons reasonably prohibited by Landlord in writing from furnishing such services. Such services shall be furnished only at such hours, and under such reasonable regulations, as may be fixed by Landlord from time to time.
4. The cost of repairing any damage to the public portions of the Building or the public facilities or to any facilities used in common with other tenants, caused by a tenant or its employees, agents, contractors, licensees or invitees, shall be paid by such tenant.
5. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, blinds, shades or screens which are different from the standards adopted by Landlord for the Building shall be attached to or hung in, or used in connection with, any exterior window or door of the premises of any tenant, without the prior written
consent of Landlord. Such curtains, blinds, shades or screens must be of a quality, type, design and color, and attached in the manner approved by Landlord.
6. No lettering, sign, advertisement, notice or object shall be displayed in or on the exterior windows or doors, or on the outside of any tenant's premises, or at any point inside any tenant's premises where the same might be visible outside of such premises, without the prior written consent of Landlord. In the event of the violation of the foregoing by any tenant, Landlord may remove the same without any liability, and may charge the expense incurred in such removal to the tenant violating this rule. Interior signs, elevator cab designations and lettering on doors and the Building directory shall, if and when approved by Landlord, be inscribed, painted or affixed for each tenant by Landlord at the expense of such tenant, and shall be of a size, color and style acceptable to Landlord.
7. The sashes, sash doors, skylights, windows and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the window sills or on the peripheral air conditioning enclosures, if any.
8. No showcases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the halls, corridors or vestibules.
9. No noise, including, but not limited to, music or the playing of musical instruments, recordings, radio or television, which, in the judgment of Landlord, might disturb other tenants in the Building, shall be made or permitted by any tenant. Nothing shall be done or permitted in the premises of any tenant which would impair or interfere with the use or enjoyment by any other tenant of any other space in the Building.
10. Additional locks or bolts of any kind which shall not be operable by the Grand Master Key for the Building shall not be placed upon any of the doors or windows by any tenant, nor shall any changes be made in locks or the mechanism thereof which shall make such locks inoperable by said Grand Master Key. Additional keys for a tenant's premises and toilet rooms shall be procured only from Landlord who may make a reasonable charge therefor. Each tenant shall, upon the termination of its tenancy, turn over to Landlord all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys furnished by Landlord, such tenant shall pay to Landlord the cost thereof.
11. All removals, or the carrying in or out of any safes, freight, furniture, packages, boxes, crates or any other object or matter of any description must take place during such hours and in such elevators, and in such manner as Landlord or its agent may determine from time to time. The persons employed to move safes and other heavy objects shall be reasonably acceptable to Landlord and, if so required by law, shall hold a Master Rigger's license. Arrangements will be made by Landlord with any tenant for moving large quantities of furniture and equipment into or out of the Building. All labor and engineering costs incurred by Landlord in connection with any moving specified in this rule, including a reasonable charge for overhead and profit, shall be paid by tenant to Landlord, on demand.
12. Landlord reserves the right to inspect all objects and matter to be brought into the Building and to exclude from the Building all objects and matter which violate any of these Rules and Regulations or the lease of which this Exhibit is a part. Landlord may require any person leaving the Building with any package or other object or matter to submit a pass, listing such package or object or matter, from the tenant from whose premises the package or object or matter is being removed, but the establishment and enlargement of such requirement shall not impose any responsibility on Landlord for the protection of any tenant against the removal of property from the premises of such tenant. Landlord shall in no way be liable to any tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from the premises or the Building under the provisions of this Rule or of Rule 2 hereof.
13. No tenant shall occupy or permit any portion of its premises to be occupied as an office for a public stenographer or public typist, or for the storage, manufacture, or sale of liquor, narcotics, dope, tobacco in any form, or as a barber, beauty or manicure shop, or as a school. No tenant shall use or permit its premises or any part thereof to be used for manufacturing or the sale at retail or auction of merchandise, goods or property of any kind.
14. Landlord shall have the right to prohibit any advertising or identifying sign by any tenant which, in Landlord's reasonable judgment, tends to impair the reputation of the Building or its desirability as a building for others, and upon written notice from Landlord, such tenant shall refrain from and discontinue such advertising or identifying sign.
15. Landlord shall have the right to prescribe the weight and position of safes and other objects of excessive weight, and no safe or other object whose weight exceeds the lawful load for the area upon which it would stand shall be brought into or kept upon any tenant's premises. If, in the judgment of Landlord, it is necessary to distribute the concentrated weight of any heavy object, the work involved in such distribution shall be done at the expense of the tenant and in such manner as Landlord shall determine.
16. No machinery or mechanical equipment other than ordinary portable business machines may be installed or operated in any tenant's premises without Landlord's prior written consent which consent shall not be unreasonably withheld or delayed, and in no case (even where the same are of a type so excepted or as so consented to by Landlord) shall any machines or mechanical equipment be so placed or operated as to disturb other tenants; but machines and mechanical equipment which may be permitted to be installed and used in a tenant's premises shall be so equipped, installed and maintained by such tenant as to prevent any disturbing noise, vibration or electrical or other interference from being transmitted from such premises to any other area of the Building.
17. Landlord, its contractors, and their respective employees, shall have the right to use, without charge therefor, all light, power and water in the premises of any tenant while cleaning or making repairs or alterations in the premises of such tenant.
18. No premises of any tenant shall be used for lodging or sleeping or for any immoral or illegal purpose.
19. The requirements of tenants will be attended to only upon application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under special instructions from Landlord.
20. Canvassing, soliciting and peddling in the Building are prohibited and each tenant shall cooperate to prevent the same.
21. No tenant shall cause or permit any unusual or objectionable odors to emanate from its premises which would annoy other tenants or create a public or private nuisance. No cooking shall be done in the premises of any tenant except as is expressly permitted in such tenant's lease.
22. Nothing shall be done or permitted in any tenant's premises, and nothing shall be brought into or kept in any tenant's premises, which would impair or interfere with any of the Building's services or the proper and economic heating, ventilating, air conditioning, cleaning or other servicing of the Building or the premises, or the use or enjoyment by any other tenant of any other premises, nor shall there be installed by any tenant any ventilating, air-conditioning, electrical or other equipment of any kind which, in the reasonable judgment of Landlord, might cause any such impairment or interference.
23. No acids, vapors or other materials shall be discharged or permitted to be discharged into the waste lines, vents or flues of the Building which may damage them. The water and wash closets and other plumbing fixtures in or serving any tenant's premises shall not be used for any purpose other than the purposes for which they were designed or constructed, and no sweepings, rubbish, rags, acids or other foreign substances shall be deposited therein. All damages resulting from any misuse of the fixtures shall be borne by the tenant who, or whose servants, employees, agents, visitors or licensees shall have, caused the same. Any cuspidors or containers or receptacles used as such in the premises of any tenant or for garbage or similar refuse, shall be emptied, cared for and cleaned by and at the expense of such tenant.
24. All entrance doors in each tenant's premises shall be left locked and all windows shall be left closed by the tenant when the tenant's premises are not in use. Entrance doors shall not be left open at any time. Each tenant, before closing and leaving its premises at any time, shall turn out all lights.
25. Hand trucks not equipped with rubber tires and side guards shall not be used within the Building.
26. All windows in each tenant's premises shall be kept closed, and all blinds therein above the ground floor shall be lowered as reasonably required because of the position of the sun, during the operation of the Building air-conditioning system to cool or ventilate the tenant's premises. If Landlord shall elect to install any energy saving film on the windows of any premises or to install energy saving windows in place of the present windows, each tenant shall cooperate with the reasonable requirements of Landlord in connection with such installation and thereafter the maintenance and replacement of the film and/or windows and permit Landlord to have access to the tenant's premises at reasonable times during Business Hours to perform such work.
27. Landlord reserves the right to rescind, alter or waive any rule or regulation at any time prescribed for the Building when, in its reasonable judgment, it deems it necessary, desirable or proper for
its best interest and for the best interests of the tenants generally, and no alteration or waiver of any rule or regulation in favor of one tenant shall operate as an alteration or waiver in favor of any other tenant. Landlord shall not be responsible to any tenant for the nonobservance or violation by any other tenant of any of the rules and regulations at any time prescribed for the Building.
PARKING AREA
EXHIBIT D
DESCRIPTION OF ASBESTOS
EXHIBIT 1
DESCRIPTION OF KEREN'S EQUIPMENT
EXHIBIT 2
CLEANING SCHEDULE
EXHIBIT 3
DESCRIPTION OF FIRST OFFER SPACE
EXHIBIT 4
RIDER TO LEASE DATED AS OF JUNE 20, 1995
BETWEEN
KEREN LIMITED PARTNERSHIP, AS LANDLORD
AND
CADUS PHARMACEUTICAL CORPORATION, AS TENANT
R1. If any of the provisions of this Rider shall conflict with any of the provisions of this Lease, such conflict shall be resolved in every instance in favor of this Rider.
R2. The words "or within five Business Days after" are hereby added after the word "before" in the second line of Section 1.08 of this Lease, and the number "4%" in the eighth line of such Section is hereby deleted and the number "2%" is hereby added in its place.
R3. The following is hereby added to the end of Article 2 of this Lease:
"2.03 Landlord represents that as of the date hereof:
(a) To Landlord's knowledge, the Premises and the common areas of the Project are in material compliance with all Legal Requirements and Environmental Laws (as defined in Section 36.01); provided, however, Landlord makes no representation as to the existence or non-existence of any condition at the Premises (or any non-compliance attributable thereto) caused or created by Carbide (as hereinafter defined) or anyone holding an interest in the Premises by, through or under Carbide, or any of their respective agents, employees, contractors or invitees; and
(b) Landlord has not received any written notice from any, federal, state or local governmental authority, which sets forth any violation of any
Legal Requirements or Environmental Laws which remain uncured with respect to the Premises and the common areas of the Project.
2.04 Tenant acknowledges the existence of asbestos in the Premises, but Landlord represents that, to Landlord's knowledge, as of the date hereof, the location of such asbestos in the Premises is limited to the places identified on Exhibit 1 attached hereto.
2.05 Landlord covenants that, on the Commencement Date, the common areas of the Project shall be in compliance with all Legal Requirements and Environmental Laws (except to the extent that any non-compliance with such laws does not materially adversely affect Tenant)."
R4. The following is hereby added to the second line of Section 3.01 of this Lease after the word "tear":
"and any damage caused by Tenant or anyone claiming by, through or under Tenant, or any of their respective agents, invitees, contractors or employees, during the term of the Sublease (as hereinafter defined) and any Alterations (as hereinafter defined) made by Tenant during the term of the Sublease (as hereinafter defined) in accordance therewith,"
R5. The first three sentences of Section 5.01 of this Lease are hereby deleted and the following is hereby added in their place:
"The term "Operating Expenses" shall mean all expenses paid or incurred by Landlord or on Landlord's behalf in respect of the repair, maintenance and operation of the Project, including, without limitation, all expenses paid or incurred as a result of Landlord complying with its obligations under this Lease. Operating Expenses shall include, without limitation, (i) salaries, wages, medical, surgical, union and general welfare benefits (including, without limitation, group life insurance and pension and
welfare payments and contributions and all other fringe
benefits paid to, for or with respect to all persons (whether
employees of Landlord or its managing agent) engaged in the
repair, operation and maintenance of the Project; (ii) payroll
taxes, workers' compensation, uniforms, dry cleaning, and
related expenses for such persons; (iii) the cost of all
charges for gas, steam, electricity, heat, ventilation,
air-conditioning, water and other utilities furnished to the
buildings within the Project (including, without limitation,
the common areas thereof) together with any taxes on such
utilities (excluding however, the cost of electricity, heat,
ventilating and air-conditioning described in clauses (9) and
(10) of this definition); (iv) the cost of painting any
portion of the Project other than rentable areas; (v) the cost
of building and cleaning supplies and equipment, cost of
replacements for tools and equipment used in the operation,
maintenance, and repair of the Project and charges for
telephone service for the Project; (vi) financial expenses
incurred in connection with the operation of the Project, such
as insurance premiums (including, without limitation,
liability insurance, fire and casualty insurance, rent
insurance and any other insurance), attorneys' fees and
disbursements (exclusive of any such fees and disbursements
incurred in applying for any reduction of Taxes or in
connection with the leasing of space in the Project or the
enforcement of leases), auditing and other professional fees
and expenses, association dues and any other ordinary and
customary financial expenses incurred in connection with the
operation of the Project; (vii) the cost or rentals of all
supplies (including, without limitation, cleaning supplies),
tools, materials and equipment, and sales and other taxes
thereon for the Project; (viii) the cost of hand tools and
other movable equipment used in the repair, maintenance or
operation of the Project; (ix) the cost of all charges for
window and other cleaning and janitorial and security services
for the Project; (x) charges of independent contractors
providing goods or services to the Project; (xi) the cost of
repairs and replacements to the Project made by
Landlord; (xii) the cost of alterations and improvements to
the Project made by reason of Legal Requirements or Insurance
Requirements in accordance with clause (z) below; (xiii)
payments under service contracts for the Project; (xiv)
management fees at the then prevailing rates for management
fees for similar properties in Westchester County if an
unaffiliated managing agent is hired to manage the Project or,
if no unaffiliated managing agent is so hired, a sum in lieu
thereof which is the greater of the then prevailing rates for
management fees of similar properties in Westchester County or
3-1/2% of the rents and additional charges collected under all
leases at the Project; and (xv) all other charges properly
allocable to the repair, operation and maintenance of the
Project in accordance with generally accepted accounting
principles; excluding, however, (1) depreciation, (2) interest
on and amortization of debts, (3) ground rent, (4) leasehold
improvements made for existing or future tenants of the
Project, (5) brokerage commissions, (6) refinancing costs, (7)
costs and expenses in connection with the construction of new
buildings, (8) Taxes, (9) the cost of Basic Electric and HVAC
Electric (as such terms are defined in Section 15.01)
furnished to the Premises or to other tenants of the Project,
(10) the cost of producing and furnishing steam and chilled
water to provide heat, ventilating and air-conditioning to the
Premises or to other tenants of the Project, (11) the cost of
any work or services to be performed for or furnished to any
tenants of the Project (including Tenant), to the extent that
the cost of such work or services is, or is to be, separately
reimbursed to Landlord or is work or a service of a type that
would be separately reimbursable to Landlord under the terms
of this Lease, and (12) expenditures for capital improvements
except (x) those which under generally accepted accounting
principles are expensed or regarded as deferred costs, (y)
capital expenditures or expenses for equipment designed to
result in savings or a reduction of Operating Expenses (e.g.,
energy saving devices), and (z) capital expenditures, required
by Legal Requirements or Insurance Requirements to be done at
the Project on or after the "Commencement Date"
(as such term is defined in the Sublease), but Tenant shall be obligated to pay only the cost of that portion of such capital expenditures required by Legal Requirements or Insurance Requirements which remain unamortized as of the Commencement Date of this Lease, and any cost covered by the foregoing clauses (y) or (z) shall, subject to the immediately following sentence, be included in Operating Expenses for the Operating Year in which the costs are incurred and subsequent Operating Years, and, to the extent that such items are depreciated, the depreciation thereof shall be calculated on a straight line basis over an appropriate period considering the useful life thereof but not more than 10 years, with an interest factor equal to the rate announced by Citibank, N.A. or its successor from time to time as its prime or base rate at the time of Landlord's having incurred such expenditure. Notwithstanding the foregoing, in no event shall any capital expenditure or expense for equipment designed to result in savings or reductions of Operating Expenses (e.g., energy saving devices) be included in Operating Expenses during any one Operating Year in an amount in excess of the amount of Operating Expenses saved during such year (as reasonably estimated by Landlord) as the result of the capital expenditure or expense in question, and in the event that such an excess exists for any Operating Year, the period for depreciating such item(s) shall be extended until Landlord has fully included such excess in Operating Expenses. If Landlord leases any equipment designed to result in savings or reductions in Operating Expenses, then the rentals and other costs paid pursuant to such leasing shall be included in Operating Expenses for the Operating Year in which they are incurred."
R6. The phrases "the greater of (a)" in the fifth line of Section 5.02 of this Lease and "or (b) the Operating Payment for the prior Operating Year" in the sixth and seventh lines of such Section are hereby deleted.
R7. Section 5.05 of this Lease is hereby deleted and the following is hereby added in its place:
"5.05 (a) Tenant, upon notice given within 90 days after the receipt of such Operating Statement, may elect to have Tenant's designated (in such notice) agent (who may be an employee of Tenant) examine such of Landlord's books and records as are directly relevant to the Operating Statement in question. If Tenant does not give such notice within such 90-day period, or does not complete its audit and give written notice to Landlord of any challenges to any Operating Expenses contained in such Operating Statement by the end of the calendar year in which such Operating Statement was delivered to Tenant, then Tenant shall be deemed to have waived all such challenges, and the Operating Statement as furnished by Landlord shall be conclusive and binding on Tenant. Pending the resolution of any contest, Tenant shall continue to pay all sums as determined to be due in the first instance by Landlord's Operating Statement and upon the resolution of such contest, suitable adjustment shall be made in accordance therewith with appropriate refund to be made by Landlord to Tenant (or credit allowed Tenant against the Fixed Rent and Additional Charges becoming due).
(b) If the resolution of any contest over disputed Operating Expenses finds that Operating Expenses are more than 5% less than as reported in the applicable Operating Statement from Landlord to Tenant, then Landlord shall pay the reasonable cost of Tenant's audit."
R8. The following is hereby added to the end of Article 5 of this Lease:
"5.07 (a) The cost of each of the following services (the "Capped Costs"), shall be included in "Operating Expenses" under Section 5.01 in each Operating Year (i) to the extent of the full amount of such cost in the case of the first Operating Year and (ii) in each subsequent Operating Year only to the
extent of the lesser of (x) the full amount of such cost for such Operating Year or (y) the amount of such cost that was included in Operating Expenses for the previous Operating Year multiplied by the sum of 100% plus the percentage increase, if any, from each previous year in the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, New York, NY - Northern NJ - Long Island, NY-NJ-CT area - (base year 1982-1984 =100) (the "Index"). If the Index has changed so that the base year differs from that used in this Section, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics, to the 1982-84 base. If the Index is discontinued or revised during the Term of the Lease, such other government index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index has not been discontinued or revised.
(b) The Index published most recently prior to the Commencement Date shall be the beginning Index. The Index published most recently prior to the date four (4) months prior to the beginning of each Operating Year shall be the Index for such Operating Year.
(c) For the purposes of this Section 5.02, "Capped Costs" shall mean the cost of labor for (i) cleaning and janitorial services under Section 5.01(a)(ix); (ii) security services under Section 5.01(a)(ix); and (iii) the maintenance of the grounds at the Project under Section 5.01(a)(i).
Notwithstanding anything to the contrary contained herein, the limitation on the inclusion of Capped Costs shall not apply to any increase in such Capped Costs arising from additional services necessitated by the acts, omissions or requirements of Tenant.
R9. The following is hereby added to the end of Section 6.01 of this Lease:
"As of the date hereof, Landlord represents that (y) Swiss Bank and Carbide are the only Superior Mortgagees under this Lease and (z) there are no Superior Lessors."
R10. The number "180" in the fourteenth line of Section 6.02 of this Lease
is hereby deleted and the number "120" is hereby added in its place.
R11. The following is hereby added to the end of Article 6 of
this Lease:
"6.05 Landlord agrees to use reasonable efforts to
obtain and deliver to Tenant:
(a)(i) A subordination and non-disturbance agreement with
respect to this Lease executed by Swiss Bank, in its standard
form and (ii) a subordination and non-disturbance agreement
with respect to this Lease, executed by Carbide, in its
standard form. Upon delivery of such agreements, Tenant agrees
to promptly execute and deliver them to Swiss Bank and Carbide
provided such form is reasonably satisfactory to Tenant. If
Landlord fails to obtain both such agreements within 60 days
after the date hereof, then Tenant shall have the right, by
notice given to Landlord within 10 days thereafter, and before
such agreements are delivered, to terminate this Lease.
(b) Unless Tenant (i) is in default in the payment of
Fixed Rent or any Additional Charges under the Lease or
(ii) is in default beyond the applicable notice or cure period
(or has not commenced the cure of any default) in the
performance of any other material terms, covenants or
conditions of this Lease, a subordination and non-disturbance
agreement with respect to this Lease, from any future Superior
Mortgagee or Superior Lessor, in such Superior Mortgagee's, or
Superior Lessor's, standard form, for the benefit of Tenant.
Tenant agrees to promptly execute and deliver such agreement
to such Superior Mortgagee or Superior Lessor provided such
form is reasonably satisfactory to Tenant."
R12. The phrase "and shall have access to the Premises 24 hours a
day, 7 days a week, 365 days a year" is hereby added after
the word "Landlord," in the sixth line of Section 7.01 of
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this Lease, and the phrase "(including, without limitation,
Landlord's rights (i) to require appropriate identification
such as the wearing or possession of prescribed
identification badges, at all times by employees, agents,
contractors and invitees of Tenant upon the Premises, and
(ii) to impose other reasonable security measures)" is
hereby added after the word "Lease" in the seventh line of
such Section.
R13. The phrase "and all Superior Mortgagees" in the ninth and tenth lines
of Section 8.01 of this Lease is hereby deleted, and the phrase ",
which shall not be unreasonably withheld" is hereby added in its place.
R14. The phrase "in which the primary purpose of such transaction is other
than the assignment or transfer of the Lease, or to transactions" is
hereby added after word "transactions" in the eleventh line of Section
8.02 of this Lease.
R15. The phrase "any corporation or partnership which controls or is
controlled by Tenant or is under common control with Tenant" in the
fourteenth, fifteenth and sixteenth lines of Section 8.02 of this Lease
is hereby deleted, and the phrase "an affiliate of Tenant" is hereby
added in its place.
R16. The following is hereby added to the end of Section 8.02 of
this Lease:
"Notwithstanding anything to the contrary contained in Section
8.01, but subject to the provisions of Sections
|
8.13 and 8.15, Tenant shall have the right to sublet the
Premises to any affiliate of Tenant without Landlord's
consent, upon written notice to Landlord to be accompanied by
a conformed or photostatic copy of the proposed sublease. For
the purposes of this Section 8.02, the term "affiliate of
Tenant" shall mean (i) any corporation which, directly or
indirectly, controls, is controlled by or is under common
control with, Tenant, and (ii) any joint venture, partnership
or similar entity controlled by Tenant; and the term "control"
shall mean, in the case of a corporation, ownership, directly
or indirectly, of more than 50% of each class of the voting
stock, and in the case of a joint venture or partnership or
similar entity, ownership, directly or indirectly, of more
than 50% of all of the interests therein."
R17. The phrase "and any Superior Mortgagee" in the fifteenth line of
Section 8.03 of this Lease and the phase "and all Superior Mortgagees"
in the eighteenth line of such Section are hereby deleted.
R18. The phrase "and all Superior Mortgagees' consent" in the second, third
and fourth lines of Section 8.04 of this Lease and the phrase "and all
Superior Mortgagees" in the seventh and eighth lines of such Section
are hereby deleted.
R19. The following changes are hereby made to Section 8.07 of
this Lease:
(a) The phrase "as specifically provided to the contrary
in" the first and second lines is hereby deleted and the
phrase "for transactions for which Landlord's consent is not
required under" is hereby added in its place.
(b) The phrase "and all Superior Mortgagees" in the fifth
line of such Section is hereby deleted.
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(c) The number "60" in the eighth, twenty-first and twenty-second
lines is hereby deleted and the number "20" is hereby added in
its place.
R20. The word "and" in the last line of Section 8.09(d) of this Lease is
hereby deleted.
R20a. The following is hereby added to the end of Section 8.09 of this Lease:
"and (f) such sublease shall provide that Landlord shall pay
to Tenant an amount equal to 50% of (i) any rents, additional
charges or other consideration payable to Landlord under any
sub-sublease between Landlord as sub-sublandlord and a
sub-subtenant (including, without limitation, sums paid for
the sale or rental of the Landlord's fixtures, leasehold
improvements, equipment or other personal property affixed to
the Premises (collectively, the "Landlord Property"; but
specifically excluding therefrom sums paid to Landlord for the
sale, in connection with a sub-sublease of the Premises, of
Landlord's furniture, furnishings and other unaffixed personal
property at the Premises, provided that such sums represent
the fair market value of such items and are not being used by
Landlord to reduce the amount available to be apportioned
equally between Landlord and Tenant pursuant to this Section
8.09(f)) which is in excess of the fixed rent and additional
charges payable by Landlord to Tenant under such sublease
accruing during the term of any sub-sublease in respect of the
subleased space, less (ii) the sum of the following: (x) in
the case of the sale of the Landlord Property, the then net
unamortized or undepreciated costs determined on the basis of
amortization or depreciation used in Landlord's federal income
tax returns (which shall be deducted each month from the
excess referred to in clause (i) for such month, ratably over
the term of the sub-sublease), and (y) the reasonable
out-of-pocket costs incurred by Landlord to effectuate such
sub-sublease, including reasonable legal fees and reasonable
brokerage fees payable in connection with such sub-sublease
which shall be deducted each month from the excess referred to
in clause (i) prior to any deductions required under clause
(ii)(x) of this Section 8.09(f), and prior to any
apportionment of such
|
excess between Landlord and Tenant pursuant to this Section
8.09(f), until such out-of-pocket costs are recovered in
full); provided, however, that the aggregate of such payments
by Landlord to Tenant pursuant to this Section 8.09(f) shall
not exceed that portion of the cost of the Initial Alterations
(as hereinafter defined) which has not been amortized as of
the date of the signing of any sub-sublease (as determined on
the basis of the amortization used in Tenant's federal income
tax returns)."
R21. The following changes are hereby made in Section 8.10 of
this Lease:
(a) The phrase "and providing that Tenant is not in default
of any of Tenant's obligations under this Lease" in the third
and fourth lines is hereby deleted and the following is hereby
added after the word "Lease" in the third line:
"then, unless (i) Tenant is in default in the payment
of Fixed Rent or Additional Charges beyond any
applicable notice or cure period or (ii) Tenant is in
default beyond any applicable notice or cure period
(or has not commenced the cure of any default) in the
performance of any other material terms, covenants or
conditions of"
(b) The word "reasonable" is hereby added after the word
"Landlord's" in the first line of Section 8.10(b).
(c) The following is hereby deleted from Section 8.10(c):
"and with sufficient financial worth considering the
responsibility involved and Landlord has been
furnished with reasonable proof thereof"
(d) The following is hereby deleted from the end of
Section 8.10(d):
"or any other building in the County of Westchester
owned or operated under a ground or underlying lease
by Landlord or any person which, directly or
indirectly, controls, is controlled by, or is under
common control with the Landlord or any person who
controls the Landlord."
|
(e) The following is hereby added to the end of Sections
8.10(d) and (e):
", unless no space at the Project, comparable to
space Tenant desires to assign or sublet, is then
available for leasing by Landlord."
R22. The following changes are hereby made to Section 8.11 of
this Lease:
(a) The word "reasonable" is hereby added before the word
"costs" in the second and the fourth lines and before
the word "legal" in the sixth line.
(b) The phrase "(up to $2,500 in each instance)" is hereby
after the word "costs" in the sixth line.
(c) The following sentence is hereby added to the end of
Section 8.11:
"Notwithstanding anything contained in this Section
8.11 to the contrary, if Landlord exercises its
option under Section 8.07 to either sublease the
Premises or terminate this Lease, Tenant shall be
under no obligation to reimburse Landlord for any
costs incurred by Landlord in connection with the
exercise of either option."
R23. The phrase "90% of" is hereby added before the word "the" in the third
line of Section 8.12 of this Lease.
R24. The word "reasonably" is hereby added after the word "shall" in the
twenty-second line of Section 8.13 of this Lease.
R25. The number "45" in the fifth line of Section 8.14 of this Lease is
hereby deleted, and the number "60" is hereby added in its place.
R26. Section 8.16 of this Lease is hereby deleted and the following is
|
hereby added in its place:
"8.16 If Landlord gives its consent to any assignment of this Lease or to any sublease, Tenant shall, in consideration therefor, pay to Landlord, as Additional Charges:
(a) in the case of an assignment, an amount equal to 50% of (i) all sums and other considerations paid to Tenant by the assignee for or by reason of such assignment (including, without limitation, sums paid for the sale of Tenant's fixtures, leasehold improvements, equipment or personal property affixed to the Premises (collectively, the "Tenant's Fixed Property"); but specifically excluding therefrom sums paid to Tenant for the sale, in connection with an assignment or sublease of the Premises, of Tenant's furniture, furnishings and other unaffixed personal property at the Premises, provided that such sums represent the fair market value of such items and are not being used by Tenant to reduce the amount available to be apportioned equally between Landlord and Tenant pursuant to this Section 8.16), less (ii) the sum of (x) the then net unamortized or undepreciated costs of the Tenant Property being assigned, as determined on the basis of amortization or depreciation used in Tenant's federal income tax returns, and (y) the reasonable out-of-pocket costs incurred by Tenant to effectuate such assignment, including reasonable legal fees and reasonable brokerage fees; and
(b) in the case of a sublease, 50% of (i) any rents, additional charges or other consideration payable under the sublease to Tenant by the subtenant (including, without limitation, sums paid for the sale or rental of the Tenant's Fixed Property) which is in excess of the Fixed Rent and Additional Charges accruing during the term of the sublease in respect of the subleased space (at the rate per square foot payable by Tenant hereunder) pursuant to the terms hereof, less (ii) the sum of the following (which shall be deducted each month from the excess referred to in clause (i) for such month, ratably over the term of the sublease) (x) in the case of the sale of the Tenant's Fixed Property, the then net unamortized or undepreciated costs determined on the basis of
amortization or depreciation used in Tenant's
federal income tax returns (which shall be
deducted each month from the excess referred to in
clause (i) for such month, ratably over the term
of the sublease), and (y) the reasonable out-of-
pocket costs incurred by Tenant to effectuate such
sublease, including reasonable legal fees and
reasonable brokerage fees payable in connection
with such sublease (which shall be deducted each
month from the excess referred to in clause (i),
prior to any deductions required under clause (ii)(x)
of this Section 8.16(b) and prior to any
apportionment of such excess between Landlord and
Tenant pursuant to this Section 8.16(b) until such
out-of-pocket costs are recovered in full)."
R27. Section 9.03 of this Lease is hereby deleted.
R28. The following is hereby added at the end of Section 11.02 of
this Lease:
"Landlord shall enforce the Rules and Regulations
in a non-discriminatory manner with respect to all
tenants of the Project,"
R29. The following changes are hereby made to Section 12.01 of
this Lease:
(a) The phrase "which requires the filing of plans with any
governmental authority" is hereby added after the word
"Alteration" in the twelfth line.
(b) The following portion of the parenthetical phrase
beginning on the thirteenth line is hereby deleted:
"if the approval of all Superior Mortgagees whose
Superior Mortgages require the approval of the
Superior Mortgagee shall have been obtained"
(c) The word "reasonably" is hereby added after the word
"shall" in the thirty-fourth line.
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(d) The following is hereby added to the end of Section
12.01:
"Notwithstanding the foregoing, Landlord shall bear,
without reimbursement from Tenant, the costs and
expenses described in the foregoing clause (f) in
connection with Tenant's initial Alteration of the
Premises after the date of this Lease (the "Initial
Alterations") to prepare the Main Premises for
initial occupancy by Tenant under the sublease dated
October 19, 1994 between Carbide as sublessor and
Tenant as sublessee (the "Sublease"). In addition,
Landlord shall, at Landlord's cost, supervise the
development, review and filing of the plans and
specifications for, and the construction of, the
Initial Alterations. Tenant agrees that any
supervision done by Landlord with respect to such
plans and specifications shall be without any
representations or warranties whatsoever to Tenant
with respect to the adequacy, correctness or
efficiency thereof or their compliance with or
conformity to any Legal Requirements."
R30. The following changes are hereby made to Section 12.03 of
this Lease:
(a) The phrase "by surety bond or by other customary means"
is hereby added after the word "record" in the twenty-
first line.
(b) The number "10" in the twenty-second line is hereby
deleted and the number "25" is hereby added in its
place.
R31. Section 13.02 of this Lease is hereby deleted and the following is
hereby added in its place:
"13.02 All (a) movable partitions, business and trade
fixtures, machinery and equipment, communications equipment,
laboratory equipment, and office equipment, whether or not
attached to or built into the Premises, which are installed in
the Premises by or for the account of Tenant or Carbide,
whether or not installed
|
at the expense of Landlord, which (i) can be removed without
structural or other material damage to the Premises or the
Building and (ii) are not among the items set forth in Exhibit
2 attached hereto, and (b) furniture, furnishings and other
articles of movable personal property owned by Tenant and
located in the Premises (all of the foregoing shall
hereinafter be collectively called the "Tenant's Property")
shall be and shall remain the property of Tenant and may be
removed by Tenant at any time during the Term; provided that
if any of the Tenant's Property is removed, Tenant shall
repair or pay the cost of repairing any damage to the Premises
or to the Building resulting from the installation and/or
removal thereof."
R32. The following is hereby added to the end of Section 14.03 of
this Lease:
"Landlord, however, shall use reasonable efforts to minimize
any interference with or interruption of Tenant's business
while making such repairs and changes in the Premises;
provided Landlord shall not be required to pay any overtime
charges or premium rates in connection therewith."
R33. The following changes are hereby made to Section 15.01 of
this Lease:
(a) The following is added immediately after the first
sentence:
"Landlord represents that the electric power available to the
Premises as of the date hereof is at least 8 watts per actual
square foot."
(b) The phrase "either be calculated pursuant to a
mathematical model, or" is hereby added after the word
"option" in the seventh line.
(c) The number "110%" is hereby deleted from the fifteenth,
seventeenth and twenty-fifth and the number "100%" is hereby
added in each case in its place.
(d) The following is hereby added at the end of Section 15.01 of
this Lease: "If the calculation of electric energy is made
pursuant to a mathematical model,
|
Landlord shall provide adequate supporting documentation to
enable Tenant to verify that the calculation derived from such
mathematical model is consistent with the provisions of the
Lease."
R34. Section 15.02 of this Lease is hereby deleted.
R35. The phrase ", if requested by Tenant," is hereby added after
the word "shall" in the first line of Section 15.04 of this
Lease.
R36. The following is hereby added to the end of Section 15.06 of
this Lease:
"If such meters are not maintained by such public
utility company, Landlord shall maintain such meters and shall
charge the cost of such maintenance to Tenant as an Operating
Expense under Section 5.01."
R37. The following changes are hereby made to Section 16.01 of
this Lease:
(a) The phrase "during Business Hours of Business Days" in
the eighth line is hereby deleted and the phrase "with 12 air
changes per hour during Business Hours, and 4 air changes per
hour at all other times" is hereby added in its place.
(b) The second sentence is hereby deleted and the following
added in its place:
"If Tenant shall require heat, ventilating or air-conditioning
service in addition to the foregoing, Landlord shall furnish
such service for such times upon not less than 48 hours
advance notice from Tenant."
(c) The last sentence is hereby deleted and the following
is hereby added in its place:
"The amount of such Additional Charges for a given period of
time shall be equal to 100% of the total cost to Landlord of
delivering steam and chilled water for the Premises during
such period."
|
R38. The phrase ", in an amount equal to Landlord's cost of furnishing such
hot and cold water," is hereby added to the end of the eighth line of
Section 17.01 of this Lease.
R39. The following changes are hereby made to Section 17.02 of
this Lease:
(a) The phrase "in a manner standard to the Building" is
hereby deleted from the third and fourth lines of such Section
of this Lease, and "in accordance with the cleaning schedule
attached hereto as Exhibit 3" is hereby added in its place.
(b) The phrase "and (c) the use of the Premises by Tenant or its
subtenants or its or their employees or visitors other than
during Business Hours on Business Days" is hereby deleted from
the seventeenth, eighteenth, nineteenth and twentieth lines of
such Section.
R40. The following is hereby added to the end of Section 17.04 of
this Lease:
"Landlord represents that the chilled water capacity at the
Premises is 50 gpm at 45(degree) Fahrenheit and the steam
pressure at the Premises is 100 psi with a capacity of 1,000
pounds per hour."
R41. The following changes are hereby made to Section 17.05 of
this Lease:
(a) The phrase "whether similar or dissimilar" at the end
of such Section is hereby deleted.
(b) The following is hereby added at the end of such
Section:
"Landlord shall use reasonable efforts (a) to
minimize any interference with or interruption to
Tenant's business at the Premises caused by the
interruption of such services to the Premises and (b)
to give Tenant reasonable notice (except in the case
of an emergency, when Landlord or its agents may
enter the Premises with no notice at
|
any time or times), in the event of such an
interruption of services to the Premises."
R42. The following is hereby added to the end of Article 17 of
this Lease:
"17.06 Landlord agrees during the term of this
Lease:
(i) to maintain guards at the guard desk and the
reception desk in the Building during the hours of 8:30 - 4:30
Monday through Friday;
(ii) to maintain the upkeep of the grounds of the
Project at a level at least substantially the same as
the level currently maintained at the Project;
(iii) to provide snow removal from the parking areas and
the walkways at the Project to the same extent as is customary
for comparable projects; and
(iv) to use reasonable efforts to make available
some level of food service to tenants at the Project;
R43. The following is hereby added to the end of Section 18.01 of
this Lease:
"In the exercise of its right of reasonable access under this
Section 18.01, Landlord shall use reasonable efforts to
minimize interference with or interruption to Tenant's
business at the Premises."
R44. The following is hereby added to the end of Section 18.02 of
this Lease:
"provided the same do not result in a material loss of usable
area in the Premises. In the exercise of its rights under this
Section 18.02, Landlord shall use reasonable efforts (a) to do
such construction work during non-Business Hours, provided
Landlord shall not be required to pay any overtime charges or
premium rates in connection therewith, and (b) to minimize
interference with or interruption to Tenant's business at the
Premises."
|
R45. The following changes are hereby made to Section 18.03 of
this Lease:
(a) The phrase "at any time or times" in the second line is
hereby deleted and the following is hereby added in its
place:
"during Business Hours upon reasonable prior notice
to Tenant and with Tenant's supervision (except in
case of an emergency, when Landlord or its agents may
enter the Premises at any time or times)"
(b) The following is hereby added to the end of
Section 18.03:
"In the exercise of its rights under this Section
18.03 Landlord shall use reasonable efforts (a) to
perform the activities required by this Section 18.03
during non-Business Hours provided Landlord shall not
be required to pay overtime charges or premium rates
in connection therewith and (b) to minimize
interference with or interruption to Tenant's
business at the Premises."
R46. The number "18" for the first line of Section 18.05 is hereby deleted
and the number "15" is hereby added in its place, and the following is
added to the end of such Section:
"during Business Hours upon reasonable prior
notice to Tenant and with Tenant's supervision."
R47. The following is hereby added to the end of Section 18.07 of
this Lease:
"provided (i) such changes, alterations, additions and
improvements shall be in keeping with the Building's status as
a first class office and laboratory facility, and shall not
result in a material reduction of the usable area in the
Premises; and (ii) Landlord shall maintain the
|
hallway between the Premises and the main stairway in the
Building substantially as it exists as of the date hereof,
unless Tenant exercises its option under Paragraph R69 of this
Rider and such hallway becomes a part of the Premises."
R48. The phrase "or permissible" in the second line of Section 18.10 of this
Lease is hereby deleted, and the phrase "due to an emergency" is added
in its place.
R49. The following is hereby added at end of Article 18 of this
Lease:
"18.11 Landlord agrees to use reasonable efforts (i) to keep
confidential any information regarding Tenant's business which
Landlord obtains in the course of its entry into the Premises
and (b) to require its agents and their employees to keep
confidential any such information such agents or employees
obtain in the course of their entry into the Premises,
provided that nothing herein shall preclude disclosure of such
information to the extent required by law or to the extent
necessary to enforce Tenant's obligations hereunder."
R50. The word "reasonable" is hereby added after the word "all" in the
twenty-third line of Section 20.03 of this Lease.
R51. The phrase "or inaccessible" is hereby added after the word
"untenantable" in the third and sixth lines, respectively, of Section
21.02 of this Lease, and the phrase "and accessible" is hereby added
after the word "tenantable" in the eleventh line of Section 21.02 of
this Lease.
R52. The following is added to the end of Section 21.03 of this
Lease:
"Notwithstanding anything to the contrary contained in Section
21.04 hereof, if (i) a
|
material portion (i.e., 30% or more) of the Premises shall be
damaged or destroyed or otherwise rendered untenantable by
fire or other casualty, and (b) Landlord fails to
substantially restore the Premises within 180 days after the
date of the fire or other casualty (which 180-day period shall
be extended by any delays caused by the acts or omissions of
Tenant and/or its agents, employees or contractors or by any
of the causes set forth in clauses (a) and (b) of Section
41.04), then Tenant shall have the right thereafter to
terminate this Lease by giving Landlord and the Superior
Mortgagees notice to such effect prior to the substantial
completion of such restoration, in which event the Fixed Rent
and Additional Charges shall be prorated and adjusted as of
the date of termination."
R53. The word "two" in the eighth line of Section 23.02 of this
Lease is hereby deleted and the phrase "one and one-half" is
hereby added in its place. The phrase "Landlord's then
asking price, on a monthly basis, for comparable space in
the Building (or, if Landlord has no asking price, the
monthly rent equal to" is hereby deleted from the tenth,
eleventh and twelfth lines of such Section, and the
parenthesis in the fourteenth line thereof is also hereby
deleted.
R54. The phrase "after notice thereof" is hereby added after the word "days"
in the third line of Section 24.02(a) of this Lease.
R55. The number "15" in the fifth, eighth, fourteenth and sixteenth lines of
Section 24.02(b) of this Lease is hereby deleted and the number "30" is
hereby added in its place.
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R56. Section 24.02(e) is hereby deleted and the following is
hereby added in its place:
"(e) if Tenant defaults under any other lease with Landlord
for premises at the Project and such default is not remedied
within the applicable grace period, if any, provided therefor
under such other lease, or
(f) if Carbide notifies Tenant of a default by Tenant under
the Sublease and such action is adjudicated, and such
adjudication is upheld on appellate review, if Tenant timely
seeks such review, in favor of Carbide and Tenant does not
remedy such default within the applicable grace period, if
any, following such adjudication, or
(g) if the Sublease is terminated, canceled or
surrendered on or prior to December 30, 1997."
R57. The following is hereby added after Section 24.02 of this
Lease:
"24.03 If a court of competent jurisdiction rules that Tenant
has defaulted under the Sublease and such ruling is upheld on
appellate review, if Tenant timely seeks such review, then
Tenant shall be estopped from contesting or disputing the
existence of such default against Landlord."
R58. The word "present" is hereby added after the word "then" in the third
line of Section 26.01(a) of this Lease.
R59. The following is hereby added after the word "that" in the twenty-first
line of Section 26.01(b) of this Lease:
"(i) such expenses of reletting the Premises shall be so
deducted from gross rents ratably over the term of the
reletting in equal monthly amounts, together with interest
thereon at the rate announced by Citibank, N.A. or its
successor as its prime or base rate at the time of such
reletting and (ii)"
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R60. The following is hereby added at the end of Article 26 of
this Lease:
"26.04 Notwithstanding anything contained in Section 24.02 or
this Article 26 to the contrary, if this Lease is terminated
under the provisions of Article 24 or if Landlord re-enters
the Premises under the provisions of Article 25, based solely
upon the occurrence of the facts described in Section 24.02(f)
and/or 24.02(g), then the only damages for which Tenant shall
be liable under Section 26.01 shall be damages in the same
amount as the amount of the payment that would be due upon the
exercise by Tenant of its cancellation option under Paragraph
R70 of this Lease."
R61. The following changes are hereby made to Section 30.01 of
this Lease:
(a) The phrase "and Cushman & Wakefield, Inc." is
hereby added in the second line.
(b) The word "Broker" in the second line is hereby
deleted and the word "Brokers" is hereby added in its
place.
(c) The following is hereby added at the end of
Section 30.01 of the Lease:
"Landlord represents that no broker except the Brokers was
instrumental in bringing about or consummating this Lease and
that Landlord had no conversations or negotiations with any
broker except the Brokers concerning the leasing of the
Premises. Landlord shall indemnify and hold Tenant harmless
against and from any claims for any brokerage commissions and
all costs, expenses and liabilities in connection therewith,
including, without limitation, attorneys' fees and expenses,
arising out of any conversations or negotiations had by
Landlord with any broker other than the Brokers."
R62. The phrase "at a comparable location" is hereby added to the end of
Section 35.01 of this Lease.
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R63. The phrase "Except as otherwise provided herein" is hereby added to the
beginning of Section 36.01 of this Lease.
R64. The following is hereby added to the end of Article 36 of
this Lease:
"36.02 Landlord shall indemnify Tenant and its partners,
directors, officers, agents and employees from and against
any and all claims, demands, losses and liability (including
reasonable attorneys' fees) resulting from any alleged or
actual violation of Environmental Laws at the Premises by
Landlord or any of its agents, employees or contractors.
Landlord assumes sole and full responsibility for all present
and future acts or omissions of Landlord or any of its
agents, employees or contractors while at, near or on the
Project and covenants and agrees to indemnify, defend, save
and hold harmless Tenant and its respective directors,
officers, agents and employees, from and against any and all
claims, demands, losses, and liability (including reasonable
attorneys' fees) resulting from such acts or omissions,
including, but not limited to, personal injury (and death
resulting therefrom), property damage, damage to natural
resources, and strict liability under Environmental Laws.
Notwithstanding anything to the contrary contained herein,
Landlord has, and shall have, no obligation or liability with
respect to any violations of Environmental Laws at the
Premises which were caused by, or any acts or omissions of,
Carbide, its agents, contractors, invitees and/or employees.
The provisions of this Section 36.02 shall survive the
expiration or termination of this Lease."
R65. The following is hereby added immediately prior to the third sentence
of Section 39.01 of this Lease:
"The Tenant shall have the right to consent, which consent
shall not be unreasonably withheld, to the location of the
Substitute Premises within 30 days after receiving Landlord's
written notice of such proposed relocation. If Landlord has
not received Tenant's written consent to or rejection of such
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proposed location within such 30-day period, Tenant shall be
deemed to have consented thereto.
R66. The following is hereby added before the word "and" in the fifteenth
line of Section 39.02 of this Lease ", the changing of Tenant's license
to handle radioactive materials and the replacing of Tenant's
stationery to reflect such move,"
R67. The following is hereby added to the end of Section 41.05 of
this Lease:
"Notwithstanding anything to the contrary contained in this
Section 41.05, if a court having jurisdiction over such matter
finds in a written opinion or order that Landlord acted
unreasonably and in "bad faith" in withholding a consent that
Landlord was required hereunder not to unreason ably withhold,
then Tenant shall be entitled to the additional remedy of
damages against Landlord on account of such withholding of
consent."
R68. The following is hereby added to the end of Article 41:
"41.08 The withholding of Landlord's consent under this Lease
shall be considered reasonable in any event if Landlord has
been unable to obtain the corresponding consent of a Superior
Mortgagee or Superior Lessee whose consent Landlord is
required to obtain pursuant to the mortgage or the lease held
by such Superior Mortgagee or by a Superior Lessee."
R69. (a) If at any time during the Term of this Lease all or a portion (in
either case, the "Offered Space") of the rentable space in the south
section of the "Spine 215 Level" of the Building as set forth on
Exhibit 4 hereto (the "First Offer Space") becomes vacant and not
subject to any lease or
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other right of occupancy, and Landlord does not desire itself to use or occupy all or a material portion thereof, then, provided Tenant is not in default beyond any notice or cure periods under this Lease, Landlord shall make a good faith offer to rent the Offered Space to Tenant (the "First Offer") by sending a written notice to Tenant (the "Offered Space Notice"). The Offered Space Notice shall set forth (i) the Fixed Rent Landlord is then considering charging for the Offered Space as well as rent concessions or tenant work allowances, if any, that Landlord is then considering granting with respect thereto, (ii) an identification of the Offered Space and (iii) such other matters as Landlord may deem appropriate for such Offered Space Notice. Tenant must notify the Landlord in writing, within 30 days after such written notice is given, stating whether Tenant accepts or rejects the First Offer (the "Election Notice"), time being of the essence with respect to the giving of the Election Notice. If Tenant fails to give an Election Notice within such 30-day period, then Tenant will be deemed to have rejected the First Offer. If the Tenant rejects or is deemed to reject such First Offer, then Landlord shall have no further obligation to again offer any of the First Offer Space to Tenant during the Term of this Lease other than
First Offer Space that subsequently qualifies as Offered Space following the termination of a lease therefor. (b) If, Tenant accepts, by means of the Election Notice, the First Offer contained in the Offered Space Notice within the required 30-day period, then Landlord shall lease to Tenant the Offered Space, on the same terms and conditions as those contained in this Lease (including, without limitation, any renewal options) and for a term commencing on the first day of the month immediately following the month in which the Election Notice is given and continuing coterminous with the Term of this Lease, except (1) the Fixed Rent will be payable at the rate contained in the Offered Space Notice, (ii) Tenant's Proportionate Share under this Lease shall be increased to include the Offered Space and (iii) as may otherwise be set forth in the Offered Space Notice. Such demise of the Offered Space shall be reflected by an amendment to this Lease to include the Offered Space as part of the Premises (but Tenant's failure to execute and deliver such an amendment shall not affect its obligations with respect to the Offered Space). Tenant shall accept the Offered Space in its "as is" condition, and Landlord will not be required to do any work to prepare the Offered Space for Tenant.
(c) If Tenant accepts a First Offer pursuant to this Paragraph R69,
Tenant shall no longer have any option to cancel this Lease pursuant to
Paragraph R70.
R70. Tenant shall have the right to cancel this Lease as of December 31,
1997 (the "First Lease Cancellation Date") or, unless Tenant (a) is in
default in the payment of Fixed Rent or any Additional Changes under
this Lease or (b) is in default beyond the applicable notice or cure
period (or has not commenced the cure of any default) in the
performance of any other material terms, covenants or conditions of
this Lease, as of December 31, 2002 (the "Second Cancellation
Date"), provided that (x) Tenant gives Landlord written notice of such
cancellation at least twelve months prior to the First Cancellation
Date or the Second Cancellation Date, as the case may be, and (y) in
the case of the First Cancellation Date, Tenant pays to Landlord,
simultaneously with the giving of such notice, the amount of $25,000
for expenses incurred by Landlord in connection with this Lease. No
such cancellation on the First Cancellation Date shall be effective
unless and until the payment to be made pursuant to the foregoing
clause (y) has been received by Landlord. If this Lease is canceled
pursuant to this paragraph, then the First Cancellation Date or the
Second Cancellation Date, as the case may be, shall be treated as if
such date were
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the date stated in this Lease to be the expiration date of the Term.
Notwithstanding anything contained herein to the contrary, if Tenant
cancels this Lease effective as of the First Cancellation Date, Tenant
shall have no obligation to restore the Premises or remove any
Alterations pursuant to Section 12.02 of this Lease, but Tenant shall
still be obligated to remove Tenant's Property pursuant to Sections
13.02 and 13.03 of this Lease.
R71. If Tenant has not canceled this Lease effective as of the
First Lease Cancellation Date, then, provided Tenant is not in default
beyond any applicable notice and cure period under this Lease, Landlord
shall pay the amount of $140,000 to Tenant on the Commencement Date.
R72. (a) Tenant, at Tenant's sole option, shall have the right
to extend the term of this Lease for an additional term of
five years (the "Extension Term") commencing on January 1,
2008 and expiring on December 31, 2012. Such option may
only be exercised by Tenant's written notice (the "Extension
Notice") given to Landlord on or before December 31, 2006,
time being of the essence with respect to the giving of such
notice, and only if Tenant (i) is not in default in the
payment of Fixed Rent or any Additional Charges under this
Lease or (ii) is not in default beyond the applicable notice
or cure period (or has not commenced the cure of any
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default) in the performance of any other material terms,
covenants or conditions of this Lease, either as of the date
of the giving of the Extension Notice or the first day of
the Extension Term.
(b) The Fixed Rent payable by Tenant to Landlord during the
Extension Term for the Premises shall be at an annual rate
that is equal to the fair market rent for the Premises for
the Extension Term as determined by Landlord and set forth
in a written notice to Tenant, which determination shall be
as of October 1, 2007 (the "Determination Date") and which
determination shall be made within a reasonable period of
time after the Determination Date.
(c) (i) If Tenant gives the Extension Notice in accordance
with the provisions of (a) above and Tenant disputes the
amount of the fair market rent as determined by Landlord
pursuant to (b)(i) above, then at any time on or before the
date occurring 30 days after Tenant has been notified by
Landlord of Landlord's determination of the fair market
rent, Tenant may initiate the arbitration process provided
for herein by giving notice to that effect to Landlord, and
if Tenant so initiates the arbitration process, such notice
shall specify the name and address of the person designated
to act as an arbitrator on its behalf. If Tenant fails to
initiate the arbitration process within such 30-day period,
time being of the essence, then Landlord's determination shall be conclusive. Within 30 days after Landlord's receipt of notice of the designation of Tenant's arbitrator, Landlord shall give notice to Tenant specifying the name and address of the person designated to act as an arbitrator on its behalf. If Landlord fails to notify Tenant of the appointment of its arbitrator within the time above specified, then the appointment of the second arbitrator shall be made in the same manner as hereinafter provided for the appointment of a third arbitrator in a case where the two arbitrators appointed hereunder and the parties are unable to agree upon such appointment. The two arbitrators so chosen shall meet within 10 days after the second arbitrator is appointed, and if within 60 days after the second arbitrator is appointed the two arbitrators shall not agree upon a determination of the Fixed Rent for the Premises for the Extension Term, they shall together appoint a third arbitrator. If the two arbitrators are unable to agree upon the third arbitrator within 80 days after the appointment of the second arbitrator, the third arbitrator shall be selected by the parties themselves if they can agree thereon within a further period of 15 days. If the parties do not so agree, then either party, on behalf of both and on notice to the other, may request such appoint-
ment by the American Arbitration Association (or any organization
successor thereto) in accordance with its rules then prevailing or if
the American Arbitration Association (or such successor organization)
shall fail to appoint the third arbitrator within 15 days after such
request is made, then either party may apply, on notice to the other,
to the Supreme Court, Westchester County (or any other Court having
jurisdiction and exercising functions similar to those now exercised by
such Court) for the appointment of the third arbitrator. The third
arbitrator shall determine whether the fair market rent as determined
by the first arbitrator or by the second arbitrator is closer to the
actual fair market rent of the Premises and render a written report of
his or her determination to both Landlord and Tenant within 60 days
from the appointment of the third arbitrator, and the fair market rent
as determined by the first arbitrator or the second arbitrator which,
in the judgment of the third arbitrator, is closer to the actual fair
market rent, shall be applied to determine the Fixed Rent for the
Premises for the Extension Term.
(ii) In determining the fair market rent under this subparagraph
(c), the arbitrators shall take into account all relevant factors
including those provisions of this Lease which will remain in effect
during the Extension Term.
(iii) Landlord and Tenant shall pay the fees and expenses of the arbitrator appointed by or for it, and the fees and expenses of the third arbitrator and all other expenses (not including the attorneys' fees, witness fees and similar expenses of the parties which shall be borne separately by each of the parties) of the arbitration shall be borne by the Landlord and Tenant equally.
(iv) Each of the arbitrators shall have at least ten years' current experience in the leasing and renting of office space in Westchester County office buildings.
(v) If Tenant initiates the aforesaid arbitration process and as of the first day of the Extension Term the amount of the fair market rent has not been determined, Tenant shall pay Fixed Rent at a monthly rate equal to the Fixed Rent during the last month of the initial Term of this Lease, and when the determination has actually been made, an appropriate retroactive adjustment shall be made as of the first day of the Extension Term. (d) Except as provided in (a) above, Tenant's occupancy of the Premises during the Extension Term shall be on the same terms and conditions as are in effect immediately prior to the expiration of the initial Term of this Lease, provided, however, Tenant shall have no further right to extend the Term of this Lease pursuant to this Paragraph R72, and
Tenant shall not be entitled to any rental abatement or contribution by Landlord for the cost of improving the Premises during the Extension Term (and, without limiting the generality of the foregoing, the provisions of Paragraphs R69 and R70 shall have no applicability to the Extension Term).
(e) If Tenant does not timely send the Extension Notice pursuant to provisions of (a) above, this Paragraph R72 of the Rider shall have no force or effect and shall be deemed deleted from this Lease. The termination or cancellation of this Lease during (or prior to) the initial Term hereof shall also terminate and render void any option or right on Tenant's part to extend the Term of this Lease pursuant to this Paragraph R72, whether or not such option or right shall have previously been exercised.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Rider as of the day and year first above written.
LANDLORD:
KEREN LIMITED PARTNERSHIP
By: Keren Management Limited
Partnership, General Partner
By: Keren Developments Inc.
By: /s/ JAMES F. KAY
----------------------------
Name: James F. Kay
Title: President
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TENANT:
CADUS PHARMACEUTICAL CORPORATION
By: /s/ JEREMY LEVIN
----------------------------
Name: Jeremy Levin
Title: President
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Tenant's Federal Identification Number
THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
530 FIFTH AVENUE, NEW YORK, N.Y. 10056
September 28, 1994
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014
Attention: James Reilly
Controller
Gentlemen/Ladies:
The Bank of New York (the "Bank") is pleased to confirm that it holds available a $1,500,000 secured line of credit to Cadus Pharmaceutical Corporation (the "Borrower").
Advances under the line of credit shall be evidenced by, shall be payable as provided in, and shall bear interest at the rate specified in, a promissory note of the Borrower in the form included with this letter.
All obligations of the Borrower to the Bank with respect to this line of credit shall be secured pursuant to a security agreement granting the Bank a first and prior security interest in the Borrower's negotiable certificate(s) of deposit by the Bank in the aggregate principal amount of $1,500,000. The form of the security agreement to be furnished to the Bank is included with this letter.
As you know, lines of credit are cancellable at any time by the Borrower or the Bank and any extension of credit under this line of credit is subject to the Bank's satisfaction, at the time of such extension of credit, with the condition (financial or otherwise), business, prospects, and operations of the Borrower. Unless cancelled earlier as provided in the first sentence of this paragraph, this line of credit shall be held available until, September 30, 1995.
Very truly yours,
THE BANK OF NEW YORK
GENERAL LOAN AND SECURITY AGREEMENT
48 Wall Street, New York ____________________________, 19______
(Banking Office)
FOR VALUE RECEIVED, and in order to induce THE BANK OF NEW YORK (hereinafter referred to as the "Bank"), in its discretion, to make loans or otherwise extend credit at any time, and from time to time to, or at the request of, the undersigned (hereinafter referred to as "Borrower"), whether the loans or credit so extended shall be absolute or contingent, Borrower, jointly and severally, if more than one, hereby grants to the Bank, as security for all present or future obligations or liabilities of any and all kinds of Borrower to it, whether incurred by Borrower as maker, endorser, drawer, acceptor, guarantor, accommodation party or otherwise, matured or unmatured, secured or unsecured, absolute or contingent, joint or several, and howsoever or whensoever acquired by the Bank (all of which are hereinafter referred to as the "Obligations"), a security interest in and a lien upon all personal property and fixtures of Borrower now or hereafter existing or acquired and wherever located which are of the type which may be collateral under the Uniforms Commercial Code as in effect in the State of New York (hereinafter referred to as the "Code") on the date hereof, now or hereafter owned or acquired by Borrower, or in which Borrower may have an interest, including all goods (other than household goods as such term is defined in 12 CFR Part 227 unless the proceeds of the Obligation secured pursuant hereto are used to purchase such goods or such Obligation is incurred for a business purpose or to purchase real property), money, instruments, accounts, contract rights, documents, chattel paper and general intangibles of Borrower, including but not limited to any property specified in Schedule A hereto and also including all products and proceeds of, all accessories to, and substitutions for, all of the foregoing (all of which shall be hereinafter collectively referred to as the "Collateral").
Borrower hereby agrees to deliver to the Bank whenever called for by it such additional collateral security of a kind and of a market value satisfactory to the Bank, so that there will, at all times, be with the Bank a margin of security for the payment of all Obligations which shall be satisfactory to it. In addition to the Bank's security interest in the Collateral, it shall have, and Borrower hereby grants to the Bank, a security interest and a lien for all the Obligations in and upon any personal property of Borrower or in which Borrower may have an interest which is now or may at any time hereafter come into the possession or control of the Bank, or of any third party acting on its behalf, whether for the express purpose of being used by the Bank as collateral security or for safekeeping or for any other or different purpose including such personal property as may be in transit by mail or carrier for any purpose, or covered or affected by any documents in the Bank's possession or control, or in the possession or control of any third party acting on its behalf. Borrower hereby authorizes the Bank in its discretion, at any time, whether or not the Collateral is deemed by it adequate, to appropriate and apply upon any of the Obligations, whether or not due, any of such property of Borrower and to charge any of the Obligations against any balance of any account standing to the credit of Borrower on the books of the Bank (said additional personal property is also hereinafter referred to as the "Collateral").
If any of the following events shall occur with respect to any Obligor (which term shall include Borrower and any endorser or guarantor of any of the Obligations): (1) the failure of Borrower to furnish satisfactory additional Collateral upon demand: (2) the failure of any Obligor in the performance of any of such Obligor's covenants herein or in any instrument, document or agreement delivered in connection with any Obligation; (3) the death of the insured under any life insurance police held as Collateral, or the non-payment of any premiums on any such life insurance policy; (4) default by any Obligor with respect to the payment of any Obligation; (5) the insolvency, general assignment, receivership, bankruptcy, or dissolution of any Obligor or the filing of any petition by or against any Obligor with respect to any of the foregoing; (6) the death, dissolution or incompetence of any Obligor; (7) the financial condition or credit standing of any Obligor shall be or become materially impaired in the sole opinion of the Bank or any of its officers; (8) non-payment when due of any other liability of any Obligor; (9) the commencement of any proceeding, procedure or other remedy supplemental to the enforcement of a judgment against any Obligor; (10) any representation in any financial or other statement of any Obligor delivered to the Bank by or on behalf of any Obligor is untrue or incomplete; or (11) any Obligor shall fail, on request, to furnish any financial information or to permit inspection of such Obligor's books and records, then all Obligations shall become due and payable forthwith, upon declaration to that effect by the Bank, without notice to Borrower or any other Obligor, anything contained herein or in any other document, instrument or agreement to the contrary notwithstanding.
Upon failure of Borrower to pay any Obligation when becoming or made due, as aforesaid, the Bank shall have, in addition to all other rights and remedies allowed by law, the rights and remedies of a secured party under the Code as in effect at that time and, without limiting the generality of the foregoing, the Bank may immediately, without demand of performance and without notice of intention to sell or of time or place of sale or of redemption or other notice of demand whatsoever to Borrower, all of which are hereby expressly waived, and without advertisement, (a) sell at public or private sale, grant options to purchase or otherwise realize upon, in the State of New York, or elsewhere, the whole or from time to time any part of the Collateral upon which the Bank shall have a security interest or lien as aforesaid, or any interest which Borrower may have therein, and (b) exercise any and all rights, options, powers, benefits or privileges given to the Bank upon the life insurance policies, if any, held as collateral. After deducting from the proceeds of any such sale or other disposition of the Collateral all expenses (including all reasonable expenses for legal services of every kind and other expenses as set forth below), the Bank shall apply the residue of such proceeds toward the payment of any of the Obligations, in such order as the Bank shall elect, Borrower remaining liable for any deficiency, plus interest thereon, remaining unpaid after such application. If notice of any sale or other disposition is required by law to be given, Borrower hereby agrees that a notice sent at least two days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be reasonable notice of such sale or other disposition. Borrower also agrees to assemble the Collateral at such place or places as the Bank designates by written notice.
At any such sale or other disposition the Bank or any other person designated by the Bank may itself purchase the whole or any part of the Collateral sold, free from any right of redemption on the part of Borrower, which right is hereby waived and released.
The Bank may, without any notice to Borrower, in its discretion, whether or not any of the Obligations be due, in its name or in the name of Borrower, demand, sue for, collect and receive any money or property at any time due, payable or receivable on or on account of or in exchange for, and may compromise, settle or extend the time of payment of, any of the demands or obligations represented by any of the Collateral, and may also exchange any of the Collateral for other property upon the reorganization, recapitalization or other readjustment of the issuer, maker or other person who is obligated on or otherwise has liabilities with respect to the Collateral, and in connection therewith, may deposit any of the Collateral with any committees or depositary upon such terms as the Bank may in its discretion claim appropriate, and Borrower does hereby constitute and appoint the Bank Borrower's true and lawful attorney to compromise, settle or extend payment of said demands or obligations and exchange such Collateral as Borrower might or could do personally; all without liability or responsibility for action herein authorized and taken or not taken in good faith. The Bank is entitled at any time in its discretion to notify any account debtor or the obligor on any instrument to make payment to it, regardless of whether or not Borrower had been previously making collections on the Collateral, and the Bank may taken control of any proceeds of any of the Collateral.
Borrower agrees that the Collateral secures, and further agrees to pay on demand, all expenses (including reasonable expenses for legal services of every kind and cost of any insurance and payment of taxes or other charges) of or incidental to, the custody, care, sale or collection of, or realization upon, any of the Collateral or in any way relating to the enforcement or protection of the rights of the Bank hereunder.
Borrower agrees to mark its books and records as the Bank shall request in order to reflect the rights of the Bank granted herein, and the Bank may, in its sole discretion, take possession of the Collateral at any time, either prior to or subsequent to a default under any of the Obligations. Borrower agrees to maintain such insurance on the Collateral as the Bank may require. The Bank may, without any notice to Borrower, in its discretion, and for its own benefit, lend, use, transfer or repledge with any person, firm or corporation all or any part of the Collateral by itself or mingled with the property of others, in bulk or otherwise. The Bank may, without any notice to Borrower, sell, assign or transfer any of the Obligations and the Bank's rights and duties hereunder, and may deliver the Collateral, or any part thereof, to the assignee or transferee of any of the Obligations, who shall become vested with all the rights, remedies, powers, security interests and liens herein given to the Bank in respect thereto; and the Bank shall thereafter be relieved and fully discharged from any liability or responsibility in the premises.
The Bank may, without any notice to Borrower, in its discretion, transfer, or cause to be transferred, all or any part of the Collateral to its name, or to the name of its nominee, vote the Collateral so transferred, and receive income and make or receive collections, including money, thereon and hold said income and collections as Collateral or apply the said income and collections to any of the Obligations, the manner and distribution of the application to be made as the Bank shall elect.
Calls for Collateral, demand for payment or notice to Borrower may be given by leaving same at the address given below or any other address hereafter filed with the Bank, or by mailing some to such address with the same effect as if delivered personally. Such notice given in the manner herein provided shall be effective whether or not received by Borrower. Borrower agrees not to change any of its places of business, remove any records of Borrower relating to any of the Collateral or move any of the Collateral without given the Bank thirty days' prior written notice.
With respect to the Collateral, the Bank shall be under no duty to send notices, perform services, exercise any rights of collection, enforcement, conversion or exchange, vote, pay for insurance, taxes or other charges or take any action of any kind in connection with the management thereof and its only duty with respect thereto shall be to use reasonable care in its custody and preservation while in its possession, which shall not include any steps necessary to preserve rights against prior parties.
Borrower hereby authorizes the Bank at Borrower's expenses to file one or more financing statements to perfect the security interests granted herein without Borrower's signature thereon, and Borrower agrees to do, file, record, make, execute and deliver all such acts, deeds, things, notices, instruments, and financing statements as the Bank may request in order to perfect and enforce the rights of the Bank herein.
If at any time it is necessary in the opinion of counsel to the Bank that any or all of the securities held as Collateral (the "Pledged Securities") be registered under the Securities Act of 1933, as amended, or that an indenture with respect thereto be qualified under the Trust Indenture Act of 1939 in order to permit the sale or other disposition of the Pledged Securities, Borrower shall at the Bank's request and at the expense of Borrower use the best efforts of Borrower promptly to cause the registration of the Pledged Securities and the qualification of such indenture and to continue such registration and qualification as long as deemed appropriate by the Bank.
Borrower hereby authorizes the Bank to date this agreement as of the date of the granting of any Obligation secured hereby and to complete any blank space herein (including any blank space in Schedule A) according to the terms upon which said Obligation was granted.
No failure on the part of the Bank to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Bank from time to time.
Borrower and each endorser or guarantor of any of the Obligations expressly waives presentment and demand for payment, protest and notice of protest and of non-payment. Unless the text otherwise requires, all terms used herein shall have the meanings specified in the Code.
THE BANK AND BORROWER HEREBY WAIVE AND AGREE TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM INSTITUTED WITH RESPECT TO ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
The provisions of this agreement shall be construed and interpreted and all rights and duties hereunder determined in accordance with the laws of the State of New York.
Every provision of this agreement is intended to be severable; if any term or provision of this agreement shall be invalid, illegal or unenforceable for any reason whatsoever, the validity, legally and enforceability of the remaining provisions hereof shall not in any way be affected or impaired hereby.
The Borrower hereby authorizes the Bank to renew the certificate of deposit(s) from time to time on such terms and at a rate of interest that the Bank, in its sole discretion, shall select on the date of such rollover.
NAME OF BORROWER ADDRESS OF BORROWER
CADUS PHARMACEUTICAL CORP. 777 Old Saw Mill River Road
SIGNATURE OF BORROWER /s/ J.S. Reilly Tarrytown, New York 10591
Title: Controller
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NAME OF BORROWER___________________ ADDRESS OF BORROWER____________________
SIGNATURE OF BORROWER_________________ ____________________________________
SCHEDULE A
Property specifically included as "Collateral" for purposes of the within General Loan and Security Agreement:
Negotiable certificate of deposit(s) issued on ______________, by the Bank and payable to the order of the Borrower in the aggregate principal amount of ______________, and all renewals, extensions, amendments and modifications thereof, replacements and substitutions thereof, and any and all proceeds of the foregoing. Certificate of deposit number ______________.
PROMISSORY NOTICE
$1,500,000 Dated: January 9, 1995
For Value received, CADUS PHARMACEUTICAL CORPORATION, a corporation formed under the laws of the State of New York (the "Borrower"), hereby promises to pay to the order of THE BANK OF NEW YORK (the "Bank") at its 48 Wall Street, New York, New York office, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) or the aggregate unpaid principal amount of all advances made by the Bank to the Borrower (which aggregate unpaid principal amount shall be equal to the amount duly endorsed and set forth opposite the date last appearing on the sheet attached to this note), whichever is less.
Each advance hereunder shall bear interest, at the Borrower's option, at a rate per annum equal to (a) the Alternate Base Rate (as hereinafter defined) or (b) a CD Rate (as hereinafter defined) plus 1%. On or before the date of each advance made at the CD Rate ("a CD Rate Advance"), the Borrower shall deposit funds in a time deposit with the Bank in an amount equal to the principal amount of the requested advance which time deposit (the "Matched Deposit") shall have a maturity of not less than one month nor more than one year and shall be in a minimum amount of $50,000, and if greater, in integral multiples of $10,000.
"Alternate Base Rate" shall mean, for any date, a rate per annum equal to the higher of (i) the prime commercial lending rate of the Bank as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate, and (ii) the Federal Funds Rate in effect on such date plus 1/2 of 1%.
"CD Rate" shall mean, for each CD Rate Advance, the rate per annum payable by the Bank on the Matched Deposit.
"Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with the members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by the Bank from three Federal funds brokers of recognized standing selected by the Bank.
Interest shall be computed on the basis of a 360 day year for the actual number of days involved. Interest on any advance shall be payable monthly on the last day of each month, and at maturity. Upon prepayment of any advance the Borrower shall pay interest on the amount so prepaid to the date of such prepayment. If any payment on this note becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If the date for any payment of principal is so extended, interest thereon shall be payable for the extended time.
Advances bearing interest at Alternate Base Rate shall be payable ON DEMAND. Each CD Rate Advance shall be payable on the maturity date of the Matched Deposit. Advances hereunder may be prepaid in whole at any time or in part from time to time. Any advance hereunder which shall not be paid when due shall bear interest at a rate per annum equal to the Alternate Base Rate plus two percent (2%).
The Borrower hereby authorizes the Bank to accept telephonic instructions from a duly authorized representative of the Borrower to make an advance or receive a payment hereunder, and to endorse the amount of all advances made hereunder and all principal payments received hereunder, the interest rate applicable to each advance on the sheet attached to the note; provided that the failure of the Bank to so endorse the sheet attached to this note shall not affect the Borrower's obligations under this notice.
If the Bank shall made a new advance on a day on which the Borrower is to repay an advance hereunder, the Bank shall apply the proceeds of the new advance to make such repayment and only the amount by which the amount being advanced exceeds the amount being repaid shall be made available to the Borrower in accordance with the terms of this note.
The Bank shall charge the Borrower's deposit account maintained at the Bank for each principal prepayment made hereunder on the date made, and for each principal payment and for each interest payment due hereunder on the due date thereof. The Bank shall credit the Borrower's deposit account the amount of each advance made hereunder on the date of such advance, which credit shall be confirmed to the Borrower by standard advice of credit. The Borrower agrees that the actual crediting of the amount of the advance to the Borrower's deposit account shall constitute conclusive evidence that the advance was made, and the failure of the Bank to forward an advice of credit to the Borrower shall not affect the Borrower's obligation to repay such advance.
The Borrower hereby agrees to pay all costs and expenses incurred by the Bank incidental to or in any way relating to the Bank's enforcement of the obligations of the Borrower hereunder
or the protection of the Bank's rights hereunder, including but not limited to, reasonable attorneys' fees incurred by the Bank.
All advances hereunder are secured pursuant to the terms of a security agreement, executed by the Borrower in favor of the Bank of even date herewith as such agreement may be amended or modified from time to time, and the Bank each other holder of this note are entitled to all the benefits thereof.
Upon the occurrence of any of the following events, all CD Rate Advances made hereunder shall become immediately due and payable together with all accrued interest and any other amounts payable hereunder, upon declaration to that effect by the Bank without notice to the Borrower: (1) the failure of the Borrower to pay any principal, interest or other amount due under this note on the date when due; (2) the failure of the Borrower in the performance of any covenants contained in this note or in any instrument or agreement delivered in connection with this note; (3) the failure of the Borrower to pay when due any other liability of the Borrower for borrowed money; (4) the failure by the Borrower to furnish any financial information requested by the Bank; (5) any representation in any financial or other statement of the Borrower delivered to the Bank or any representation made or deemed made by the Borrower at the time of any advance shall be untrue when made or deemed made; or (6) the financial condition or credit standing of the Borrower shall be or become materially impaired in the sole opinion of the Bank.
All advances hereunder together with all accrued interest thereon shall become immediately and automatically due and payable, without demand, presentment, protest or notice of any kind, upon the insolvency, general assignment, receivership, bankruptcy or dissolution of the Borrower.
The Borrower does hereby forever waive presentment, demand, protest, notice of protest and notice of nonpayment or dishonor of this note.
THE BORROWER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF, BASED UPON, OR IN ANY WAY CONNECTED TO THIS NOTE.
THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND INTERPRETED AND ALL
RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
CADUS PHARMACEUTICAL CORPORATION
By /s/ James S. Reilly
-------------------------------
James S. Reilly
---------------------------------
(Print Name)
Title: Treasurer/Secretary
---------------------------
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Advances and Payments of Principal
Promissory Note - CADUS PHARMACEUTICAL CORPORATION
Date of Amount of *Interest Amount of Aggregate Unpaid Advance Advance Rate Payment Principal Amount - ------- ------- ---- ------- ---------------- |
*Indicate "CD Rate" or "ABR Rate"
THE BANK OF NEW YORK
NEW YORK'S FIRST BANK - FOUNDED 1784 BY ALEXANDER HAMILTON
530 FIFTH AVENUE, NEW YORK, N.Y. 10036
June 22, 1995
Cadus Pharmaceutical Corporation
777 Old Saw Mill River Road
Tarrytown, New York 10591
Attention: James Rielly
Controller
Gentlemen/Ladies:
The Bank of New York (the "Bank") is pleased to confirm that it has increased the secured line of credit that it holds available to Cadus Pharmaceutical Corporation (the "Borrower") from $1,500,000 to $2,500,000.
Extensions of credit under this line of credit shall be evidenced by, shall be payable as provided in, and shall bear interest at the rate specified in, a promissory note of the Borrower in the form included with this letter.
All Obligations of the Borrower to the Bank with respect to this line of credit shall be secured pursuant to various security agreements granting the Bank a first priority security interest in each of the Borrower's negotiable certificate of deposit(s) issued by the Bank in the aggregate principal amount of $2,500,000. The form of the security agreement to be furnished to the Bank is included with this letter.
As you know this line of credit is cancellable at any time by the Borrower or the Bank and any extension of credit under this line of credit is subject to the Bank's satisfaction, at the time of such extension of credit, with the condition (financial or otherwise), business, prospects, and operations of the Borrower. Unless cancelled earlier as provided in the first sentence of this paragraph, this line of credit shall be held available until June 30, 1996
Very truly yours,
THE BANK OF NEW YORK
PROMISSORY NOTE
$2,500,000 Dated: ________________, 1995
For Value Received, CADUS PHARMACEUTICAL CORPORATION, a corporation formed under the laws of the State of New York (the "Borrower"), hereby promises to pay to the order of THE BANK OF NEW YORK (the "Bank") at its 48 Wall Street, New York, New York office, the principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) or the aggregate unpaid principal amount of all advances made by the Bank to the Borrower (which aggregate unpaid principal amount shall be equal to the amount duly endorsed and set forth opposite the date last appearing on the sheet attached to this note), whichever is less.
Each advance hereunder shall bear interest, at the Borrower's option, at a rate per annum equal to (a) the Alternate Base Rate (as hereinafter defined) or (b) a CD Rate (as hereinafter defined) plus 1%. On or before the date of each advance made at the CD Rate ("a CD Rate Advance"), the Borrower shall deposit funds in a time deposit with the Bank in an amount equal to the principal amount of the requested advance which time deposit (the "Matched Deposit") shall have a maturity of not less than one month nor more than six months and shall be in a minimum amount of $50,000, and if greater, in integral multiples of $10,000.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to the higher of (i) the prime commercial lending rate of the Bank as publicly announced to be in effect from time to time, such rate to be adjusted automatically, without notice, on the effective date of any change in such rate, and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"CD Rate" shall mean, for each CD Rate Advance, the rate per annum payable by the Bank on the Matched Deposit.
"Federal Funds Rate" shall mean, for any day, the weighted average of the rates on overnight Federal funds transactions with the members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (of if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day which is a Business Day, the average of quotations for such day on such transactions received by the Bank from three Federal funds brokers of recognized standing selected by the Bank.
Interest shall be computed on the basis of a 360 day year for the actual number of days involved. Interest on any advance shall be payable monthly on the last day of each month, and at maturity. Upon prepayment of any advance the Borrower shall pay interest on the amount so prepaid to the date of such prepayment. If any payment on this note becomes due and payable on a day other than a Business day, such payment shall be extended to the next succeeding Business Day. If the date for any payment of principal is so extended, interest thereon shall be payable for the extended time.
Advances hearing interest at Alternate Base Rate shall be payable ON DEMAND. Each CD Rate Advance shall be payable on the maturity date of the Matched Deposit. Advances hereunder may be prepaid in whole at any time or in part from time to time. Any advance hereunder which shall not be paid when due shall bear interest at a rate per annum equal to the Alternate Base Rate plus two percent (2%).
The Borrower hereby authorizes the Bank to accept telephonic instructions from a duly authorized representative of the Borrower to make an advance or receive a payment hereunder, and to endorse the amount of all advances made hereunder and all principal payments received hereunder, the interest rate applicable to each advance on the sheet attached to the note; provided that the failure of the Bank to so endorse the sheet attached to this note shall not affect the Borrower's obligations under this note.
If the Bank shall make a new advance on a day on which the Borrower is to repay an advance hereunder, the Bank shall apply the proceeds of the new advance to make such repayment and only the amount by which the amount being advanced exceeds the amount being repaid shall be made available to the Borrower in accordance with the terms of this note.
The Bank shall charge the Borrower's deposit account maintained at the Bank for each principal prepayment made hereunder on the date made, and for each principal payment and for each interest payment due hereunder on the due date thereof. The Bank shall credit the Borrower's deposit account the amount of each advance made hereunder on the date of such advance, which credit shall be confirmed to the Borrower by standard advice of credit. The Borrower agrees that the actual crediting of the amount of the advance to the Borrower's deposit account shall constitute conclusive evidence that the advance was made, and the failure of the Bank to forward an advice of credit to the Borrower shall not affect the Borrower's obligation to repay such advance.
The Borrower hereby agrees to pay all costs and expenses incurred by the Bank incidental to or in any way relating to the Bank's enforcement of the obligations of the Borrower hereunder
or the protection of the Bank's rights hereunder, including but not limited to, reasonable attorneys' fees incurred by the Bank.
All advances hereunder are secured pursuant to the terms of a security agreement executed by the Borrower in favor of the Bank of even data herewith as such agreement may be amended or modified from time to time, and the Bank and each other holder of this note are entitled to all the benefits thereof.
Upon the occurrence of any of the following events, all CD Rate Advances made hereunder shall become immediately due and payable together with all accrued interest and any other amounts payable hereunder, upon declaration to that effect by the Bank without notice to the Borrower: (1) the failure of the Borrower to pay any principal, interest or other amount due under this note on the date when due; (2) the failure of the Borrower in the performance of any covenants contained in this note or in any instrument or agreement delivered in connection with this note; (3) the failure of the Borrower to pay when due any other liability of the Borrower for borrowed money; (4) the failure by the Borrower to furnish any financial information requested by the Bank; (5) any representation in any financial or other statement of the Borrower delivered to the Bank or any representation made or deemed made by the Borrower at the time of any advance shall be untrue when made or deemed made; or (6) the financial condition or credit standing of the Borrower shall be or become materially impaired in the sole opinion of the Bank.
All advances hereunder together with all accrued interest thereon shall become immediately and automatically due and payable, without demand, presentment, protest or notice of any kind, upon the insolvency, general assignment, receivership, bankruptcy or dissolution of the Borrower.
The Borrower does hereby forever waive presentment, demand, protest, notice of protest and notice of nonpayment or dishonor of this note.
THE BORROWER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF, BASED UPON, OR IN ANY WAY CONNECTED TO THIS NOTE.
THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND INTERPRETED AND ALL RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ James S. Rielly
------------------------
James S. Rielly
(Print Name)
Title: Secretary/Treasurer
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GENERAL LOAN AND SECURITY AGREEMENT
48 Wall Street, New York ____________________________, 19______
(Banking Office)
FOR VALUE RECEIVED, and in order to induce THE BANK OF NEW YORK (hereinafter referred to as the "Bank"), in its discretion, to make loans or otherwise extend credit at any time, and from time to time to, or at the request of, the undersigned (hereinafter referred to as "Borrower"), whether the loans or credit so extended shall be absolute or contingent, Borrower, jointly and severally, if more than one, hereby grants to the Bank, as security for all present or future obligations or liabilities of any and all kinds of Borrower to it, whether incurred by Borrower as maker, endorser, drawer, acceptor, guarantor, accommodation party or otherwise, matured or unmatured, secured or unsecured, absolute or contingent, joint or several, and howsoever or whensoever acquired by the Bank (all of which are hereinafter referred to as the "Obligations"), a security interest in and a lien upon all personal property and fixtures of Borrower now or hereafter existing or acquired and wherever located which are of the type which may be collateral under the Uniforms Commercial Code as in effect in the State of New York (hereinafter referred to as the "Code") on the date hereof, now or hereafter owned or acquired by Borrower, or in which Borrower may have an interest, including all goods (other than household goods as such term is defined in 12 CFR Part 227 unless the proceeds of the Obligation secured pursuant hereto are used to purchase such goods or such Obligation is incurred for a business purpose or to purchase real property), money, instruments, accounts, contract rights, documents, chattel paper and general intangibles of Borrower, including but not limited to any property specified in Schedule A hereto and also including all products and proceeds of, all accessories to, and substitutions for, all of the foregoing (all of which shall be hereinafter collectively referred to as the "Collateral").
Borrower hereby agrees to deliver to the Bank whenever called for by it such additional collateral security of a kind and of a market value satisfactory to the Bank, so that there will, at all times, be with the Bank a margin of security for the payment of all Obligations which shall be satisfactory to it. In addition to the Bank's security interest in the Collateral, it shall have, and Borrower hereby grants to the Bank, a security interest and a lien for all the Obligations in and upon any personal property of Borrower or in which Borrower may have an interest which is now or may at any time hereafter come into the possession or control of the Bank, or of any third party acting on its behalf, whether for the express purpose of being used by the Bank as collateral security or for safekeeping or for any other or different purpose including such personal property as may be in transit by mail or carrier for any purpose, or covered or affected by any documents in the Bank's possession or control, or in the possession or control of any third party acting on its behalf. Borrower hereby authorizes the Bank in its discretion, at any time, whether or not the Collateral is deemed by it adequate, to appropriate and apply upon any of the Obligations, whether or not due, any of such property of Borrower and to charge any of the Obligations against any balance of any account standing to the credit of Borrower on the books of the Bank (said additional personal property is also hereinafter referred to as the "Collateral").
If any of the following events shall occur with respect to any Obligor (which term shall include Borrower and any endorser or guarantor of any of the Obligations): (1) the failure of Borrower to furnish satisfactory additional Collateral upon demand: (2) the failure of any Obligor in the performance of any of such Obligor's covenants herein or in any instrument, document or agreement delivered in connection with any Obligation; (3) the death of the insured under any life insurance police held as Collateral, or the non-payment of any premiums on any such life insurance policy; (4) default by any Obligor with respect to the payment of any Obligation; (5) the insolvency, general assignment, receivership, bankruptcy, or dissolution of any Obligor or the filing of any petition by or against any Obligor with respect to any of the foregoing; (6) the death, dissolution or incompetence of any Obligor; (7) the financial condition or credit standing of any Obligor shall be or become materially impaired in the sole opinion of the Bank or any of its officers; (8) non-payment when due of any other liability of any Obligor; (9) the commencement of any proceeding, procedure or other remedy supplemental to the enforcement of a judgment against any Obligor; (10) any representation in any financial or other statement of any Obligor delivered to the Bank by or on behalf of any Obligor is untrue or incomplete; or (11) any Obligor shall fail, on request, to furnish any financial information or to permit inspection of such Obligor's books and records, then all Obligations shall become due and payable forthwith, upon declaration to that effect by the Bank, without notice to Borrower or any other Obligor, anything contained herein or in any other document, instrument or agreement to the contrary notwithstanding.
Upon failure of Borrower to pay any Obligation when becoming or made due, as aforesaid, the Bank shall have, in addition to all other rights and remedies allowed by law, the rights and remedies of a secured party under the Code as in effect at that time and, without limiting the generality of the foregoing, the Bank may immediately, without demand of performance and without notice of intention to sell or of time or place of sale or of redemption or other notice of demand whatsoever to Borrower, all of which are hereby expressly waived, and without advertisement, (a) sell at public or private sale, grant options to purchase or otherwise realize upon, in the State of New York, or elsewhere, the whole or from time to time any part of the Collateral upon which the Bank shall have a security interest or lien as aforesaid, or any interest which Borrower may have therein, and (b) exercise any and all rights, options, powers, benefits or privileges given to the Bank upon the life insurance policies, if any, held as collateral. After deducting from the proceeds of any such sale or other disposition of the Collateral all expenses (including all reasonable expenses for legal services of every kind and other expenses as set forth below), the Bank shall apply the residue of such proceeds toward the payment of any of the Obligations, in such order as the Bank shall elect, Borrower remaining liable for any deficiency, plus interest thereon, remaining unpaid after such application. If notice of any sale or other disposition is required by law to be given, Borrower hereby agrees that a notice sent at least two days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be reasonable notice of such sale or other disposition. Borrower also agrees to assemble the Collateral at such place or places as the Bank designates by written notice.
At any such sale or other disposition the Bank or any other person designated by the Bank may itself purchase the whole or any part of the Collateral sold, free from any right of redemption on the part of Borrower, which right is hereby waived and released.
The Bank may, without any notice to Borrower, in its discretion, whether or not any of the Obligations be due, in its name or in the name of Borrower, demand, sue for, collect and receive any money or property at any time due, payable or receivable on or on account of or in exchange for, and may compromise, settle or extend the time of payment of, any of the demands or obligations represented by any of the Collateral, and may also exchange any of the Collateral for other property upon the reorganization, recapitalization or other readjustment of the issuer, maker or other person who is obligated on or otherwise has liabilities with respect to the Collateral, and in connection therewith, may deposit any of the Collateral with any committees or depositary upon such terms as the Bank may in its discretion claim appropriate, and Borrower does hereby constitute and appoint the Bank Borrower's true and lawful attorney to compromise, settle or extend payment of said demands or obligations and exchange such Collateral as Borrower might or could do personally; all without liability or responsibility for action herein authorized and taken or not taken in good faith. The Bank is entitled at any time in its discretion to notify any account debtor or the obligor on any instrument to make payment to it, regardless of whether or not Borrower had been previously making collections on the Collateral, and the Bank may taken control of any proceeds of any of the Collateral.
Borrower agrees that the Collateral secures, and further agrees to pay on demand, all expenses (including reasonable expenses for legal services of every kind and cost of any insurance and payment of taxes or other charges) of or incidental to, the custody, care, sale or collection of, or realization upon, any of the Collateral or in any way relating to the enforcement or protection of the rights of the Bank hereunder.
Borrower agrees to mark its books and records as the Bank shall request in order to reflect the rights of the Bank granted herein, and the Bank may, in its sole discretion, take possession of the Collateral at any time, either prior to or subsequent to a default under any of the Obligations. Borrower agrees to maintain such insurance on the Collateral as the Bank may require. The Bank may, without any notice to Borrower, in its discretion, and for its own benefit, lend, use, transfer or repledge with any person, firm or corporation all or any part of the Collateral by itself or mingled with the property of others, in bulk or otherwise. The Bank may, without any notice to Borrower, sell, assign or transfer any of the Obligations and the Bank's rights and duties hereunder, and may deliver the Collateral, or any part thereof, to the assignee or transferee of any of the Obligations, who shall become vested with all the rights, remedies, powers, security interests and liens herein given to the Bank in respect thereto; and the Bank shall thereafter be relieved and fully discharged from any liability or responsibility in the premises.
The Bank may, without any notice to Borrower, in its discretion, transfer, or cause to be transferred, all or any part of the Collateral to its name, or to the name of its nominee, vote the Collateral so transferred, and receive income and make or receive collections, including money, thereon and hold said income and collections as Collateral or apply the said income and collections to any of the Obligations, the manner and distribution of the application to be made as the Bank shall elect.
Calls for Collateral, demand for payment or notice to Borrower may be given by leaving same at the address given below or any other address hereafter filed with the Bank, or by mailing some to such address with the same effect as if delivered personally. Such notice given in the manner herein provided shall be effective whether or not received by Borrower. Borrower agrees not to change any of its places of business, remove any records of Borrower relating to any of the Collateral or move any of the Collateral without given the Bank thirty days' prior written notice.
With respect to the Collateral, the Bank shall be under no duty to send notices, perform services, exercise any rights of collection, enforcement, conversion or exchange, vote, pay for insurance, taxes or other charges or take any action of any kind in connection with the management thereof and its only duty with respect thereto shall be to use reasonable care in its custody and preservation while in its possession, which shall not include any steps necessary to preserve rights against prior parties.
Borrower hereby authorizes the Bank at Borrower's expenses to file one or more financing statements to perfect the security interests granted herein without Borrower's signature thereon, and Borrower agrees to do, file, record, make, execute and deliver all such acts, deeds, things, notices, instruments, and financing statements as the Bank may request in order to perfect and enforce the rights of the Bank herein.
If at any time it is necessary in the opinion of counsel to the Bank that any or all of the securities held as Collateral (the "Pledged Securities") be registered under the Securities Act of 1933, as amended, or that an indenture with respect thereto be qualified under the Trust Indenture Act of 1939 in order to permit the sale or other disposition of the Pledged Securities, Borrower shall at the Bank's request and at the expense of Borrower use the best efforts of Borrower promptly to cause the registration of the Pledged Securities and the qualification of such indenture and to continue such registration and qualification as long as deemed appropriate by the Bank.
Borrower hereby authorizes the Bank to date this agreement as of the date of the granting of any Obligation secured hereby and to complete any blank space herein (including any blank space in Schedule A) according to the terms upon which said Obligation was granted.
No failure on the part of the Bank to exercise, and no delay in exercising, any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Bank of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the Bank or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Bank from time to time.
Borrower and each endorser or guarantor of any of the Obligations expressly waives presentment and demand for payment, protest and notice of protest and of non-payment. Unless the text otherwise requires, all terms used herein shall have the meanings specified in the Code.
THE BANK AND BORROWER HEREBY WAIVE AND AGREE TO WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM INSTITUTED WITH RESPECT TO ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
The provisions of this agreement shall be construed and interpreted and all rights and duties hereunder determined in accordance with the laws of the State of New York.
Every provision of this agreement is intended to be severable; if any term or provision of this agreement shall be invalid, illegal or unenforceable for any reason whatsoever, the validity, legally and enforceability of the remaining provisions hereof shall not in any way be affected or impaired hereby.
The Borrower hereby authorizes the Bank to renew the certificate of deposit(s) from time to time on such terms and at a rate of interest that the Bank, in its sole discretion, shall select on the date of such rollover.
NAME OF BORROWER ADDRESS OF BORROWER
CADUS PHARMACEUTICAL CORP. 777 Old Saw Mill River Road
SIGNATURE OF BORROWER /s/ J.S. Reilly Tarrytown, New York 10591
Title: Controller
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NAME OF BORROWER___________________ ADDRESS OF BORROWER____________________
SIGNATURE OF BORROWER_________________ ____________________________________
SCHEDULE A
Property specifically included as "Collateral" for purposes of the within General Loan and Security Agreement:
Negotiable certificate of deposit(s) issued on ______________, by the Bank and payable to the order of the Borrower in the aggregate principal amount of ______________, and all renewals, extensions, amendments and modifications thereof, replacements and substitutions thereof, and any and all proceeds of the foregoing. Certificate of deposit number ______________.
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
CONSULTING AGREEMENT
AGREEMENT dated as of February 1, 1994 by and between CADUS PHARMACEUTlCAL CORPORATION (the "Corporation"), a Delaware corporation having its offices at 180 Varick Street, New York, New York 10014-4606 and James R. Broach ("Consultant").
WITNESSETH:
WHEREAS, the Corporation desires to retain Consultant to perform consulting services on its behalf, and Consultant desires to render such services on behalf of the Corporation, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows:
1. RETENTION OF SERVICES.
The Corporation hereby retains Consultant to perform consulting services, and Consultant agrees to render such services to the Corporation, upon the terms and conditions hereinafter set forth.
2. TERM.
The retension of Cosultant by the Corporation hereunder shall be effective and shall commence on the date hereof.
3 EXTENT OF SERVICES.
Upon the request of the Corporation, and on such dates and at such times during the term hereof as are agreed upon by the Corporation and Consultant, Consultant would continue to serve as the full time Director of Research. Consultant would be needed at least one day per week in the offices of Cadus or attending outside meetings. This agreement is addition to the obligations set forth in the Consultant's agreements as a founder and SAB member.
4. COMPENSATION.
As full and complete compensatrion for the consulting services to be rendered by Consultant, the Corporation shall pay to Consultant a consulting fee of [c.i.]
5. REIMBURSEMENT OF EXPENSES.
The Corporation will reimburse Consultant for reasonable out-of-pocket expenses properly incurred by Consultant on behalf of and directly for the benefit of the Corporation in rendering his services hereunder; provided, however, that Consultant shall submit written vouchers to the Corporation evidencing such expenses and the purpose for which the same were incurred.
6. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
Consultant acknowledges and agrees that his rendering, of consulting services to the Corporation will necessarily involve his understanding of and access to 'trade secrets" (as hereinafter defined) and confidential information pertaining to the Corporation, its proprietary technology and its business. Accordingly, Consultant agrees that during the term of his retention,
and at all other times thereafter, he will not disclose to any unauthorized third party or use for his own benefit any of the trade secrets or confidential information pertaining to the Corporation, its proprietary technology or its business. For the purposes hereof, "trade secrets" is information, not generally known to the trade, which gives the Corporation an advantage over its competitors. Trade secrets include, without limitation, research being planned and developed, research methods and processes, materials used in research, inventions, information concerning the filing or pendency of patent applications, and the Company's business and legal plans, finances, competitive position, customers and vendors. This Paragraph 6 shall not apply to information which (i) is in the public domain at the time of disclosure, (ii) is properly in the possession of Consultant prior to the time of disclosure, or (iii) after disclosure enters the public domain through no act or omission of Consultant.
7. THE CORPORATION'S PROPERTY
Consultant further agrees that all memoranda, notes, records, notebooks, letters, instruments, drawings designs, models, prototypes, specifications, customer lists, proposals, business plans, materials, other documents, databases or copies thereof, or any other confidential information of any type or description, made or compiled by Consultant, or made available to Consultant, concerning the Corporation, its proprietary technology or its business, shall be the Corporation's sole property and shall be delivered to the Corporation upon the termination of the Consultant's retention or at any other time on request.
8. OWNERSHIP OF INVENTIONS.
Consultant agrees that any inventions, improvements, processes, designs, materials, products, developments or discoveries (whether or not subject to patent, copyright or trademark protection) (all of the foregoing being hereinafter referred to as "Intangible Property") that he may conceive, make, invent, develop, suggest or reduce to practice during the course of his retention by the Corporation (whether individually or jointly with any other person or persons), at the facilities of the Corporation or in pursuit of projects delegated to him by the Corporation, relating in any way to the business of the Corporation or the general biotechnology industry of which the Corporation is a part, shall be the sole, exclusive and absolute property of the Corporation. Consultant will immediately disclose in writing any such Intangible Property to the Corporation and will, at any time, whether during or following his retention by the Corporation, at the Corporation's request and without additional compensation, execute and deliver to the Corporation such assignments, certificates or other instruments as the Corporation may from time to time deem necessary or desirable to effect disclosure thereof and/or to evidence, establish, maintain, perfect, protect, enforce or defend the Corporation's right, title and interest in and to such Intangible Property. Consultant further agrees, upon the request of the Corporation, to execute any patent, trademark or copyright documents covering such Intangible Property, as well as any documents which may be considered necessary or helpful by the Corporation in the prosecution of applications for patent, trademark or copyright protection thereon in the United States and/or any foreign countries, and in the prosecution of applications for the reissue or renewal of such patents, copyrights or trademarks, or which may relate to any litigation or controversy in connection therewith, all expenses incident to the filing of such applications, the prosecution thereof and the conduct of any such litigation to be borne by the Corporation. Upon request by the Corporation, Consultant shall assist in locating writings and other physical evidence relating to the Intangible Property, shall provide unrecorded information relating to such Intangible Property, and shall give testimony in any
proceeding in which any of the Intangible Property, or any application or patent, copyright or trademark relating thereto, may be involved.
9. COPYRIGHTS.
Consultant shall promptly disclose to the Corporation any and all publishable and/or copyrightable material which he produces, composes, or writes, individually or in collaboration with others, which arises out of work delegated to him by the Corporation. Consultant shall assign to the Corporation all his interest in such copyrightable materials, and will sign documents and do all other acts necessary to assist the Corporation in obtaining copyrights on such material in any and all countries
10. NON-SOLICITATION OF EMPLOYEES.
During the term of this Agreement and for a period of one (1) year thereafter, Consultant will not directly or indirectly: (i) employ, hire, or cause to be employed or hired, any person who is then employed by the Corporation or was employed within six (6) months prior thereto; or (ii) cause, invite, solicit, entice or induce any such person to terminate his employment with the Corporation.
11. NON-COMPETITION.
During the term of this Agreement and for a period of two years thereafter, Consultant shall not, without the prior written consent of the Board of Directors of the Corporation, either directly or indirectly through any other person, firm corporation engage or participate in, tender advisory or other services to or make any financial investment in any firm, corporation or other business enterprise engaged in developing yeast based assays for drug discovery in G coupled receptor signaling or ABC transporters. Nothing contained herein, however, shall restrict Consultant from (i) acquiring any debt security of any publicly-held company so long as such investment does not give him the right to control or influence the policy or decisions of any such business or enterprise or (ii) acquiring or holding stock in any publicly-held company so long as such ownership does not exceed 5% of the total outstanding stock of such company. If consultant becomes employed within the commercial and/or for-profit sector during the term of this agreement, then the Corporation and the Consultant each reserve the right to terminate this agreement
12. INJUNCTIVE AND OTHER EQUITABLE RELIEF
Consultant acknowledges that, in the event of his breach or threatened breach of any of the provisions of this Agreement, the Corporation would sustain great and irreparable injury and damage. Therefore, in addition to any other remedies which the Corporation may have under this Agreement or otherwise, the Corporation shall be entitled to the remedies of injunction, specific performance and other equitable relief for a breach or threatened breach by Consultant of any of the provisions of this Agreement. This Paragraph 12 shall not however, be construed as a waiver of any of the rights which the Corporation have for damages or otherwise.
13. NO CONFLICTING AGREEMENTS.
Consultant represents and warrants that he is not a party to any agreement, contract or understanding, whether employment or otherwise, which would in any way restrict or prohibit him from performing services or entering into any other obligations in accordance with the terms and conditions of this Agreement.
14. RELATIONSHIP OF THE PARTIES.
(a) In all activities hereunder, Consultant shall be an independent contractor and the Corporation shall have no Liability whatsoever for withholding, collection or payment of income taxes or for taxes of any other nature on behalf of Consultant or any of his employees who shall furnish services hereunder.
(b) Nothing contained herein shall be deemed to (i) make either party or any employee of such party agent, employee, joint venturer or partner of the other party or (ii) provide either party or any employee of such party, with the power or authority to act on behalf of the other party or to bind the other party to any contract, agreement or arrangement with any other person.
(c) All personnel employed or otherwise engaged by either party shall be the agents, servants, employees of such party only, and the other party shall incur no obligations or liabilities, express or implied, by reason of, or with respect to, the conduct of such personnel.
15. ASSIGNMENT.
This Agreement may not be assigned by either party, and no obligation owed or performable by either party hereunder may be delegated, without the prior written consent of the other party. Any attempted assignment or delegation either party without any such requisite prior written consent of the other party shall be void and ineffective for all purposes.
16. NOTICES.
All notices, requests, consents or other communications given by either party hereto shall be in writing and shall be deemed duly given if personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, to the other party at its address set forth below or at such other address as such other party may hereafter designate in manner herein provided. If to the Corporation, at:
Cadus Pharmaceutical Corporation
Attn: President
180 Varick Street
New York, New York 10014-4606
If to Consultant, at:
James R. Broach
360 E. 88th Street, Apt. 2A
NY, NY 10128
17. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations representations and agreements made by and between such
parties. No alteration, amendment or modification of any of the terms or provisions of this Agreement shall be valid unless made pursuant to an instrument in writing, signed by each of the parties hereto.
18. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York.
19. CONSENT TO EXCLUSIVE JURISDICTION AND SERVICE OF PROCESS.
The Corporation and Consultant hereby agree that any dispute which may arise between them out of or in connection with this Agreement, its construction, interpretation, effect, performance or nonperformance, or the consequences, thereof, shall be litigated exclusively in a state court of the State of New York or the United States District Court for the South District of New York. Accordingly, to the extent the parties are not otherwise subject to any such court's personal jurisdiction, acceptance of the terms and conditions of this Agreement constitutes consent by both parties to sue and be sued in such court. Each of the Corporation and Consultant agrees that any and all process directed to it in any such litigation may be served upon it outside of the State of New York with the same force and effect as if service had been made within the State of New York.
20. PARAGRAPHS HEADINGS.
The paragraph headings contained in this Agreement are for reference purposes only and shall not effect any way the meaning or interpretation of this Agreement.
21. SEVERABILITY; REFORMATION.
If at any time subsequent to the date hereof any provisions of this Agreement shall be held by any court competent jurisdiction to be illegal, void, or unenforceable, such provisions shall be of no force and effect, but the illegality unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any provision of the Agreement. Furthermore, if any provision of this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the fullest extent compatible with then existing, applicable law.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION CONSULTANT By: /s/ JEREMY LEVIN By: /s/ JAMES R. BROACH ------------------------------- ---------------------------- Jeremy Levin, President and CEO James R. Broach |
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
AMENDED AND RESTATED LICENSE AGREEMENT
This Agreement is made this the 10th day of May, 1994, by and between Duke University ("DUKE"), a nonprofit educational and research organization organized under the laws of North Carolina, and having its principal office at Durham, North Carolina, and Cadus Pharmaceutical Corporation ("CADUS"), a corporation organized under the laws of Delaware and having its principal place of business at 180 Varick Street, New York, New York.
WHEREAS, Robert Lefkowitz, Marc Caron, Henrik G. Dohlman and Klim King have invented "G-Protein Coupled Receptor Screening Technology" (the "Invention"), and DUKE owns all rights, title, and interest in and to such Invention, including related patents, patent applications, and unpatented technology; and
WHEREAS, DUKE has the right to grant licenses to the foregoing Invention, and wishes to have the Invention utilized in the public interest; and
WHEREAS, DUKE has granted an exclusive license to CADUS to the Invention and related patent rights and technology pursuant to a License Agreement, dated March 12, 1993, (the "Original License Agreement"); and
WHEREAS, DUKE and CADUS wish to amend the Original License Agreement in certain respects and to restate it in its entirety;
NOW, THEREFORE, in consideration of the terms and conditions set forth herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.01. "Invention" shall mean the Yeast based G-Protein Coupled Receptor Screening Technology, as invented by Robert Lefkowitz, Marc Caron, Henrik G. Dohlman and Klim King and described in King et al, "Control of Yeast Mating Signal Transduction by a Mammalian beta-2 Adrenergic Receptor and Gs alpha subunit, Science, pp121-123, October 5, 1990, and in PCT patent application WO 92/05244, published 2 April 1992.
1.02. "Patent Rights" shall mean any and all United States and foreign patent applications now or hereafter filed and any patent now or hereafter issued on any such patent applications, and substitutes, reexaminations, extensions, or reissues thereof. As of the date hereof no patent has issued. US. Patent Application Serial No. 07,581,714 has been filed.
1.03. "Subject Technology" shall mean the technology licensed hereunder described in detail in documents referenced in Paragraph 1.01, alterations thereto that are and are hereafter during the term of this Agreement conceived and/or reduced to practice by DUKE, its employees, faculty members, or students as evidenced by written records.
1.04. "Product" shall mean any human medical therapeutic compound whose utility was initially identified by CADUS utilizing a process that infringes one or more claims of the Patent Rights.
1.05. "Net Sales" shall mean the amount billed and received by CADUS or an Affiliate from the sale for commercial use of Products to independent third parties, less five percent (5%) of the billed amount to cover discounts, credits, returned goods, freight charges, taxes and similar adjustments. In the event a Product is sold in the form of a combination product containing one or more active ingredients other than such Product (combination products), Net Sales from such combination products shall be calculated by multiplying actual Net Sales of such Products by the fraction A/(A+B) where A is the invoice price of the given Product if sold separately by CADUS or an Affiliate, and B is the total invoice price of any other active component or components in the combination if sold separately by CADUS or an Affiliate. If the given Product and the other active component or components in the combination are not sold separately by CADUS or an Affiliate, Net Sales for purposes of determining royalties of the combination shall be calculated by multiplying Net Sales of the combination by the fraction C/(C+D) where C is number of Products and D is number of other active ingredients. However, at no time shall the value of the fraction A/(A+B) or the fraction C/(C+D) be less than 1/3 for the purposes of calculating Net Sales.
1.07. "Affiliate" or "Affiliates" shall mean any company in which CADUS owns or controls at least fifty-one (51) percent of the stock entitled to vote in election of members of the Board of Directors.
1.08. "Effective Date" shall mean March 1, 1993.
1.09. "Licensed Know-how" shall mean all data, confidential information or articles representing confidential information on the part of DUKE relating to the Invention including, but not limited to, laboratory and human clinical data, technical information, knowledge, techniques, processes, systems, formulae, results of experimentation, and records pertaining thereto in which DUKE has any rights on the Effective Date or which shall be subsequently acquired by DUKE during the term of this Agreement.
1.10. "New Chemical Entity" shall mean any compound that has not been previously sold as a pharmaceutical product at the time of first sale by CADUS.
1.11. "CADUS Technology" shall mean all data, information, technology, or special ability on the part of the CADUS relating to the Invention including, but not limited to, laboratory and clinical data, technical information, knowledge, techniques, processes, systems, formulae, results of experimentation, and records pertaining thereto in which CADUS has any rights on the Effective Date or which shall be subsequently acquired by CADUS during the term of this Agreement.
1.12. "Clinical Milestone Payment" shall mean cash revenues received by CADUS from a third party, pursuant to a license agreement, upon the licensee achieving specific milestones in the FDA approval process for a Product. Any and all other payments received by CADUS from third parties, including, but not limited to, proceeds from the sale of stock or research and development payments shall not be considered Clinical Milestone Payments.
ARTICLE 2 - LICENSE
2.01. DUKE hereby grants to the CADUS and CADUS hereby accepts from DUKE, upon the terms and conditions herein specified, an exclusive, worldwide license to use Subject Technology during the term of this Agreement. CADUS shall have the right to sublicense its rights hereunder without the consent of DUKE. The term of the license granted hereunder is as set forth in Section 7.01 hereof.
2.02. Should this Agreement be terminated for any reason whatsoever, CADUS and DUKE agree that all sublicenses shall remain in effect and shall be assigned directly to DUKE, subject to approval of the sublicensee.
2.03. Within thirty (30) days following the Effective Date of this Agreement and thereafter during the period of this Agreement, DUKE agrees to provide CADUS with copies of all Licensed Know-how it may have or later obtain, and copies of any and all patents or patent applications owned or controlled by the DUKE covering the Invention or the use of the Invention or processes for the manufacture of the Invention, including all Patent Office actions received and amendments filed, if any, relative thereto and all documents relevant to prosecution of the patent(s).
2.04. CADUS agrees to use the Subject Technology to seek to identify Products. CADUS also agrees to develop Products so identified in accordance with the development schedule set forth on attached Exhibit A. CADUS will also test, seek to obtain required government approvals for, and thereafter make reasonable efforts to market any such Product. Variations from that plan must be approved by DUKE in writing. Such approval shall not be unreasonably withheld. Notwithstanding the foregoing, CADUS shall have the right to license any Product to a third party which undertakes to develop, test, seek to obtain government approvals for, and thereafter market such Product.
ARTICLE 3 - PAYMENTS
3.01. In consideration of the rights granted to CADUS by DUKE under Article 2 hereof, CADUS will make payments to DUKE as follows:
ARTICLE 4 - ROYALTIES. RECORDS. AND REPORTS
4.01(a). In consideration of the exclusive license granted CADUS herein,
CADUS shall pay to DUKE a royalty based on a percentage of Net Sales by CADUS of
any FDA approved Product:
- --------------------------------------------------------------------------------
New Chemical Entity [c.i.] of the first [c.i.]
in Net Sales,
|
4.01(b). MINIMUM ROYALTIES. Beginning in calendar year 1995, if the royalties calculated in accordance with Paragraphs 4.01(a) above and 4.02 below do not total at least [c.i.] in a given year, CADUS shall pay to DUKE the difference between [c.i.] and the amount so calculated.
4.02. With respect to sublicenses granted by CADUS for use of Subject
Technology, CADUS shall pay royalties to DUKE at the rate of the lesser of
[c.i.] per year per sublicense or [c.i.] of the annual fees and royalties
received each year from each sublicensee which is not an Affiliate. With respect
to licenses granted by CADUS for each Product, CADUS shall pay to DUKE [c.i.] of
the Clinical Milestone Payments and royalties that CADUS receives from each
licensee which is not an Affiliate.
4.03. If CADUS is obligated to pay royalties with respect to a Product to more than one entity and all such other entities agree to the same percentage reduction in CADUS's royalty obligation to them with respect to such Product, DUKE shall accept an identical percentage reduction in the royalties payable under this Agreement.
4.04. All Payments made by CADUS pursuant to Section 3.01 hereof shall be fully credited against royalties payable pursuant to sections 4.01 and 4.02; provided, however, that the amount of such credit for any one royalty period shall not exceed [c.i.] percent of the royalties which would otherwise be payable to DUKE for such royalty period.
4.05. CADUS shall render to DUKE on an annual basis a written account of Net Sales. CADUS and its Affiliates shall keep full, true, and accurate books of accounts and other records containing all particulars which may be necessary to reasonably ascertain and verify properly such Net Sales. Upon DUKE's request and at DUKE's sole expense, CADUS and its Affiliates shall permit an independent Certified Public Accountant selected by DUKE (except one to whom CADUS has some reasonable objections) to have access during ordinary business hours to such of CADUS's or its Affiliates' records as may be necessary to determine, in respect of any quarter ending not more than two (2) years prior to the date of such request, the correctness of any report made under this Agreement.
4.06. During the term of this Agreement, representatives of DUKE will meet with representatives of CADUS at times and places mutually agreed upon to discuss the progress and results, as well as ongoing plans, with respect to the evaluation and development of Inventions licensed to CADUS. Provided, however that should DUKE's personnel be required by CADUS to consult with CADUS outside of Durham, North Carolina, CADUS will reimburse reasonable travel and living expenses incident thereto.
4.07. FORCE MAJEURE - GOVERNMENT INTERFERENCE. In the event CADUS is unable to make, have made, use or sell Products or Subject Technology because it is prevented, restricted, or interfered with by reason of any cause beyond the control of CADUS, including but not limited to fire, strikes or labor disputes, or any law, regulation or policy of the Federal or any State or local government or any agency thereof, CADUS, upon written notice to the DUKE, shall be excused from making the payments provided for in paragraph 3 and from adhering to commitments provided for in paragraph 4, during the time of such prevention, restriction or interference. CADUS shall make a diligent effort to correct any restrictions thereto. Failure to do so shall be considered a breach of this Agreement.
4.08. MANDATORY LICENSES. In the event local laws or regulation in any country shall require DUKE to enter into a mandatory, royalty-free license, no royalties shall be due DUKE from CADUS with respect to Net Sales in such country.
4.09. Royalties shall be payable from the country in which they are earned and subject to foreign exchange regulations then prevailing in such country, paid at such place as DUKE may, from time to time, designate and shall be payable to DUKE. Unless otherwise agreed to by the parties hereto, royalties shall be remitted in United States Dollars. When, and if, all parties hereto agree that royalties shall be paid in a currency other than the currency of the country in which the royalties are earned, such royalties shall be first determined in the currency of the country in which they are earned and then converted to their equivalent in the currency of the country for which the parties have agreed royalties shall be paid. Such conversion shall be made using the buying rates of exchange quoted by CITIBANK (or its successor in interest ) in New York, New York as of the close of the last business day of the calendar quarterly period in which the royalties were earned.
4.10. In the event that CADUS, its Affiliates, or its third party sublicensees are unable as a result of legal or government restrictions to remit royalties from any country in which sales of Products are made, CADUS, its Affiliates, or its third party sublicensees, as the case may be, shall deposit, if possible, the appropriate royalties in a bank account in such country agreed by DUKE, such agreement not to be unreasonably withheld. For so long as such restriction applies, CADUS, its Affiliates, or third party sublicensees shall be relieved of any further obligations to DUKE in respect of such royalties except that of reporting to DUKE under paragraph 3.10 of this Agreement the amounts of royalty payable and so deposited.
4.11. TAXES WITHHELD. Any income or other tax that CADUS, its Affiliates, or its third party sublicensees are required to withhold on behalf of the DUKE with respect to the royalties payable to the DUKE under this Agreement shall be deducted from said royalties prior to remittance to the DUKE; provided however, that in regard to any tax so deducted, CADUS, its Affiliates, and its third party sub-licensees shall give or cause to be given to the DUKE such assistance as may reasonably be necessary to enable the DUKE to claim exemption therefrom or credit therefore, and in each case shall furnish the DUKE proper evidence of the taxes paid on its behalf.
4.12. In the event of a judgment in any suit requiring CADUS to pay a royalty to a third party, or in the event of a settlement of such suit requiring royalty payments to be made, applicable royalty payments due the DUKE under this Agreement shall be correspondingly reduced by the amount due under the requirement of such judgment or under the terms of such settlement.
ARTICLE 5 - PATENTS
5.01. Beginning upon the Effective Date of this Agreement, CADUS shall have responsibility for the filing, prosecuting, and maintaining of the appropriate United States patent protection for the Subject Technology, and all of the expenses of such protection shall be paid by CADUS. CADUS shall reimburse DUKE for all patent administration expenses, including legal expenses, which have been incurred through January 31, 1993, up to a maximum amount of [c.i.] , and all such expenses incurred by DUKE from February 1, 1993, through the effective date of this Agreement. CADUS shall keep DUKE advised as to the prosecution of such applications by forwarding to DUKE copies of all official correspondence relating thereto. DUKE agrees to cooperate with CADUS in the prosecution of all patent applications to insure that such applications reflect, to the best of DUKE's knowledge, all items of commercial and technical interest and importance including, but not limited to, disclosing material art, commenting on patent office actions and executing all lawful declarations deemed desirable by CADUS. As of the date of this Agreement, CADUS has paid to DUKE a total of [c.i.] for patent administration expenses.
5.02. CADUS shall designate the foreign countries, if any, in which CADUS desires patent protection, and CADUS shall proceed to obtain such protection. CADUS shall pay all expenses with regard to such foreign patent protection. DUKE may elect to seek patent protection in countries not so designated by CADUS, in which case DUKE shall be responsible for all expenses attendant thereto. In such instances, however, CADUS shall forfeit its rights under this license agreement as to those countries unless CADUS shall agree to pursue such protection within thirty (30) days after receiving written notice that DUKE intends permanently to cancel CADUS's rights with respect to that country.
5.03. CADUS shall give DUKE prompt notice of such claim or allegation received by it that the use of Subject Technology constitutes an infringement of a third party patent or patents. If CADUS is obligated to make payments to a third party for the purpose of obtaining a license required by CADUS for use of the Subject Technology, all such payments may be deducted by CADUS from the royalties due to the DUKE under this Agreement, except that the amount of such deduction for any one royalty period shall not exceed [c.i.] of the royalties which would otherwise be payable to DUKE for such royalty period. CADUS shall have the primary right and responsibility at its own expense to defend and control the defense of any such claim against CADUS, by counsel of its choosing. DUKE agrees to cooperate with CADUS in any reasonable manner deemed by CADUS to be necessary in defending or prosecuting such action. CADUS shall reimburse DUKE for all reasonable expenses incurred in providing such assistance. Notwithstanding the foregoing, DUKE shall, in its sole discretion and at its own costs, be entitled to participate through counsel of its own choosing in any such action.
5.04. In the event, in its sole discretion, CADUS elects to obtain additional patent coverage on subject matter relating to Subject Technology not referenced in 1.02, in the United States and in foreign countries in the name of the inventor or in the name of DUKE, as the case may be, CADUS shall so advise DUKE, in writing, and the provisions of paragraphs 5.01 and 5.02 shall apply. Conversely, in the event CADUS elects not to obtain patent coverage on subject matter relating to Subject Technology, it shall so advise DUKE in writing and DUKE shall have the option to file such patent application on its own behalf, at its own cost and expense, and CADUS shall thereafter have no rights under such applications and resulting patents.
ARTICLE 6 - GOVERNMENT CLEARANCE. PUBLICATION. OTHER USE.
EXPORT
6.01. CADUS agrees to use reasonable efforts to have Subject Technology cleared for marketing in those countries in which CADUS intends to sublicense the Subject Technology by the responsible government agencies requiring such clearance. To accomplish such clearances at the earliest possible date, CADUS agrees to file, according to the usual practice of CADUS, any necessary data with such government agencies.
6.02. CADUS further agrees that the right of publication of the Invention and such Subject Technology shall reside in the inventor and other staff of DUKE. DUKE shall provide a copy of such publications sixty (60) days in advance of such submission for publication for review by CADUS, but such review will be in no way construed as a right to restrict such publication. CADUS shall also have the right to publish and/or co-author any publication regarding the application of the Subject Technology.
6.03. It is agreed that, notwithstanding any provisions herein, DUKE shall have a non-transferable right to make and use, but not to sell the Subject Technology and Patent Rights for its own educational, teaching, research, and clinical purposes without restriction and without payment of royalties or other fees. However, all commercial applications arising from such uses are exclusively licensed to CADUS hereunder and are subject to terms of this Agreement
6.04. This Agreement is subject to all of the United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes, and other commodities and technology.
ARTICLE 7 - DURATION AND TERMINATION
7.01. Subject to earlier termination as provided in paragraphs 7.02, 7.03, and 7.04, this Agreement shall begin on the Effective Date and shall continue until the earliest to occur of (i) the expiration of all issued claims under the Patent Rights, (ii) the determination (by a court of competent jurisdiction from which no appeal is or can be taken) of the invalidity or unenforceability of all issued claims under the Patent Rights, or (iii) the abandonment by DUKE of all claims under the Patent Rights. Notwithstanding the foregoing, when and as any claim under said Patent Rights is abandoned, expires, or is declared invalid or unenforceable (by a court or tribunal of competent jurisdiction from which no appeal is or can be taken), CADUS shall be entitled to use, practice, and sublicense each such abandoned, expired or invalid claim without restriction or further obligation or liability to DUKE hereunder or at law.
7.02. CADUS may terminate this Agreement at any time by giving DUKE written notice at least [c.i.] prior to such termination.
7.03. Either party may immediately terminate this Agreement for fraud, willful misconduct, or illegal conduct of the other party upon written notice of same to that other party. Except as provided above, if either party fails to fulfill any of its obligations under this Agreement, the non-breaching party may terminate this Agreement, upon written notice to the breaching party, as provided below. Such notice must contain a full description of the event or occurrence constituting a breach of the Agreement. The party receiving notice of the breach will have the opportunity to cure that breach within thirty (30) days of receipt of notice. If the breach is not cured within that time, the termination will be effective as of the forty-fifth (45th) day after receipt of notice. A party's ability to cure a breach will apply only to the first two breaches properly noticed under the terms of this Agreement, regardless of the nature of those breaches. Any subsequent breach by that party will entitle the other party to terminate this Agreement upon proper notice.
7.04. If during the term of this Agreement, CADUS shall become bankrupt or insolvent or if the business of CADUS shall be placed in the hands of a receiver or trustee, whether by the voluntary act of CADUS or otherwise, or if CADUS shall cease to exists as an active business, this Agreement shall to the extent permitted by law, immediately terminate.
ARTICLE 8 - GOVERNING LAW
This Agreement shall be construed as having been entered into the State of North Carolina and shall be interpreted in accordance with and its performance governed by the laws of the State of North Carolina.
ARTICLE 9 - ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto.
ARTICLE 10 - NOTICES
It shall be a sufficient giving of any notice, request, report, statement, disclosure or other communication hereunder, if the party giving the same shall deposit a copy thereof in the Post Office in certified mail, postage prepaid, addressed to the other party at its address hereinafter set forth or at such other address as the other party shall have theretofore in writing designated:
DUKE
Duke University
Office of Science and Technology
001 Allen Building
Durham, North Carolina 27706
CADUS
Cadus Pharmaceutical Corporation
President and CEO
180 Varick Street
New York, NY 10014
The date of giving any such notice, request, report, statement, disclosure or other communications, and the date of making any payment hereunder required (provided such payment is received), shall be the US. postmark of such envelope if marked or actual date of receipt if delivered otherwise.
ARTICLE 11 - INDEMNITY. INSURANCE. REPRESENTATIONS. STATUS
11.01. CADUS agrees to indemnify, hold harmless, and defend DUKE, its trustees, officers, employees, and agents, against any and all claims, suits, losses, damages, costs, fees, and expenses, including attorney fees, resulting from or arising out of the exercise of this license. CADUS shall not be responsible for the negligence or intentional wrongdoing of DUKE. However, DUKE does warrant that it has complied with the duty of disclosure to the U.S. Patent and Trademark Office.
11.02. At time of sales of Product in accordance with this Agreement, CADUS shall maintain in force at its sole cost and expense with reputable insurance companies, general liability insurance and products liability insurance coverage in an amount reasonably sufficient to protect against liability under Article 11.01 above. DUKE shall have the right to ascertain from time to time that such coverage exists, such right to be exercised in a reasonable manner.
11.03. Nothing in this Agreement shall be deemed to be a representation or warranty by DUKE of the validity of any of the patents or the accuracy, safety, efficacy, or usefulness for any purpose of any Subject Technology. DUKE shall have no obligation, express or implied, to supervise, monitor, review, or otherwise assume responsibility for the production, manufacture, testing, marketing, or sale of any Product, and DUKE shall have no liability whatsoever to CADUS or any third parties for or on account of any injury, loss, or damage, of any kind or nature, sustained by, or any damage assessed or asserted against, or any other liability incurred by or imposed upon CADUS or any other person or entity arising out of or in connection with or resulting from:
a. the production, use, or sale of any Product
b. the use of any Subject Technology or any advertising or other promotional activities with respect to any of the foregoing.
11.04. Neither party hereto is an agent of the other party for any purpose whatsoever.
ARTICLE 12 - USE OF A PARTY'S NAME
12.01. Neither party will, without the prior written consent of the other party, use in advertising, publicity, or otherwise, any trade-name, trademark, trade device, service mark, symbol, or any abbreviation contraction, or simulation thereof owned by the other party, use the name of any employee or agent of the other party in any publication,
publicity, advertising, or otherwise or represent, either directly or indirectly, that any product or service of the other party is a product or service of the representing party, or that it is made in accordance with or utilizes the information or documents of the other party.
12.02. EXCEPTIONS TO 12.01. Each party may acknowledge the existence of this agreement and the parties hereto, publicly or privately, as necessary for carrying out its business or as required by law.
ARTICLE 13 - SEVERANCE
Each clause of this Agreement is a distinct and severable clause and if any clause is deemed illegal, void, or unenforceable, the validity, legality, or enforceability of any other clause or portion of this Agreement will not be affected thereby.
ARTICLE 14 - ENTIRE AGREEMENT
This Agreement, including any schedules or other attachments which are incorporated herein by reference, contain the entire agreement between the parties as to its subject matter. This Agreement merges all prior discussions between the parties and neither party shall be bound by conditions, definitions, warranties, understandings, or representations concerning such subject matter except as provided in this Agreement as or as may be specified later in writing and signed by the properly authorized representatives of the parties. This Agreement supersedes the Original License Agreement. This Agreement can be modified or amended only by written agreement duly signed by persons authorized to sign agreements on behalf of the parties.
ARTICLE 15 - WAIVER
The failure of a party in any instance to insist upon the strict performance of the terms of this Agreement shall not be construed to be a waiver or relinquishment of any of the terms of this Agreement, either at the time of the party's failure to insist upon strict performance or at any time in the future, and such term or terms shall continue in full force and effect.
ARTICLE 16 - TITLES
All titles and article headings contained in this Agreement are inserted only as a matter of convenience and reference. They do not define, limit, extend, or describe the scope of this Agreement or the intent of any of its provisions.
ARTICLE 17 - CONFIDENTIALITY
17.01. All CADUS technology which shall be disclosed to the DUKE to fulfill the intent and objective of this Agreement shall be held in confidence by the DUKE and shall remain the property of CADUS. DUKE hereby agrees to maintain the confidentiality of all communications from CADUS to DUKE relating to CADUS Technology for a period of three (3) years from the date of receipt by the DUKE.
17.02. EXCEPTIONS TO CONFIDENTIALITY. The obligations of paragraph 18.01 shall not apply to written disclosures of CADUS Technology by CADUS to DUKE which:
(i) were in the receiving party's possession prior to receipt from the transferring party as evidenced by the receiving party's written records; or,
(ii) were in the public domain at the time of receipt from the transferring party; or,
(iii) become part of the public domain through no fault of the receiving party; or,
(iv) shall be required to be disclosed in a judicial or administrative proceeding after legal remedies for maintaining the subject matter in confidence have been exhausted; or,
(v) shall be lawfully required to be disclosed by the receiving party to the United States Food & Drug Administration or other regulatory governmental agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
SEAL DUKE UNIVERSITY
By /s/ Robert Taber
--------------------------------
|
Director, Office of Science and Technology
ATTEST:
By: /s/
--------------------------------
Assistant Secretary
|
SEAL CADUS PHARMACEUTICAL
CORPORATION
By: /s/ Jeremy Levin
--------------------------------
President
ATTEST:
By: /s/ Philip N. Sussman
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|
Exhibit A:
CADUS shall use reasonable efforts, commensurate with standards commonly followed in the pharmaceutical industry and the requirements imposed upon manufacturers by governmental agencies, to proceed diligently with the development, manufacture and sale of Products and shall earnestly and diligently offer and continue to offer for sale such Products once developed and approved for commercial use, both under reasonable conditions and consistent with sound business practices, including those specifically adopted by the management of CADUS for the conduct of its overall business, during the term of this Agreement.
PERFORMANCE INDICATORS
The parties agree that CADUS shall use reasonable effort to meet the following performance indicators for Products for in vivo uses:
(i) Twelve (12) months to complete preclinical studies and toxicology, commencing on the date on which the first Product has been identified as a candidate for commercial development.
(ii) Following the completion of (i) and the decision by CADUS that the Product in question will be taken into clinical trials, nine (9) months for the completion of an IND submission.
(iii) Twelve (12) months to complete Phase I/II clinical studies for IN VIVO diagnostic uses and thirty (30) months for therapeutic uses, where the twelve-month and thirty-month time span, respectively, begins when the first patient is enrolled in Phase I/II.
(iv) Twelve (12) months to compete Phase III clinical studies for IN VIVO diagnostic uses and thirty-six (36) months for therapeutic uses, where the twelve and thirty-six month time span, respectively, begins when the first patient is enrolled in Phase III.
(v) Six (6) months to prepare and file a PLA or NDA, commencing on the date on which the Phase III clinical studies, as provided in (iv), have been completed.
It is agreed that the performance indicators listed above are based on current estimates. The proposed time intervals refer to active clinical trials exclusive of delays due to regulatory findings by appropriate authorities, manufacturing of Products or other special clinical issues relating to indication and clinical endpoints, and also to any changes in regulatory laws and practices. CADUS will keep DUKE informed about any delays, and reasons for such delays, throughout the course of the activities described here within Exhibit A.
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
LICENSE AGREEMENT
This Agreement is made this the 1st day of November, 1994, by and between National Jewish Center for Immunology and Respiratory Medicine ("NJC"), a non-profit educational and research organization organized under the laws of Colorado and having its principal office at 1400 Jackson Street, Denver, Colorado, and Cadus Pharmaceutical Corporation ("CADUS"), a corporation organized under the laws of Delaware and having its principal place of business at 180 Varick Street, New York, New York.
WHEREAS, Gary L. Johnson and John C. Cambier have developed various technologies relating to signal transduction within cells, and NJC owns all rights, title and interest in and to such technologies, including related patents, patent applications and unpatented technology, and
WHEREAS, NJC has the right to grant licenses to the foregoing technologies; and
WHEREAS, NJC is willing to provide CADUS with an exclusive license to certain of NJC's technologies subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the terms and conditions set forth herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1. "NJC Technical Information" shall mean all proprietary information relating to products, processes, know-how, inventions
(conceived of or reduced to practice), and improvements and modifications thereto, relating to mammalian cell and/or enzyme- based assays useful in identifying compounds that regulate cellular transduction pathways that is owned or possessed by NJC (without restrictions from any third party which would preclude a license to CADUS), that was or is conceived or reduced to practice either solely or jointly by Dr. Gary Johnson and/or Dr. John Cambier, and that infringes on one or more claims, as they may be amended and as they may issue, as set forth in any of the [c.i.] U.S. Patent Applications listed in Exhibit A, and any substitutions, extensions, continuations, continuations-in-part and divisions to such applications.
1.2. "Product(s)" shall mean any compound, formulation or composition whose utility is identified using an Assay.
1.3. "Assay" shall mean one or more mammalian cell and/or enzyme-based assays relating to the regulation of cellular transduction pathways, including G protein-coupled and/or tyrosine kinase-coupled receptor signal transduction pathways, which incorporates or utilizes NJC Technical Information.
1.4. "First Commercial Sale" shall mean the initial transfer by or on behalf of CADUS of Product(s) in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales. First Commercial Sale shall not encompass the sale of a Product for compassionate uses that are sold at cost.
1.5. "Net Sales" shall mean the total gross revenues (when received) from the sale of Product(s) to third party customers,
less returns and allowances actually granted, discounts, credits, returned goods, transportation and delivery charges (including insurance on shipments), private sector or government rebates and taxes. No deductions shall be made for commissions paid to individuals, whether they be independent sales agents or regularly employed by CADUS, or for the costs of collections.
1.6. "Combination Products" shall mean a combination of a Product(s) with at least one other active ingredient, such other active ingredient being one that is either proprietary to CADUS or licensed by CADUS from a third party.
1.7. "Future Technologies" shall mean all proprietary information owned or possessed by NJC (without restriction from any third party which would preclude a license to CADUS) relating to products, processes, know-how and inventions that relate to mammalian cell and/or enzyme-based assays useful in identifying compounds that regulate cellular transduction pathways, that is conceived of or reduced to practice during the term of this Agreement and that is either solely invented by Dr. Gary Johnson and/or Dr. John Cambier, or jointly invented by either or both Doctors Johnson and Cambier and any third party, and further that does not infringe one or more claims, as they may be amended and as they may issue, as set forth in any of the [c.i.] U.S. patent applications listed in Exhibit A.
1.8. "Affiliate" or "Affiliates" shall mean any company or business entity in which CADUS owns or controls at least fifty-one (51) percent of the outstanding stock, or any entity over which
CADUS, directly or indirectly, exercises effective control, or any individual or company which owns, directly or indirectly, 51% or more of the outstanding stock of CADUS.
1.9. "Effective Date" shall mean the date of execution of this Agreement.
1.10. "Option Period" shall mean the period commencing with the Effective Date and ending upon [c.i.]
1.11. "Fields of Use" shall mean all agricultural, veterinary and human therapeutic and diagnostic uses for NJC Technical Information.
ARTICLE 2 - LICENSE GRANT
2.1. EXCLUSIVE LICENSE. During the term of this Agreement and in consideration of the royalties and payments set forth herein, NJC hereby grants to CADUS and CADUS hereby accepts from NJC, upon the terms and conditions herein specified:
a. an exclusive, worldwide license in the Fields of Use to practice NJC Technical Information to develop, identify, make, use and sell Product(s); and
b. an exclusive, worldwide license to practice NJC Technical Information to develop, make, use, license and sell Assays that utilize or incorporate NJC Technical Information.
2.2. RIGHT TO SUBLICENSE. CADUS shall have the right to sublicense its rights hereunder with the prior written consent of
NJC, such consent not to be unreasonably withheld or delayed. In order to obtain NJC's written consent, CADUS shall advise NJC in writing as to the entity to which it wishes to sublicense its rights under this Agreement. NJC shall respond to CADUS's request within ten (10) days of receipt of CADUS's notice. If NJC shall refuse to provide its consent, it shall provide its reasons in writing. Failure by NJC to respond within said ten (10) day period shall be deemed consent to CADUS's request. Notwithstanding the foregoing, CADUS shall have the right to sublicense its rights hereunder to any entity with a net worth in excess of $50,000,000 without NJC's consent. If this Agreement is terminated for any reason whatsoever, all sublicenses shall remain in effect and shall be assigned directly to NJC and the rights of the sublicensees thereunder shall not be affected. NJC shall not assume any affirmative obligations to sublicensees other than those already contained in this Agreement.
ARTICLE 3 - RESERVATION OF RIGHTS TO NJC AND GRANT BACK
3.1. Notwithstanding any other provision of this Agreement, NJC hereby reserves the perpetual, royalty-free right to conduct research and other academic, non-commercial activities with respect to all or any portion of NJC Technical Information licensed hereunder to CADUS, it being the intent of the parties that NJC shall be entitled to use and enjoy NJC Technical Information to the fullest extent consistent with academic and research missions, including the right of NJC to contract with third parties to obtain
funding for further research and development, provided that such third parties are not granted any rights or licenses to NJC Technical Information licensed to CADUS hereunder. In the event this License Agreement is terminated or expires, NJC is hereby granted a non-exclusive, world-wide, royalty free, irrevocable and perpetual right to practice all technology conceived of or reduced to practice by Doctors Johnson and Cambier pursuant to their respective consulting agreements with CADUS, or its Affiliates, with the right to sublicense, as long as such technology infringes one or more claims, as they may be amended and as they may issue, as set forth in any of the [c.i.] U.S. Patent Applications listed in Exhibit A.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF NJC
4.1. NJC hereby represents and warrants to CADUS that:
a. It is the owner of all of the patent applications listed on Exhibit A and has the exclusive right to grant licenses therefor;
b. It is the owner of all of the NJC Technical Information and has the exclusive right to grant licenses therefor;
c. To the best of its knowledge as of the Effective Date (without any investigation whatsoever), the practice of the NJC Technical Information does not infringe upon or conflict with any patent or other proprietary rights of any third party; and
d. It has not entered into any agreement with any third party which is in conflict with the rights granted to CADUS pursuant to this Agreement.
e. To the best of its knowledge as of the Effective Date (without any investigation whatsoever), no NJC Technical Information or biological materials based on or utilizing NJC Technical Information were purchased or offered for sale by NJC prior to April 15, 1993.
ARTICLE 5 - OPTION TO LICENSE FUTURE TECHNOLOGIES
5.1. CADUS OPTION. Provided that CADUS has paid the option fee set forth in
Section 5.2 for each applicable year, NJC hereby grants to CADUS an option to
acquire an exclusive license to Future Technologies conceived or reduced to
practice during the Option Period. The term of each such option grant shall be
for a period of [c.i.] commencing on the date NJC provides CADUS with a notice
of the development of Future Technologies, together with an invention disclosure
relating to any new invention. CADUS shall be deemed to have effectively
exercised any such option if CADUS sends written notice of its exercise of such
option to NJC within the [c.i.] option period. During the [c.i.] period
commencing on the date of the notice of such exercise, NJC and CADUS shall
negotiate in good faith to reach a definitive agreement for such license. NJC
shall not negotiate with third parties with respect to such Future Technologies
during such [c.i.] period.
5.2. OPTION FEE. CADUS shall pay [c.i.] to NJC for each year of the Option Period for which CADUS desires the option set forth in Section 5.1, within thirty (30) days after the beginning of each such year.
ARTICLE 6 - MILESTONES AND PAYMENTS
6.1. In partial consideration of the rights granted to CADUS by NJC under Article 2 hereof, CADUS will make the following payments to NJC upon accomplishing the following milestones:
6.2. PAYMENTS CREDITED AGAINST ROYALTIES. Payments made by CADUS to NJC
pursuant to Sections 6.1 and 8.1(c) shall be credited against amounts payable
pursuant to Section 8.1(a) hereof, except that the first [c.i.] paid under
Section 8.1(c) shall not be credited.
6.3. ANTI-SHELVING. CADUS shall use reasonable efforts to earnestly and diligently proceed with the use or sublicense of, and
to seek to advance, NJC Technical Information in all four areas within the Field of Use to achieve maximum commercial advantage therefore, such efforts to be consistent with sound business practices (including those specifically adopted by the management of CADUS for the conduct of its overall business during the term of this Agreement) so that Products, Assays and compounds which incorporate or utilize NJC Technical Information can be developed for commercial uses and, once approved for use, if required, can be offered for sale or license under appropriate conditions. If NJC believes that CADUS has failed to devote reasonable resources to exploit the commercial potential in NJC Technical Information within one or more areas in the Field of Use, it shall provide written notice thereof to CADUS. CADUS shall have a period of thirty (30) days from its receipt of such notice to commence devoting reasonable resources to such area or areas in the Field of Use. If CADUS fails to so commence devoting reasonable resources during such thirty (30) day period, NJC shall have the right to require CADUS to sublicense the NJC Technical Information for such area or areas in the Field of Use to a sublicensee designated by NJC on terms reasonably acceptable to CADUS, unless CADUS has commenced to devote reasonable resources prior to receiving notice of such designation. The foregoing remedy shall be NJC's sole remedy for CADUS's failure to perform its obligations set forth in this Section 6.3.
ARTICLE 7 - RESPONSIBILITIES OF PARTIES
7.1. PROVISION OF NJC TECHNICAL INFORMATION. Subject to the confidentiality provisions of Article 22, within thirty (30) days following the Effective Date of this Agreement and thereafter during the period of this Agreement, NJC agrees to provide CADUS with copies of any and all NJC Technical Information, including, without limitation, copies of all patent applications covering NJC Technical Information and all Patent Office actions received and amendments filed, if any, relative thereto and all documents relevant to prosecution of the patent(s) covering NJC Technical Information licensed hereunder.
7.2. DEVELOPMENT OF PRODUCT(S). CADUS agrees to seek to develop Assays and to use them to seek to identify Product(s). CADUS also agrees to seek to develop Product(s) identified by Assays in accordance with the development schedule set forth in attached Exhibit B. CADUS will also test, seek to obtain required government approvals for, and thereafter make reasonable efforts to market any such Product(s) that CADUS owns or has rights to, consistent with sound business practices. Significant variations from the foregoing must be approved by NJC in writing. Such approval shall not be unreasonably withheld or delayed. If NJC shall refuse to provide its approval, it shall provide its reasons in writing. Failure by NJC to respond within ten (10) days of a request for such variation shall be deemed approval of CADUS's request.
7.3. CADUS RESPONSIBILITIES IN DEVELOPMENT AND TESTING. In accordance with the terms and conditions of the consulting agreements between CADUS and each of Dr. Gary Johnson and Dr. John Cambier, CADUS shall provide them with adequate physical research facilities, skilled personnel at the Ph.D. level, appropriate equipment and adequate laboratory supplies. In accordance with the first year budget annexed as an Exhibit to the consulting agreements between CADUS and each of Drs. Johnson and Cambier, CADUS shall make available a minimum of [c.i.] dollars during the first year of their research program. CADUS shall use reasonable efforts to achieve the milestones set forth on Exhibit C, such efforts to include those generally accepted by the biomedical science community as reasonable for the accomplishment of such goals and objectives.
7.4. MEETINGS TO DISCUSS PROGRESS. During the term of this Agreement, representatives of NJC will meet with representatives of CADUS at times and places mutually agreed upon to discuss the progress and results, as well as ongoing plans, with respect to the evaluation and development of technology licensed to CADUS hereunder. In the event the parties agree that meetings are required outside of Denver, Colorado, CADUS agrees to be responsible for all reasonable travel and living expenses incident thereto.
7.5. GOVERNMENT APPROVALS. It is understood that CADUS shall be responsible for obtaining any government approvals which may be necessary to manufacture and sell Product(s). CADUS shall use
reasonable diligent efforts to obtain such government approvals for such Product(s) and upon receipt thereof, to cause Product(s) to be manufactured and sold. For the purpose hereof "reasonable diligent efforts" shall mean efforts no less diligent than CADUS puts forth in pursuing government approvals and commercialization of its other products and processes.
ARTICLE 8 - ROYALTIES, RECORDS AND REPORTS
8.1.(a) ROYALTY. In consideration of the exclusive license granted CADUS herein, CADUS shall pay to NJC royalties based on the following schedule:
(i) For Products that are sold to third parties by CADUS and/or its
Affiliates and that have received FDA approval and/or other foreign
government approval - [c.i.] of Net Sales, except that the royalty shall be
[c.i.] of Net Sales of such Products identified by CADUS or its Affiliates
using an Assay that is substantially completed as of the Effective Date and
that measures
[c.i.]
(ii) For Products that have not received FDA approval and/or any other
foreign government approval and that are sold by CADUS or its Affiliates to
third parties - [c.i.] of all Net Sales, except that the royalty shall be
[c.i.] of Net Sales of such Products identified by CADUS or its Affiliates
using an Assay that is substantially completed as of the Effective Date
and that measures [c.i.]
(iii) For Products that have not received FDA approval and/or any other foreign government approval that are licensed by CADUS and/or its Affiliates to third parties - [c.i.] of all licensing income, royalties, and milestone payments, whether up-front or subsequent, received by CADUS and/or its Affiliates from such third parties with respect to such Products.
(iv) For Products identified by a sublicensee of CADUS using an Assay that is substantially completed as of the Effective Date and that measures
[c.i.]
- [c.i.] of licensing income, royalties, and milestone payments, whether up-front or subsequent, relating to such Products that are received by CADUS and/or its Affiliates from such sublicensee.
(v) For Assays that are sold by CADUS and/or its Affiliates - [c.i.] of Net Sales of such Assays.
(vi) Where CADUS and/or its Affiliates use an Assay to test compounds
owned by a third party - [c.i.] of royalties, and milestone payments, and
[c.i.] of service payments, whether up-front or subsequent, that are
received by CADUS and/or its Affiliates from such third party.
CADUS shall not intentionally attempt to avoid royalty payments to NJC by
avoiding the use of an Assay. An Assay shall be deemed substantially completed
if CADUS does not have to spend more than [c.i.] in research and development
costs to refine and automate such Assay so that it provides at least a [c.i.]
fold measurable difference between a positive control and a negative control, in
which no more than [c.i.] micromolar concentration of at least one of every
[c.i.] test compounds is required to generate a significant response. A
significant response is [c.i.] of the maximal response. The cells used in the
Assay must be reproducibly culturable and require no more than 24 hours of
incubation with the test compounds to obtain a readout that does not vary more
than [c.i.] between identical samples.
8.1.(b) COMBINATION PRODUCT ROYALTY. Net Sales from Combination Products shall be calculated by multiplying actual Net Sales of such Product(s) by the fraction A/(A+B) where A is the invoice price of the given Product(s) if sold separately by CADUS or an Affiliate, and B is the total invoice price of any other active ingredient in the combination if the invoice price of any other active ingredient in the combination is sold separately by CADUS or an Affiliate. If the given Product(s) and the other active ingredient in the Combination Product are not sold separately by CADUS or an Affiliate, Net Sales for purposes of determining royalties of the Combination Product shall be calculated by multiplying Net Sales of the Combination Product by the fraction (C/(C+D) where C is number of Product(s) and D is
number of other active ingredients. However, at no time shall the value of the fraction A/(A+B) or the fraction C/(C+D) be less than 1/3 for the purposes of calculating Net Sales.
8.1.(c) ANNUAL MAINTENANCE PAYMENTS. During the term of this Agreement,
CADUS shall pay to NJC annual maintenance payments as follows: (i) [c.i.] on the
Effective Date, (ii) [c.i.] on the first anniversary of the Effective Date,
(iii) [c.i.] on each of the second and third anniversaries of the Effective
Date, (iv) [c.i.] on the fourth anniversary of the Effective Date, and (v)
[c.i.] on each of the fifth through the ninth anniversaries of the Effective
Date. During the term of this Agreement, if CADUS obtains a commitment for
significant research funding to develop technology based on NJC Technical
Information, prior to the second anniversary of the Effective Date, CADUS shall
pay to NJC [c.i.] within thirty (30) days of such commitment.
8.1.(d) If CADUS is obligated to pay royalties with respect to a Product to more than one entity and all such other entities agree to the same percentage reduction in CADUS's royalty obligation to them with respect to such Product, NJC shall accept an identical percentage reduction in the royalties payable under this Agreement; provided, however, such royalties shall not be less than 50% of the payment CADUS and/or its Affiliates would otherwise be obligated to pay NJC.
8.2. SUBLICENSE PAYMENTS. CADUS shall pay NJC [c.i.] per year per sublicensee for each sublicense to a third party which is not an Affiliate of CADUS in excess of [c.i.] in effect during each
year. If CADUS grants a sublicense to Dr. Gary Johnson or Dr. John Cambier to
enable him to continue his research using NJC Technical Information for academic
research purposes at a not-for-profit entity other than NJC, such sublicense
shall not be considered a sublicense to a third party for purposes of this
Section 8.2.
8.3. REPORTS. CADUS shall render to NJC within thirty (30) days after the end of each calendar quarter a written account including quantities and monetary amounts of CADUS's and CADUS's Affiliates' Net Sales subject to royalty payments, as well as the royalties and other payments received by CADUS from its sublicensees to the extent that NJC is entitled to receive payments thereon. Cadus shall submit with such report the amount of royalties and other payments due to NJC for such period. CADUS shall remit to NJC the total payments owed during such period and such payments shall accompany the report. CADUS and its Affiliates shall keep full, true and accurate books of accounts and other records containing all particulars which may be necessary to reasonably ascertain and verify properly such Net Sales. Upon NJC's request and at NJC's sole expense, CADUS and its Affiliates shall permit an independent Certified Public Accountant selected by NJC (except one to whom CADUS has some reasonable objections) to have access during ordinary business hours to such of CADUS's and its Affiliates' records as may be necessary to determine, in respect of any quarter ending not more than three (3) years prior to the date of such request, the correctness of any report made under this Agreement. CADUS shall remain responsible for all
payments due hereunder by any CADUS Affiliate. If a discrepancy in royalty payments favoring CADUS and its Affiliates is discovered, and the amount of such discrepancy is more than ten percent of the total royalties paid by CADUS and its Affiliate during the period covered by the audit, CADUS shall pay for the cost of the audit.
8.4. INTEREST ON PAST DUE AMOUNTS. CADUS shall pay NJC interest on all payments and royalties past due, at an annual rate of 10%, compounded on each anniversary of the payment due date.
8.5. FOREIGN EXCHANGE RATES. Royalties shall be payable from the country in which they are earned and subject to foreign exchange regulations then prevailing in such country, paid at such place as NJC may, from time to time, designate and shall be payable to NJC. Unless otherwise agreed to by the parties hereto, royalties shall be remitted in United States Dollars. When, and if, all parties hereto agree that royalties shall be paid in a currency other than the currency of the country in which the royalties are earned, such royalties shall be first determined in the currency of the country in which they are earned and then converted to their equivalent in the currency of the country for which the parties have agreed royalties shall be paid. Such conversion shall be made using the average of the selling and buying rates of exchange quoted by CITIBANK (or its successor in interest) in New York, New York as of the close of the last business day of the calendar quarterly period in which the royalties were earned.
8.6. REMISSION OF FOREIGN ROYALTIES. In the event that CADUS and its Affiliates are unable as a result of legal or government restrictions to remit royalties from any country in which Product(s) are made, used or sold, CADUS or its Affiliates, as the case may be, shall deposit the appropriate royalties in a bank account in such country agreed by NJC, such agreement not to be unreasonably withheld.
8.7. TAXES WITHHELD. Any income or other tax that CADUS and its Affiliates are required to withhold on behalf of NJC with respect to the royalties payable to NJC under this Agreement, shall be deducted from said royalties prior to remittance to NJC; provided, however, that in regard to any tax so deducted, CADUS, its Affiliates, and its third party sublicensees shall give or cause to be given to NJC such assistance as may reasonably be necessary to enable NJC to claim exemption therefrom or credit therefor, and in each case shall furnish NJC proper evidence of the taxes paid on its behalf.
8.8. SUIT BY THIRD PARTY. In the event of a judgment in any suit requiring CADUS to pay a royalty to a third party due to the use by CADUS and/or its Affiliates of a technology which utilizes or incorporates NJC Technical Information, or in the event of a settlement of such suit requiring royalty payments to be made, CADUS and its Affiliates shall be entitled to reduce the amount of royalties payable to NJC under Section 8.1(a) by 50% of any such judgment and/or settlement amount, (excluding any amounts payable solely by reason of willful infringement on the part of CADUS
and/or its Affiliates), except that the amount of such reduction for any one royalty period shall not exceed fifty percent (50%) of the royalties which would otherwise be payable to NJC for such royalty period.
ARTICLE 9 - PATENTS
9.1. RESPONSIBILITIES FOR FILING, PROSECUTING AND MAINTAINING PATENTS. Beginning upon the Effective Date of this Agreement, CADUS shall have responsibility for filing, prosecuting and maintaining in NJC's name, the appropriate United States patent protection for NJC Technical Information and all related expenses of such protection (other than those incurred prior to the Effective Date for the patent applications listed on Exhibit A) shall be paid by CADUS. Notwithstanding the foregoing, CADUS shall not file any continuation-in-part applications derived from any of the [c.i.] patent applications listed in Exhibit A based on inventions made at NJC, without the prior written consent of NJC. Moreover, NJC shall, in its sole discretion, decide whether or not to file any of its future patent applications as continuation-in- part applications with respect to inventions made at NJC. NJC shall be entitled, at its expense, to review and comment on the preparation of patent applications by CADUS prior to the filing thereof (except in circumstances where a statutory bar exists and/or where such review is impracticable), and CADUS shall reasonably address all reasonable concerns raised by NJC. The parties will endeavor in good faith to exchange their ideas with
respect to the preparation of patent applications in sufficient time to permit the timely filing of such patent applications in the United States and foreign countries. In the event CADUS does not diligently pursue prosecution of any of the [c.i.] patent applications listed in Exhibit A, CADUS will have no rights to the technology described in any such patent application and/or the patent issued therefrom and NJC shall have the right to freely license such technology to third parties, unless patent counsel for CADUS has advised CADUS that it is unlikely that a patent will issue and NJC counsel agrees with this assessment. CADUS shall reimburse NJC for all patent administration expenses, including legal expenses, which are incurred after the Effective Date, as well as future filing and prosecution expenses, for all patent applications exclusively licensed to CADUS hereunder. CADUS shall keep NJC advised as to the prosecution of any and all patent applications for which CADUS is responsible by promptly forwarding to NJC copies of all official correspondence relating thereto. At CADUS's request, NJC agrees to cooperate with CADUS in the prosecution of all such patent applications to insure that such applications reflect, to the best of NJC's knowledge, all items of commercial and technical interest and importance including, but not limited to, disclosing material art, commenting on patent office actions and executing all lawful declarations deemed desirable by CADUS, and all legal expenses incurred by NJC related thereto shall be reimbursed by CADUS.
9.2. FOREIGN PATENT PROTECTION. CADUS shall designate the foreign countries, if any, in which CADUS desires patent protection and CADUS shall proceed to obtain such protection. CADUS shall pay all expenses with regard to such foreign patent protection for the patents covering NJC Technical Information. NJC may elect to seek patent protection in countries not so designated by CADUS, in which case NJC shall be responsible for all expenses attendant thereto. In such instances, CADUS shall forfeit its rights under this License Agreement as to those countries unless CADUS shall agree to pursue such protection within thirty (30) days after receiving written notice that NJC intends permanently to cancel CADUS's rights with respect to that country. CADUS shall give notice to NJC of any decision to cease prosecution and maintenance of any patent covering NJC Technical Information, and, in such case, NJC, at its sole discretion, shall be entitled to continue prosecution or maintenance of such patent(s) at its own expense for the benefit of NJC. If NJC elects, at NJC's expense, to continue such prosecution or maintenance, CADUS shall execute such documents and perform such acts as may be reasonably necessary for NJC to continue prosecution or maintenance of such patent(s) for the benefit of NJC.
9.3. INFRINGEMENT. CADUS shall give NJC prompt notice of any claim or allegation received by it that the use of NJC Technical Information constitutes an infringement of a third party patent or patents. If CADUS is obligated to make payments to a third party for the purpose of obtaining a license required by CADUS for use of
NJC Technical Information, [c.i.] of such payments may be deducted by CADUS from royalties due to NJC pursuant to Section 8.1(a) of this Agreement, except that the amount of such deduction for any one royalty period shall not exceed [c.i.] of the royalties which would otherwise be payable to NJC for such royalty period. CADUS shall have the primary right and responsibility at its own expense to defend and control the defense of any such claim against CADUS, by counsel of its choosing. NJC agrees to cooperate with CADUS in any reasonable manner deemed by CADUS to be necessary in defending or prosecuting such action. CADUS shall reimburse NJC for all reasonable legal expenses incurred in providing such assistance. Notwithstanding the foregoing, NJC shall, in its sole discretion and at its own costs, be entitled to participate through counsel of its own choosing in any such action.
9.4. PATENT ENFORCEMENT.
a. With respect to any alleged infringement involving a claim(s) of any patents covering NJC Technical Information, CADUS shall have the first right, but not the duty, to institute patent infringement actions against third parties. If CADUS does not institute an infringement proceeding against an offending third party, NJC shall have the right, but not the duty, to institute such an action.
b. The costs and expenses of any action instituted pursuant to this
Section 9.4 (including fees of attorneys and other professionals) shall be borne
by the party instituting the action, or, if the parties elect to cooperate in
instituting and
maintaining such action, such costs and expenses shall be borne by the parties in such proportions as they may agree in writing. Each party shall execute all necessary and proper documents and take such actions as shall be appropriate to allow the other party to institute and prosecute such infringement actions (if such other party has the right to institute and prosecute such infringement actions pursuant to this Section 9.4). Any award paid by third parties as a result of such an infringement action (whether by way of settlement or otherwise) shall be paid to the party who instituted and maintained such action, or, if both parties instituted and maintained such action, such award shall be allocated among the parties in proportion to their respective contributions to the costs and expenses incurred in such action, or as they may have otherwise agreed. Notwithstanding the above, NJC shall receive 5% of any such award by way of settlement or otherwise after deducting legal and other reasonable expenses.
9.5. COMPULSORY LICENSES. In any country where a compulsory license must be granted involving patents covering NJC Technical Information, the exclusive rights and license granted to CADUS hereunder shall not prohibit or prevent the granting of a compulsory license under the patents covering NJC Technical Information and any royalty payable by CADUS shall be equal to the royalty payable by the compulsory licensee if less than that payable hereunder.
ARTICLE 10 - GOVERNMENT CLEARANCE AND EXPORT
10.1. MARKETING CLEARANCE. CADUS agrees to use reasonable efforts to have NJC Technical Information cleared for marketing in those countries in which CADUS intends to sublicense the NJC Technical Information by the responsible government agencies requiring such clearance. To accomplish such clearances at the earliest possible date, CADUS agrees to file, according to the usual practice of CADUS, any necessary data with government agencies requiring such clearance.
10.2. EXPORT CONTROL LAWS. CADUS agrees to abide by all of the United States laws and regulations controlling the export of technical data, computer software, biological materials, laboratory prototypes and other commodities and technology.
ARTICLE 11 - DURATION AND TERMINATION
11.1. TERM. Subject to earlier termination as provided in Paragraphs 11.2, 11.3 and 11.4, this Agreement shall begin on the Effective Date and shall continue until the earliest to occur of (i) the expiration of all issued claims under the patents covering NJC Technical Information, (ii) the determination (by a court of competent jurisdiction from which no appeal is or can be taken) of the invalidity or unenforceability of all issued claims under the patents covering NJC Technical Information, or (iii) the abandonment by NJC of all claims under the patent applications and patents covering NJC Technical Information. Notwithstanding the foregoing, when and as any claim under any said patent covering NJC
Technical Information is abandoned, expires or is declared invalid or unenforceable (by a court or tribunal of competent jurisdiction from which no appeal is or can be taken), CADUS shall be entitled to use, practice and sublicense each such abandoned, expired or invalid claim without restriction or further obligation or liability to NJC hereunder or at law.
11.2. EARLY TERMINATION. CADUS may terminate this Agreement at any time by giving NJC written notice of at least [c.i.] prior to such termination. Termination of this Agreement shall not relieve CADUS of the obligations to pay royalties with respect to Product(s) disposed of before such termination, nor the obligation to pay royalties with respect to sales or disposals made after such termination for Product(s) manufactured prior to but sold or otherwise disposed of after such termination. Termination of this License Agreement will also occur if either of the Consulting Agreements of even date between CADUS and each of Dr. Johnson and Dr. Cambier is terminated by them pursuant to subparagraph 25(a) thereof, or, if such Agreements automatically terminate pursuant to subparagraph 25(b) thereof, prior to the third anniversary of the Effective Date, as provided in subparagraph 8(c) of the Stock Option Agreements of even date between CADUS and each of Dr. Johnson and Dr. Cambier. If this Agreement is terminated as provided in the preceding sentence, CADUS shall not license from NJC, and NJC shall not license to CADUS or any of its Affiliates, any NJC Technical Information for a period of two years following such termination.
11.3. TERMINATION BY BREACH OR FRAUD. Either party may immediately terminate this Agreement for fraud, willful misconduct or illegal conduct of the other party upon written notice of same to the other party. Except as provided above, if either party fails to fulfill any of its obligations under this Agreement, the non-breaching party may terminate this Agreement, upon written notice to the breaching party, as provided below. Such notice must contain a full description of the event or occurrence constituting a breach of the Agreement. The party receiving notice of the breach will have the opportunity to cure that breach within thirty (30) days of receipt of notice. If the breach is not cured within that time, the termination will be effective as of the forty-fifth (45th) day after receipt of notice.
11.4. TERMINATION UPON BANKRUPTCY. If, during the term of this Agreement, CADUS shall become bankrupt or insolvent or if the business of CADUS shall be placed in the hands of a receiver or trustee, whether by the voluntary act of CADUS or otherwise, or if CADUS shall cease to exist as an active business, this Agreement shall, to the extent permitted by law, immediately terminate.
ARTICLE 12 - DISPUTE RESOLUTION
12.1. DISPUTE RESOLUTION. If one of the parties hereto declares that a dispute between the parties has arisen related to this Agreement, such dispute shall, in the first instance, be the subject of good faith negotiations between the parties to resolve such dispute. Meetings to resolve disputes shall be held in the
jurisdiction of the party that did not first allege the existence of a dispute.
Should the negotiations not lead to a settlement of the dispute within thirty
(30) days of the date of the meeting, the parties shall refer the dispute to a
mutually acceptable mediation service to resolve the dispute. The mediation
shall be attended by individuals from within each party who have decision-making
authority with respect to the matter in question. If the mediation does not lead
to a settlement of the dispute within forty-five (45) days of the date of the
meeting, then the parties shall submit the issue to arbitration before a panel
of arbitrators under the rules of the American Arbitration Association. Unless
the parties otherwise agree, if CADUS first alleged the existence of a dispute
the arbitration will be held in Denver, Colorado and if NJC first alleged the
existence of a dispute the arbitration will be held in New York, New York. The
panel of arbitrators shall consist of three parties: one selected by each party,
as well as a disinterested third party that the two arbitrators shall name. The
third arbitrator shall be a person who has had experience in the business of
pharmaceutical licensing. If a qualified person in this field cannot be found
and agreed upon, the two arbitrators shall use their own discretion and select a
third arbitrator with qualifications as they deem appropriate. The three
arbitrators shall be given full power to hear and finally determine and dispose
of all disputes between the parties that may arise from or that are related to
this Agreement. The arbitrators will make their ruling in writing no later than
thirty (30) days after the hearing. The
decision of two of the three arbitrators will be binding on the parties. No party has a right to appeal the ruling, to any court or otherwise. Judgment upon the decision rendered may be entered in any court having jurisdiction or application may be made to such court of a judicial acceptance of the award and an order of enforcement, as the case may be. Each party shall pay its own attorney's fees. All fees and expenses payable with respect to the mediation and arbitration proceedings shall be shared by both parties during the course of the mediation and arbitration proceedings, but, in the case of the arbitration, shall be reimbursed in favor of the prevailing party after the arbitration ruling is rendered.
ARTICLE 13 - GOVERNING LAW
This Agreement shall be construed as having been entered into the State of Colorado and shall be interpreted in accordance with and its performance governed by the laws of the State of Colorado.
ARTICLE 14 - ASSIGNABILITY
This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of the parties hereto, however, a party may only assign its rights hereunder with the prior written consent of the other party, such consent not to be unreasonably withheld or delayed. In order to obtain the other party's written consent, the assigning party shall advise the other party in writing as to the entity to which it wishes to assign this
Agreement. The other party shall respond to the assigning party's request within ten (10) days of receipt of the assigning party's notice. If the other party shall refuse to provide its consent, it shall provide its reasons in writing. Failure by the other party to respond within said ten (10) day period shall be deemed consent to the assigning party's request. Notwithstanding the foregoing, CADUS shall have the right to assign this Agreement without the prior written consent of NJC in connection with the sale of all or substantially all of its assets.
ARTICLE 15 - NOTICES
It shall be a sufficient giving of any notice, request, report, statement, disclosure or other communication hereunder, if the party giving the same shall deposit a copy thereof in the United States Post Office in certified mail, postage prepaid, addressed to the other party at its address hereinafter set forth or at such other address as the other party shall have theretofore in writing designated:
NJC:
National Jewish Center for Immunology and Respiratory Medicine
Executive Vice President
Office of Academic Affairs
1400 Jackson Street
Denver, CO 80206
CADUS:
Cadus Pharmaceutical Corporation
President and CEO
180 Varick Street
New York, NY 10014
The date of giving any such notice, request, report, statement, disclosure or other communications, and the date of making any payment hereunder required (provided such payment is received), shall be the U.S. postmark of such envelope, if marked, or actual date of receipt if delivered otherwise.
ARTICLE 16 - INDEMNITY, INSURANCE, REPRESENTATIONS, STATUS
16.1. INDEMNITY. CADUS agrees to indemnify, hold harmless and defend NJC, its trustees, officers, employees and agents against any and all claims, suits, losses, damages, costs, fees and expenses, including attorney fees, resulting from or arising out of the exercise of this license. CADUS shall not be responsible for the negligence or intentional wrongdoing of NJC. However, NJC does warrant that it has complied with the duty of disclosure to the U.S. Patent and Trademark Office.
16.2. INSURANCE. At the time of its sale of Product(s) in accordance with this Agreement, CADUS shall maintain in force at its sole cost and expense, with reputable insurance companies, general liability insurance and products liability insurance coverage that names NJC as a beneficiary and insures for losses in an amount reasonably sufficient to protect against liability under Paragraph 16.1 above, such amount as is customary in the industry, but not to be less than one million dollars. NJC shall have the right to ascertain from time to time that such coverage exists, such right to be exercised in a reasonable manner.
16.3. WARRANTIES AND REPRESENTATIONS. Nothing in this Agreement shall be deemed to be a representation or warranty by NJC of the validity of any of the patents or the accuracy, safety, efficacy or usefulness for any purpose of any technology licensed hereunder. NJC shall have no obligation, express or implied, to supervise, monitor, review or otherwise assume responsibility for the production, manufacture, testing, marketing or sale of any Product(s), and, except as set forth in Sections 8.8 and 9.3 hereof, NJC shall have no liability whatsoever to CADUS or any third parties for or on account of any injury, loss or damage, of any kind or nature, sustained by, or any damage assessed or asserted against, or any other liability incurred by or imposed upon CADUS, its Affiliates or sublicensees, or any other person or entity arising out of or in connection with or resulting from:
a. the production, use or sale of any Product(s); or
b. the use of any NJC Technical Information or any advertising or other promotional activities with respect to any of the foregoing.
16.4. STATUS OF PARTIES. Neither party hereto is an agent of the other party for any purpose whatsoever.
ARTICLE 17 - USE OF A PARTY'S NAME
17.1. USE OF PARTY'S NAMES. Neither party will, without the prior written consent of the other party, use in advertising, publicity or otherwise, any trade name, trademark, trade device, service mark, symbol, or any abbreviation, contraction or
simulation thereof owned by the other party, use the name of any employee or agent of the other party in any publication, publicity, advertising or otherwise, or represent, either directly or indirectly, that any product or service of the other party is a product or service of the representing party, or that it is made in accordance with or utilizes the information or documents of the other party.
17.2. EXCEPTIONS TO PARAGRAPH 17.1. Each party may acknowledge the existence of this Agreement and the parties hereto, publicly or privately, as necessary for carrying out its business or as required by law.
ARTICLE 18 - SEVERANCE
Each clause of this Agreement is a distinct and severable clause and if any clause is deemed illegal, void or unenforceable, the validity, legality or enforceability of any other clause or portion of this Agreement will not be affected thereby.
ARTICLE 19 - ENTIRE AGREEMENT
This Agreement, including any schedules or other attachments which are incorporated herein by reference, contain the entire agreement between the parties as to its subject matter. This Agreement merges all prior discussions between the parties and neither party shall be bound by conditions, definitions, warranties, understandings or representations concerning such subject matter except as provided in this Agreement or as may be
specified later in writing and signed by the properly authorized representatives of the parties. This Agreement can be modified or amended only by written agreement duly signed by persons authorized to such agreements on behalf of the parties.
ARTICLE 20 - WAIVER
The failure of a party in any instance to insist upon the strict performance of the terms of this Agreement shall not be construed to be a waiver or relinquishment of any of the terms of this Agreement, either at the time of the party's failure to insist upon strict performance or at any time in the future, and such term or terms shall continue in full force and effect.
ARTICLE 21 - TITLES
All titles and article headings contained in this Agreement are inserted only as a matter of convenience and reference. They do not define, limit, extend or describe the scope of this Agreement or the intent of any of its provisions.
ARTICLE 22 - CONFIDENTIALITY
22.1. NJC TECHNICAL INFORMATION. All NJC Technical Information that is disclosed to CADUS shall be maintained in confidence and shall not be disclosed to any other person, firm or agency, governmental or private, or used for purposes other than those set forth in this Agreement, without the prior written consent of NJC, except to the extent that such information:
a. is known at the time of its receipt by CADUS as documented by written records dated prior to such disclosure; or
b. is in the public domain other than through the fault of CADUS; or
c. is subsequently disclosed to CADUS by a third party who may lawfully do so and who is not under an obligation of confidentiality to NJC; or
d. disclosed to the Securities and Exchange Commission in filings by CADUS therewith or to other governmental agencies to facilitate the issuance of marketing approvals for Assays or Product(s); or
e. is disclosed to potential sublicensees, potential investors, potential business partners, agents, consultants, Affiliates, and/or other third parties for the research, development, manufacture, sale or marketing, external testing and marketing trials of Assays or Product(s) under this Agreement, which entities and individuals shall first agree to be bound by the confidentiality obligations contained in this Agreement; or
f. is required to be disclosed in a judicial or administrative proceeding after legal remedies for maintaining the subject matter in confidence have been exhausted.
22.2. DURATION OF CONFIDENTIALITY OBLIGATIONS. CADUS's obligations of confidentiality shall extend until such time as the information in question falls within one of the exceptions set forth in Section 22.1.
22.3. FINANCIAL TERMS OF THIS AGREEMENT. Neither party shall disclose the financial terms of this Agreement to any third party (other than employees of either party) without the prior written consent of the other party, unless such disclosure is otherwise required by law or other applicable regulation.
ARTICLE 23 - MISCELLANEOUS PROVISIONS
23.1. FORCE MAJEURE. No failure or omission by the parties hereto in the performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the parties, including, but not limited to, the following: act of God, acts or omissions of any government; any rules, regulations or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection; riot; invasion; strike; and lockouts; and provided that such failure or omission resulting from one of the above causes is cured as soon as is practicable after the occurrence of one or more of the above-mentioned causes.
23.2. PUBLICATIONS. Both parties recognize that each may wish to publish the results of their work relating to the NJC Technical Information. However, both parties also recognize the importance of acquiring patent protection on inventions. Consequently, any proposed publication by either party shall comply with this Section 23.2. At least 15 days before a manuscript is to
be submitted to a publisher, the publishing party will provide the other party with a copy of the manuscript. If the publishing party wishes to make an oral presentation, it will provide the other party with a copy of the abstract (if one is submitted) at least 15 days before it is to be submitted. The publishing party will also provide to the other party a copy of the text of the presentation, including all slides, posters, and any other visual aids, at least 15 days before the presentation is made. The receiving party will review the manuscript, abstract, text or any other material provided under this Section 23.2 to determine if patentable subject matter is disclosed. The reviewing party will notify the publishing party within 15 days of receipt of the proposed publication if the reviewing party, in good faith, determines that patentable subject matter is or may be disclosed, or if the reviewing party, in good faith, believes confidential or proprietary information is or may be disclosed. If it is determined by the reviewing party that patent applications should be filed, the publishing party shall delay its publication or presentation for a period not to exceed 45 days from the reviewing party's receipt of the proposed publication to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the 45 day period, the parties will discuss the need for obtaining an extension of the publication delay beyond the 45 day period. If it is determined in good faith by the reviewing party that confidential or proprietary
information is being disclosed, the parties will consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication to avoid such disclosure.
23.3. CONFLICTS WITH OTHER AGREEMENTS. In the event any dispute or conflict arises with respect to the terms and conditions of the present Agreement as compared with agreements entered into between CADUS or its Affiliates and NJC employees, specifically Dr. Johnson and Dr. Cambier, the terms and conditions of this Agreement shall govern. CADUS acknowledges that all consulting agreements between CADUS and any NJC employee must be in compliance with NJC's policies in effect at the time they are entered into. NJC's current policies with respect to consulting agreements with its employees is annexed hereto as Exhibit D. NJC hereby acknowledges that the Consulting Agreements and the Stock Option Agreements between CADUS and each of Dr. Johnson and Dr. Cambier are in compliance with NJC's current policies.
23.4. OWNERSHIP OF TECHNOLOGY. The parties acknowledge and agree that all NJC Technical Information are now and shall be solely owned by NJC and that CADUS and its Affiliates shall have no right, title or interest therein except as explicitly set forth in this Agreement.
23.5. SURVIVABILITY. In the event of termination of this Agreement, the following provisions will survive: 9.4, 11.2, 12.1, 13, 16, 22.1, 22.2, 22.3 and 23.4.
23.6. ARMS-LENGTH TRANSACTION. This Agreement is the product of arms-length negotiations by and between the parties. Each of
the parties hereto has obtained the advice of independent counsel before signing this Agreement. The parties execute this Agreement freely and voluntarily with full knowledge of its significance. Each party has participated in the review and drafting of this Agreement such that no construction of the terms or effect of this Agreement shall be made against either party on the basis of such party's capacity as the principal drafter hereof. In executing this Agreement, the parties rely upon no inducements, promises or representations made by any other party other than as set forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
NATIONAL JEWISH CENTER FOR
IMMUNOLOGY AND RESPIRATORY
MEDICINE
By: /s/
--------------------------------
Executive Vice President and
Chief Operating Officer
ATTEST:
|
CADUS PHARMACEUTICAL CORPORATION
By:/s/ Jeremy Levin
--------------------------------
President
ATTEST:
By:/s/ James S. Rielly
-------------------------
James S. Rielly, Secretary
|
EXHIBIT A
PATENT APPLICATIONS COVERING NJC TECHNICAL INFORMATION
1. U.S. Patent Application Serial No. 08/049,254 entitled "METHOD AND PRODUCT FOR REGULATING CELL RESPONSIVENESS TO EXTERNAL SIGNALS" filed April 15, 1993;
2. U.S. Patent Application Serial No. [c.i.] entitled "USING TYROSINE
PHOSPHORYLATION OF MAP KINASE AND CHARACTERIZATION OF THE COMPONENTS OF THE
MAP KINASE ACTIVATION PATHWAY AS A DRUG DISCOVERY ASSAY SYSTEM", filed
[c.i.].
[c.i.]
3. U.S. Patent Application Serial No. 08/215,116, entitled "PRODUCT AND PROCESS FOR REGULATING SIGNAL TRANSDUCTION PATHWAYS", filed March 17, 1994.
4. PCT Patent Application Serial No. US94/04178 entitled "METHOD AND PRODUCT FOR REGULATING CELL RESPONSIVENESS TO EXTERNAL SIGNALS", filed April 15, 1994.
[c.i.]
EXHIBIT B
CADUS shall use reasonable efforts, commensurate with standards commonly followed in the pharmaceutical industry and the requirements imposed upon manufacturers by governmental agencies, to proceed diligently with the development, manufacture and sale of Product(s) and shall earnestly and diligently offer and continue to offer for sale such Product(s) once developed and approved for commercial use, both under reasonable conditions and consistent with sound business practices, including those specifically adopted by the management of CADUS for the conduct of its overall business, during the term of this Agreement.
PERFORMANCE INDICATORS
The parties agree that CADUS shall use its reasonable efforts to meet the following performance indicators for Product(s) for IN VIVO uses:
(i) Twenty-four (24) months to complete preclinical studies, including optimizing the Product(s) through medicinal chemistry, commencing on the date on which the first Product(s) has been identified as a candidate for commercial development.
(ii) Following the completion of (i) and the decision by CADUS that the Product(s) in question will be taken into clinical trials, nine (9) months for the completion of an IND submission.
(iii) Twelve (12) months to complete Phase I/II clinical studies for IN VIVO diagnostic uses and thirty (30) months for therapeutic uses, where the twelve-month and thirty-month time span, respectively, begins when the first patient is enrolled in Phase I/II.
(iv) Twelve (12) months to complete Phase III clinical studies for IN VIVO diagnostic uses and thirty-six (36) months for therapeutic uses, where the twelve and thirty-six month time span, respectively, begins when the first patient is enrolled in Phase III.
(v) One (1) year to prepare and file a PLA or NDA, commencing on the date on which the Phase III clinical studies, as provided in (iv), have been completed.
It is agreed that the performance indicators listed above are based on current estimates. The proposed time intervals refer to active clinical trials exclusive of delays due to regulatory findings by appropriate authorities, manufacturing of Product(s) or other special clinical issues relating to indication and clinical endpoints, and also to any changes in regulatory laws and practices. CADUS will keep NJC informed about any delays, and
reasons for such delays, throughout the course of the activities described here within Exhibit A.
EXHIBIT C
MILESTONES
[c.i.]
EXHIBIT D
NATIONAL JEWISH CENTER FOR IMMUNOLOGY
AND RESPIRATORY MEDICINE
Policy Regarding Conflicts of Interest
I. GENERAL STATEMENT
This policy Regarding Conflicts of Interest shall apply to the following individuals: the officers of the Center, the members of the Center's Faculty, and all other employees of the Center who have responsibilities to the Center, the performance of which may be influenced by those employee's conflicting interests.
The Center recognizes that all individuals subject to this Policy have a duty of loyalty to the Center. The purpose of this Policy is to identify certain requirements of that duty of loyalty and to establish limitations and procedures to ensure that those requirements are met.
II. THE DUTY OF LOYALTY TO THE CENTER
Although the duty of loyalty is broad in scope and is not capable of precise definition that encompasses all of its requirements, the following requirements may be stated:
1. The duty of loyalty includes the duty to act in good faith toward the Center in the performance of one's responsibilities to the Center and in all other activities that may affect the interests of the Center.
2. The duty of loyalty includes the duty to be strictly honest with the Center in all matters.
3. The duty of loyalty includes the duty to deal fairly with the Center in all matters.
4. The duty of loyalty includes the duty to abstain from any transaction or relationship in which one has, directly or indirectly, an interest that is adverse to the interests of the Center.
The Center recognizes that occasions may arise in which an individual who is subject to this Policy has interests that may conflict with the interests of the Center. The Center believes that full disclosure of the circumstances of such occasions, and resolution of the conflicts by persons with authority to act on behalf of the Center, and who are without conflicts of their own in the circumstances, can provide an appropriate means of dealing with those occasions.
The balance of this Policy sets forth limitations and procedures to ensure that the duty of loyalty owed to the Center by the individuals subject to this Policy can be met in circumstances involving conflicts of interest.
The term "Responsible Person" used in this Policy means a supervisor, a department chairman, any Vice President, or the President of the Center. However, no one who is subject to this Policy shall have complied with this Policy by making disclosure to or securing approval from any Responsible person who is known by that individual to have the same or a similar conflict of interest, involving one or more of the same parties, as that which is disclosed or for which approval is sought.
III. OTHER EMPLOYMENT AND CONSULTING ACTIVITIES
It is expected that all full-time employees and Faculty members of the Center will regard the Center as their primary employment activity and that they will not permit any other employment or any consulting activity to interfere with their discharge of their full-time service obligations to the Center.
Individuals covered by this policy, may, with the prior approval of a
Responsible Person, engage in external consulting activity up to thirty-three
(33) days per fiscal year provided such effort does not represent a conflict of
interest.
Any individual subject to this Policy who is employed by any other entity on either a part-time or a full-time basis or who consults for any entity other than the Center shall report that employment or consulting activity to a superior Responsible Person. Any such employment or activity that is in existence at the time of the adoption of this Policy shall be so reported promptly after such adoption, and any employment or consulting activity that is to be entered into or engaged in after the adoption of this Policy shall be so reported before the employment or activity commences. In each case, the full particulars of the employment or consulting activity shall be reported in order that a determination may be made concerning the impact of the employment or activity upon the interests of the Center. The provisions of this paragraph shall not apply to consulting activities that are provided without direct or indirect compensation and do not involve a disclosure of information about the Center and do not significantly infringe upon the time required to meet one's responsibilities to the Center.
Any individuals subject to this Policy who is employed by any other entity or who consults for any other entity other than the Center shall comply with the following requirements:
1. The individual shall advise the person providing the employment or for whom the consulting services are rendered that (i) the individual is acting, in the role of employee or consultant, solely on his or her own account and not as the agent or employee of, or under the sponsorship, auspices, or control of, the Center; (ii) the
Center has no liability whatsoever for the individual's actions or omissions as such an employee or consultant; and (iii) the individual is subject to the Center's patent policy governing the rights to inventions resulting from activities that are supported by the Center or that utilize its resources or facilities; and
2. The individual shall not use the Center's resources or facilities for any significant personal purposes and shall not use any such resources or facilities for any purpose that may benefit another employer or person to whom the individual may render consulting activities, unless prior approval of a superior Responsible Person is obtained.
IV. OWNERSHIP OF OTHER ENTITIES
The Center believes that while ownership by individuals who are subject to this Policy of entities that may have interests in conflict with those of the Center may pose difficulties, it is not presently necessary to preclude such ownership but merely to require disclosure of its existence to responsible authorities of the Center in order that circumstances can be monitored to avoid adverse impacts upon the interests of the Center.
Accordingly, each individual who is subject to this Policy shall report to a superior Responsible Person all ownership interests that he or she may have, directly or indirectly, in any entity whose interests do, or conceivably may in the future, conflict with any interests of the Center. No such reporting shall be required, however, of ownership of less than five percent of the outstanding ownership interests in any entity in which such ownership interests are publicly traded.
V. RECEIPT OF GIFTS: CONTRACTING WITH OTHER ENTITIES
The receipt of gifts or the like, by one who is empowered to act for the Center, from a person who may have business with the Center, can give rise at least to the appearance of impropriety and oftentimes to an actual impairment of one's duty of loyalty to the Center. Accordingly, any individual who is subject to this Policy who receives from any entity any hospitalities, courtesies, remunerations, or gifts that he or she reasonably believes to be of more than $100 in value, either singly or in the aggregate, shall report such hospitalities, courtesies, remunerations, or gifts to a superior Responsible Person if he or she has the responsibility or power to contract with that entity on behalf of the Center.
Furthermore, no individual who is subject to this Policy shall accept any hospitality, courtesy, remuneration, or gift from any entity if such acceptance could influence or might reasonably appear to influence any action that the individual might or could take on behalf of the Center.
National Jewish resources will not normally be used for consulting under this penalty. If facilities or personnel are to be used in conjunction with such consulting or related research, this must be disclosed in writing through the Internal Grant Review Procedure; and if approved, full direct and indirect costs will be recovered including fees for research or other services supplemented by the Center.
VI. DUTIES OF RESPONSIBLE PERSONS
It shall be the duty of each Responsible Person to whom a disclosure is made, or of whom an approval is requested, pursuant to this Policy to evaluate the matter and determine whether he or she may appropriately resolve the matter or whether the matter should be referred to a more senior Responsible Person. In all determinations made by Responsible Persons under this Policy, protection and furtherances of the interests of the Center shall be of paramount importance.
VII. PERIODIC DISCLOSURE
The President of the Center shall annually send to all individuals who are subject to this Policy a copy of this Policy, together with an appropriate explanation and a questionnaire designed to provoke disclosure of all activities or interests that could give rise to conflicts of interest or to other breaches of the duty of loyalty. Such questionnaire shall be completed by each recipient and returned to the appropriate superior Responsible Person. Each Responsible Person shall deliver the returned questionnaires to the President, accompanied by a report summarizing the returned questionnaires and containing such other observations on the subjects he or she may care to make.
The President of the Center shall comply with this Policy and provide a completed questionnaire annually to the Chairman of the Board.
Each new officer, Faculty member, or other individual who hereafter becomes subject to this Policy shall complete such a questionnaire promptly following the event by which he or she becomes subject to this Policy.
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
STOCK OPTION AGREEMENT
AGREEMENT made as of November 1, 1994 by and between CADUS PHARMACEUTICAL CORPORATION (the "Corporation"), a Delaware corporation with offices located at 180 Varick Street, New York, New York 10014, and JOHN C. CAMBIER (the "Consultant") having an office at National Jewish Center for Immunology & Respiratory Medicine ("NJC"), 1400 Jackson Street, Denver, Colorado 80206.
W I T N E S S E T H:
WHEREAS, in order to induce Consultant to provide consulting services to the Corporation in connection with a research program to be undertaken by the Corporation at a facility (other than Consultant's laboratory at NJC) to be established in or close to Denver or Boulder (the "Colorado Facility") and involving technology to be licensed from NJC (the "Research Program"), the Corporation desires to grant to Consultant the right and option, subject to certain conditions, to purchase shares of the Common Stock, $.001 par value, of the Corporation (the "Common Stock");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. GRANT OF STOCK OPTION.
As an additional inducement to provide consulting services to the
Corporation, the Corporation hereby grants to Consultant the right and option
(the "Option"), to purchase from the Corporation five hundred thousand (500,000)
shares of Common Stock (the "Shares"), subject to adjustment as provided in
Paragraph 7 hereof, on the terms and subject to the conditions hereinafter set
forth.
2. PURCHASE PRICE.
Subject to adjustment as provided in Paragraph 7 hereof, the purchase price (the "Option Purchase Price") to be paid upon exercise of the Option shall be fifty cents ($.50) per Share.
3. EXERCISABILITY OF OPTION.
(a) The Option shall be exercisable, on a cumulative basis, during a period of ten (10) years commencing from the date hereof and terminating at the close of business on October 31, 2004, as follows:
(i) up to 125,000 Shares subject to the Option may be purchased by Consultant after the first anniversary of the
date (the "Effective Date") the Colorado Facility is first occupied by the Corporation's employees;
(ii) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the second anniversary of the Effective Date;
(iii) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the third anniversary of the Effective Date; and
(iv) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the fourth anniversary of the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, but subject to subparagraph 3(c) hereof, if the Corporation at any time terminates the Research Program, the portion of the Option which has not yet become exercisable shall automatically terminate and become null and void; provided, however, that the Corporation agrees not to terminate the Research Program before a date which is at least 352 days after the Effective Date. The Corporation shall have the right, at any time after 352 days after the Effective Date, to terminate the Research Program for any reason whatsoever. The Corporation shall give Consultant prompt written notice of such termination.
(c) Notwithstanding subparagraphs 3(a) and 3(b) hereof, the Option shall become immediately exercisable as to all of the Shares if the Corporation terminates the Research Program, after the occurrence of any of the following events (and the Corporation shall give Consultant prompt written notice of the occurrence of any such event):
(i) the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock);
(ii) the merger or consolidation of the Corporation with or into another Corporation or other entity or person, or any other transaction or series of related transactions by the Corporation, in which in excess of fifty percent (50%) of
the voting power held by the holders of the Corporation's issued and outstanding capital stock is transferred, or the sale of all or substantially all of the Corporation's properties and assets to any other person; or
(iii) the consummation of a transaction with a third party pursuant to which such third party will provide at least $10,000,000 of funding to the Corporation to pay for research to be conducted by the Corporation relating to the Research Program.
(d) If the Consulting Agreement between the Corporation and Consultant (the "Consulting Agreement"), of even date herewith, is terminated by the Corporation pursuant to subparagraph 25(a) thereof, the Option will terminate upon the expiration of three (3) months from the date of such termination. The Option will be exercisable during such three-month period only to the extent that it was exercisable immediately prior to the termination of the Consulting Agreement.
4. EXERCISE OF OPTION.
(a) The Option may be exercised by Consultant with respect to all or part of the Shares (but not as to a fractional share of Common Stock) as to which the Option has become exercisable, within the applicable period specified in Paragraph 3 hereof, by the giving of written notice of the exercise thereof to the Corporation in the manner provided in Paragraph 13 hereof and substantially in the form annexed hereto as Exhibit A, which notice shall be accompanied by payment in full of the purchase price therefor by certified or bank cashier's check. Such exercise shall be effective upon receipt by the Corporation of such written notice and payment; and Consultant, to the extent permitted by law, shall be deemed the owner of the Shares as of the close of business on the date of such exercise, payment and delivery. The Corporation shall cause a certificate or certificates representing the Shares to be delivered to Consultant within ten (10) days after the effective date of such exercise. Consultant agrees that such certificate or certificates shall bear such legend or legends as the Board of Directors of the Corporation, in its reasonable discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act of 1933, as amended (the "Securities Act").
(b) In lieu of the certified or bank cashier's check provided for in subparagraph 4(a) above, Consultant may, at his sole option and to the extent permitted by applicable law, pay for the purchase price of the Shares being purchased by the exercise of the Option, by delivering to the Corporation shares of Common Stock (in proper form for transfer and accompanied by all requisite stock transfer tax stamps or cash in lieu thereof) owned by Consultant
having a Fair Market Value (as hereinafter defined in subparagraph 4(c) hereof) equal to such purchase price. Consultant may elect to make such delivery to the Corporation of shares of Common Stock from Shares he is purchasing pursuant to his exercise of the Option by including such election in his notice of exercise.
(c) The Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean:
(i) If the Corporation's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.
(ii) If the Corporation's Common Stock is not traded on an exchange or on the NASDAQ National Market System but is traded in the over-the-counter market, then the mean of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.
(iii) Except as provided in subsections 4(c)(iv) and 4(c)(v) below, if the Corporation's Common Stock is not publicly traded, then as determined in good faith by the Corporation's Board of Directors upon a review of relevant factors.
(iv) If the Determination Date is the date on which the Corporation's Common Stock is first sold to the public by the Corporation in a firm commitment public offering under the Securities Act, then the initial public offering price (before deducting commissions, discounts or expenses) at which the Common Stock is sold in such offering.
(v) If the Determination Date is the date of a liquidation, dissolution or winding up of the Corporation, then all amounts to be payable per share to holders of the Common Stock in the event of such liquidation, dissolution or winding up.
5. PURCHASE FOR INVESTMENT.
Consultant agrees that at the request of the Corporation (prior to the time the Shares have been registered under the Securities Act) and upon exercise of the Option, he shall execute and deliver to the Corporation a written statement, in form satisfactory to the Corporation, representing and warranting that he is purchasing the Shares for his own account, for investment only and not with a view to the resale or distribution thereof and that any subsequent offer for sale or sale of any of such shares shall be made either pursuant to (a) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with respect to the
shares being offered and sold, or (b) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption Consultant shall, prior to any offer for sale or sale of such shares, obtain a written legal opinion satisfactory to the Corporation as to the availability of such exemption.
6. NON-TRANSFERABILITY OF OPTION.
The Option shall not be transferable by Consultant other than by will or the laws of descent and distribution.
7. ADJUSTMENT OF SHARES; ADVANCE NOTICE OF CERTAIN TRANSACTIONS.
If any change is made in the Shares deliverable upon exercise of the Option (through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, spin-off, split-off, subdivision or combination of shares, exchange of shares, issuance of rights to subscribe, change in capital structure or similar event), such adjustments or substitutions shall be made by the Board of Directors of the Corporation in or for the Shares (including adjustments in the number of Shares and in the per share price of Shares subject to the Option) as the Board of Directors of the Corporation reasonably shall determine to be appropriate and equitable to prevent dilution or enlargement of Consultant's rights hereunder. After the Option has become exercisable as to any of the Shares, the Corporation shall provide Consultant with 10 days' prior written notice of the consummation of any of the transactions described in subparagraph 3(c)(ii) hereof, so as to enable Consultant to exercise the Option prior to the consummation of any such transaction.
8. COVENANTS OF THE CORPORATION.
The Corporation hereby covenants and agrees that:
(a) During the period within which the Option may be exercised, the Corporation shall at all times reserve and keep available by all necessary corporate action out of its shares of Common Stock for the purpose of issuance or transfer upon exercise of the Option the number of shares of Common Stock included in the Shares and such additional securities as may from time to time be deliverable hereunder. Such shares may be authorized but unissued shares, or may be shares held in the treasury of the Corporation or a combination thereof, at the option of the Corporation.
(b) All shares which may be issued upon exercise of the Option or delivered pursuant to this Agreement will, upon issuance and payment therefor as provided herein, be validly issued, fully paid, nonassessable and free from all liens and charges with respect to the issue thereof.
(c) Notwithstanding anything to the contrary set forth in this Agreement or the Consulting Agreement, if Consultant terminates the Consulting Agreement pursuant to subparagraph 25(a) thereof or if the Consulting Agreement automatically terminates pursuant to subparagraph 25 (b) thereof, prior to the third anniversary of the Effective Date, and if the Option has not become exercisable as to all of the Shares as of the date of such termination, then the Corporation shall [c.i.]
[c.i.] For a period of two years commencing on the date the Corporation terminates the NJC License pursuant to this subparagraph 8(c), the Corporation and its affiliates shall not license "NJC Technical Information" (as defined in the NJC License) from NJC.
(d) If the Corporation shall grant registration rights to its scientist founders (I.E., James R. Broach, Dana Fowlkes and Thomas Shenk) or to any of its officers with respect to any securities of the Corporation owned by them, the Corporation shall grant the same registration rights to Consultant with respect to the Shares owned by him or which are subject to the Option.
(e) If the Corporation registers any of its securities pursuant to a Form S-8 (or successor to such Form) filed under the Securities Act and if the Shares are then registrable on Form S-8, the Corporation shall cause to be registered pursuant to such Form S-8 the same proportion of the Shares as that of securities owned by and securities subject to options owned by other employees of the Corporation. If the Shares are not eligible for registration on such Form S-8, the Corporation and the Consultant will use reasonable efforts to achieve such eligibility so as to enable their registration on such Form S-8.
(f) The Corporation shall ensure that if and when the Consultant exercises the Option and acquires Shares, such Shares shall be deemed securities issued pursuant to Rule 701 promulgated under the Securities Act. In order to do so, the Corporation shall limit, as necessary, its issuing of stock or options to its employees and consultants pursuant to Rule 701. The Corporation shall also take such action as may be reasonably necessary to enable the Consultant's resale of the Shares pursuant to Rule 701(c)(3) and any applicable state securities laws, including certifying to the Consultant and/or to a broker retained by Consultant, at such time or times that the Consultant exercises the Option or sells the Shares, that the Shares are securities issued pursuant to Rule 701 and that all conditions to the availability of Rule 701 have been met with respect to the issuance of the Shares.
(g) If the Corporation becomes subject to the reporting requirements (the "Reporting Requirements") of either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, if the Shares have not been registered under the Securities Act, and if they cannot be sold by Consultant pursuant to an exemption from the registration requirements thereof, the Corporation shall use its reasonable best efforts to ensure that adequate "current public information" is available with respect to it within the meaning of Rule 144(c) promulgated under the Securities Act.
(h) The Corporation shall indemnify the Consultant and provide insurance coverage to the Consultant to the same extent and subject to the same limitations as are set forth for NJC in Article 16 of the NJC License.
9. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation hereby represents and warrants to Consultant that: (i) this
Agreement and the grant of the Option to Consultant have been duly authorized by
all required corporate action on the part of the Corporation, (ii) the
Corporation is not a party to any agreement which would restrict or prohibit it
from issuing the Option to Consultant (or, to the extent such restrictions or
prohibitions exist, they have been waived by the beneficiaries thereof), (iii)
the anti-dilution protection provided in Paragraph 7 hereof is no less than that
provided under any and all of the option agreements and plans pursuant to which
the Corporation's officers have been granted stock options, (iv) the
capitalization of the Corporation as of the date hereof, on a fully diluted
basis, is as set forth on Exhibit B annexed hereto, (v) this Agreement is
enforceable against the Corporation in accordance with its terms, (vi) the grant
of the Option pursuant to this Agreement is exempt from the registration
requirements of the Securities Act and any applicable state securities laws,
(vii) the issuance of Shares to Consultant upon his exercise of the Option shall
be exempt from the registration requirements of the Securities Act, and (viii)
ninety (90) days after the Corporation becomes subject to the Reporting
Requirements, Consultant shall be able to resell the Shares acquired by him upon
exercise of the Option in accordance with Rule 701(c)(3) promulgated under the
Securities Act.
10. NO FRACTIONAL SHARES.
Upon the exercise of the Option, the Corporation shall not be required to issue any fractional shares or scrip certificates evidencing any fractional interest in shares. In any case where, pursuant to the terms of the Option, Consultant would be entitled, except for the provisions of this Paragraph 10, to receive a fractional share, the number of shares issuable upon such exercise shall be rounded to the next larger whole share if such fractional share interest is a major fraction; if such fractional share interest is not a major fraction, it shall be disregarded.
11. "LOCK-UP" AGREEMENT.
The Consultant, if so requested by the Corporation and an underwriter of Common Stock or other securities of the Corporation, shall not sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Corporation held by him or which he has
the right to acquire during the 180-day period following the effective date of a registration statement of the Corporation filed with the Securities and Exchange Commission in connection with such offering or such shorter period as such underwriter shall have advised the Corporation in writing is adequate to permit the successful and orderly distribution of such Common Stock or other securities; provided, however, that such "lock-up" agreement shall be in writing and in form and substance satisfactory to the Corporation and such underwriter. The Corporation may impose stop-transfer instructions with respect to the shares subject to the foregoing restrictions until the end of said 180-day period. In connection with the preparation and filing of any such registration statement, the Corporation shall use its reasonable best efforts (i) to enforce the obligations of its stockholders (and any person who shall have the right to acquire capital stock of the Corporation) who have agreed with the Corporation to enter into "lock-up" or "market stand-off" agreements and (ii) to obtain a "lock-up" or "market stand-off" agreement from all of its other stockholders and all other such persons.
12. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party except as expressly set forth herein. This Agreement supersedes and cancels all prior agreements between the parties, whether written or oral, with respect to the subject matter hereof. No alteration, amendment or modification of any of the terms and provisions hereof shall be valid unless made pursuant to a written instrument signed by all of the parties hereto.
13. NOTICES.
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, first class, postage prepaid, certified mail, return receipt requested, to the other party at its or his address as set forth at the beginning of this Agreement or as either of the parties may designate in conformity with the foregoing.
14. APPLICABLE LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.
15. PARAGRAPH HEADINGS.
The paragraph headings set forth in this Agreement are for reference purposes only and shall not considered as part of this Agreement in any respect nor shall they in any way affect the substance of any provisions contained in this Agreement.
16. SUCCESSORS AND ASSIGNS.
This Agreement shall not be assignable by Consultant, but the rights hereunder may be transferred as described in Paragraph 6 hereof. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by Consultant, the Corporation, the heirs and personal representatives of Consultant and the successors and assigns of the Corporation.
17. ARBITRATION.
(a) The parties hereto agree that they shall use their best efforts to settle amicably any disputes, differences or controversies arising between the parties out of or in connection with this Agreement. However, subject to the limitations set forth in the final sentence of this subparagraph 17(a) and in subparagraph 17(b) below, any such disputes, differences or controversies, if not so settled within thirty (30) days after the occurrence thereof, shall be finally and exclusively determined by arbitration. Unless the parties otherwise agree, arbitration initiated by the Corporation shall be held in Denver, Colorado, and arbitration initiated by the Consultant shall be held in New York, New York. Any such arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the Commercial Rules of the American Arbitration Association then obtaining. The parties hereby empower such arbitrators to grant equitable relief as necessary to resolve any dispute between the parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, either party may, without recourse to arbitration, assert against the other party a third-party claim or cross-claim in any action brought by a third party to which the subject matter of this Agreement may be relevant.
(b) Notwithstanding subparagraph 17(a) above, Consultant may seek emergency injunctive relief, emergency specific performance or other emergency equitable relief in a state court of the State of New York or the United States District Court for the Southern District of New York with respect to a breach or threatened breach by the Corporation of Paragraphs 3, 4, 7 or 8 hereof. The Corporation hereby consents to the personal jurisdiction of any such court and agrees to be sued in such court
in the circumstances described in the preceding sentence. The Corporation agrees that any and all process directed to it in any such litigation may be served upon its agents outside of the State of New York with the same force and effect as if service had been made within the State of New York.
18. SURVIVAL.
The rights and obligations of the parties arising under Paragraphs 8, 9, 11 and 17 hereof shall survive the termination of the Option.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION
By: /s/ Jeremy Levin
--------------------------
Jeremy M. Levin, President
/s/ John C. Cambier
--------------------------
JOHN C. CAMBIER
|
EXHIBIT A
[Date of Exercise]
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014
Attention: Corporate Secretary
Re: STOCK OPTION
Dear Sir:
I am the holder of a Stock Option granted to me by Cadus Pharmaceutical
Corporation (the "Corporation"), pursuant to a Stock Option Agreement dated as
of November 1, 1994, to purchase 500,000 shares of Common Stock of the
Corporation ("Shares"). I hereby exercise such option with respect to
____________ Shares, the total purchase price for which is $______________, and
[I enclose a certified or bank cashier's check payable to the order of the
Corporation in the amount of $______________, representing the total purchase
price for the Shares] [I hereby elect to pay the purchase price by delivering to
the Corporation _________ shares of Common Stock of the Corporation having a
fair market value equal to $______________ from the Shares I am purchasing
pursuant to the exercise of such option]. The certificate or certificates
representing the Shares should be registered in my name and should be forwarded
to me at ____________________________________________________.
Please acknowledge receipt of the exercise of my stock option on the attached copy of this letter.
Very truly yours,
JOHN C. CAMBIER
RECEIPT ACKNOWLEDGED:
CADUS PHARMACEUTICAL CORPORATION
By: ____________________________
EXHIBIT B
CAPITALIZATION OF
CADUS PHARMACEUTICAL CORPORATION
AS OF OCTOBER 31, 1994
Common Stock: 4,140,000
Series A Preferred Stock: 14,879,651 shares
Series B Preferred Stock: 3,571,429 shares
Options to acquire Common Stock: 1,620,459
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
STOCK OPTION AGREEMENT
AGREEMENT made as of November 1, 1994 by and between CADUS PHARMACEUTICAL CORPORATION (the "Corporation"), a Delaware corporation with offices located at 180 Varick Street, New York, New York 10014, and GARY L. JOHNSON (the "Consultant") having an office at National Jewish Center for Immunology & Respiratory Medicine ("NJC"), 1400 Jackson Street, Denver, Colorado 80206.
W I T N E S S E T H:
WHEREAS, in order to induce Consultant to provide consulting services to the Corporation in connection with a research program to be undertaken by the Corporation at a facility (other than Consultant's laboratory at NJC) to be established in or close to Denver or Boulder (the "Colorado Facility") and involving technology to be licensed from NJC (the "Research Program"), the Corporation desires to grant to Consultant the right and option, subject to certain conditions, to purchase shares of the Common Stock, $.001 par value, of the Corporation (the "Common Stock");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. GRANT OF STOCK OPTION.
As an additional inducement to provide consulting services to the
Corporation, the Corporation hereby grants to Consultant the right and option
(the "Option"), to purchase from the Corporation five hundred thousand (500,000)
shares of Common Stock (the "Shares"), subject to adjustment as provided in
Paragraph 7 hereof, on the terms and subject to the conditions hereinafter set
forth.
2. PURCHASE PRICE.
Subject to adjustment as provided in Paragraph 7 hereof, the purchase price (the "Option Purchase Price") to be paid upon exercise of the Option shall be fifty cents ($.50) per Share.
3. EXERCISABILITY OF OPTION.
(a) The Option shall be exercisable, on a cumulative basis, during a period of ten (10) years commencing from the date hereof and terminating at the close of business on October 31, 2004, as follows:
(i) up to 125,000 Shares subject to the Option may be purchased by Consultant after the first anniversary of the
date (the "Effective Date") the Colorado Facility is first occupied by the Corporation's employees;
(ii) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the second anniversary of the Effective Date;
(iii) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the third anniversary of the Effective Date; and
(iv) up to an additional 125,000 Shares subject to the Option may be purchased by Consultant after the fourth anniversary of the Effective Date.
(b) Notwithstanding anything to the contrary contained herein, but subject to subparagraph 3(c) hereof, if the Corporation at any time terminates the Research Program, the portion of the Option which has not yet become exercisable shall automatically terminate and become null and void; provided, however, that the Corporation agrees not to terminate the Research Program before a date which is at least 352 days after the Effective Date. The Corporation shall have the right, at any time after 352 days after the Effective Date, to terminate the Research Program for any reason whatsoever. The Corporation shall give Consultant prompt written notice of such termination.
(c) Notwithstanding subparagraphs 3(a) and 3(b) hereof, the Option shall become immediately exercisable as to all of the Shares if the Corporation terminates the Research Program, after the occurrence of any of the following events (and the Corporation shall give Consultant prompt written notice of the occurrence of any such event):
(i) the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation in which the Corporation actually receives gross proceeds equal to or greater than $7,500,000 (calculated after deducting underwriters' discounts and commissions but before calculation of expenses), and in which the price per share of Common Stock equals or exceeds $1.38 (such price subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Common Stock);
(ii) the merger or consolidation of the Corporation with or into another Corporation or other entity or person, or any other transaction or series of related transactions by the Corporation, in which in excess of fifty percent (50%) of
the voting power held by the holders of the Corporation's issued and outstanding capital stock is transferred, or the sale of all or substantially all of the Corporation's properties and assets to any other person; or
(iii) the consummation of a transaction with a third party pursuant to which such third party will provide at least $10,000,000 of funding to the Corporation to pay for research to be conducted by the Corporation relating to the Research Program.
(d) If the Consulting Agreement between the Corporation and Consultant (the "Consulting Agreement"), of even date herewith, is terminated by the Corporation pursuant to subparagraph 25(a) thereof, the Option will terminate upon the expiration of three (3) months from the date of such termination. The Option will be exercisable during such three-month period only to the extent that it was exercisable immediately prior to the termination of the Consulting Agreement.
4. EXERCISE OF OPTION.
(a) The Option may be exercised by Consultant with respect to all or part of the Shares (but not as to a fractional share of Common Stock) as to which the Option has become exercisable, within the applicable period specified in Paragraph 3 hereof, by the giving of written notice of the exercise thereof to the Corporation in the manner provided in Paragraph 13 hereof and substantially in the form annexed hereto as Exhibit A, which notice shall be accompanied by payment in full of the purchase price therefor by certified or bank cashier's check. Such exercise shall be effective upon receipt by the Corporation of such written notice and payment; and Consultant, to the extent permitted by law, shall be deemed the owner of the Shares as of the close of business on the date of such exercise, payment and delivery. The Corporation shall cause a certificate or certificates representing the Shares to be delivered to Consultant within ten (10) days after the effective date of such exercise. Consultant agrees that such certificate or certificates shall bear such legend or legends as the Board of Directors of the Corporation, in its reasonable discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act of 1933, as amended (the "Securities Act").
(b) In lieu of the certified or bank cashier's check provided for in subparagraph 4(a) above, Consultant may, at his sole option and to the extent permitted by applicable law, pay for the purchase price of the Shares being purchased by the exercise of the Option, by delivering to the Corporation shares of Common Stock (in proper form for transfer and accompanied by all requisite stock transfer tax stamps or cash in lieu thereof) owned by Consultant
having a Fair Market Value (as hereinafter defined in subparagraph 4(c) hereof) equal to such purchase price. Consultant may elect to make such delivery to the Corporation of shares of Common Stock from Shares he is purchasing pursuant to his exercise of the Option by including such election in his notice of exercise.
(c) The Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean:
(i) If the Corporation's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.
(ii) If the Corporation's Common Stock is not traded on an exchange or on the NASDAQ National Market System but is traded in the over-the-counter market, then the mean of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.
(iii) Except as provided in subsections 4(c)(iv) and 4(c)(v) below, if the Corporation's Common Stock is not publicly traded, then as determined in good faith by the Corporation's Board of Directors upon a review of relevant factors.
(iv) If the Determination Date is the date on which the Corporation's Common Stock is first sold to the public by the Corporation in a firm commitment public offering under the Securities Act, then the initial public offering price (before deducting commissions, discounts or expenses) at which the Common Stock is sold in such offering.
(v) If the Determination Date is the date of a liquidation, dissolution or winding up of the Corporation, then all amounts to be payable per share to holders of the Common Stock in the event of such liquidation, dissolution or winding up.
5. PURCHASE FOR INVESTMENT.
Consultant agrees that at the request of the Corporation (prior to the time the Shares have been registered under the Securities Act) and upon exercise of the Option, he shall execute and deliver to the Corporation a written statement, in form satisfactory to the Corporation, representing and warranting that he is purchasing the Shares for his own account, for investment only and not with a view to the resale or distribution thereof and that any subsequent offer for sale or sale of any of such shares shall be made either pursuant to (a) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with respect to the
shares being offered and sold, or (b) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption Consultant shall, prior to any offer for sale or sale of such shares, obtain a written legal opinion satisfactory to the Corporation as to the availability of such exemption.
6. NON-TRANSFERABILITY OF OPTION.
The Option shall not be transferable by Consultant other than by will or the laws of descent and distribution.
7. ADJUSTMENT OF SHARES; ADVANCE NOTICE OF CERTAIN TRANSACTIONS.
If any change is made in the Shares deliverable upon exercise of the Option (through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, spin-off, split-off, subdivision or combination of shares, exchange of shares, issuance of rights to subscribe, change in capital structure or similar event), such adjustments or substitutions shall be made by the Board of Directors of the Corporation in or for the Shares (including adjustments in the number of Shares and in the per share price of Shares subject to the Option) as the Board of Directors of the Corporation reasonably shall determine to be appropriate and equitable to prevent dilution or enlargement of Consultant's rights hereunder. After the Option has become exercisable as to any of the Shares, the Corporation shall provide Consultant with 10 days' prior written notice of the consummation of any of the transactions described in subparagraph 3(c)(ii) hereof, so as to enable Consultant to exercise the Option prior to the consummation of any such transaction.
8. COVENANTS OF THE CORPORATION.
The Corporation hereby covenants and agrees that:
(a) During the period within which the Option may be exercised, the Corporation shall at all times reserve and keep available by all necessary corporate action out of its shares of Common Stock for the purpose of issuance or transfer upon exercise of the Option the number of shares of Common Stock included in the Shares and such additional securities as may from time to time be deliverable hereunder. Such shares may be authorized but unissued shares, or may be shares held in the treasury of the Corporation or a combination thereof, at the option of the Corporation.
(b) All shares which may be issued upon exercise of the Option or delivered pursuant to this Agreement will, upon issuance and payment therefor as provided herein, be validly issued, fully paid, nonassessable and free from all liens and charges with respect to the issue thereof.
(c) Notwithstanding anything to the contrary set forth in this Agreement or
the Consulting Agreement, if Consultant terminates the Consulting Agreement
pursuant to subparagraph 25(a) thereof or if the Consulting Agreement
automatically terminates pursuant to subparagraph 25 (b) thereof, prior to the
third anniversary of the Effective Date, and if the Option has not become
exercisable as to all of the Shares as of the date of such termination, then the
Corporation shall (i) upon the written request of Consultant and John Cambier
[c.i.]
[c.i.] For a period of two years commencing on the date the Corporation terminates the NJC License pursuant to this subparagraph 8(c), the Corporation and its affiliates shall not license "NJC Technical Information" (as defined in the NJC License) from NJC.
(d) If the Corporation shall grant registration rights to its scientist founders (I.E., James R. Broach, Dana Fowlkes and Thomas Shenk) or to any of its officers with respect to any securities of the Corporation owned by them, the Corporation shall grant the same registration rights to Consultant with respect to the Shares owned by him or which are subject to the Option.
(e) If the Corporation registers any of its securities pursuant to a Form S-8 (or successor to such Form) filed under the Securities Act and if the Shares are then registrable on Form S-8, the Corporation shall cause to be registered pursuant to such Form S-8 the same proportion of the Shares as that of securities owned by and securities subject to options owned by other employees of the Corporation. If the Shares are not eligible for registration on such Form S-8, the Corporation and the Consultant will use reasonable efforts to achieve such eligibility so as to enable their registration on such Form S-8.
(f) The Corporation shall ensure that if and when the Consultant exercises the Option and acquires Shares, such Shares shall be deemed securities issued pursuant to Rule 701 promulgated under the Securities Act. In order to do so, the Corporation shall limit, as necessary, its issuing of stock or options to its employees and consultants pursuant to Rule 701. The Corporation shall also take such action as may be reasonably necessary to enable the Consultant's resale of the Shares pursuant to Rule 701(c)(3) and any applicable state securities laws, including certifying to the Consultant and/or to a broker retained by Consultant, at such time or times that the Consultant exercises the Option or sells the Shares, that the Shares are securities issued pursuant to Rule 701 and that all conditions to the availability of Rule 701 have been met with respect to the issuance of the Shares.
(g) If the Corporation becomes subject to the reporting requirements (the "Reporting Requirements") of either Section 13 or Section 15(d) of the Securities Exchange Act of 1934, if the Shares have not been registered under the Securities Act, and if they cannot be sold by Consultant pursuant to an exemption from the registration requirements thereof, the Corporation shall use its reasonable best efforts to ensure that adequate "current public information" is available with respect to it within the meaning of Rule 144(c) promulgated under the Securities Act.
(h) The Corporation shall indemnify the Consultant and provide insurance coverage to the Consultant to the same extent and subject to the same limitations as are set forth for NJC in Article 16 of the NJC License.
9. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation hereby represents and warrants to Consultant that: (i) this
Agreement and the grant of the Option to Consultant have been duly authorized by
all required corporate action on the part of the Corporation, (ii) the
Corporation is not a party to any agreement which would restrict or prohibit it
from issuing the Option to Consultant (or, to the extent such restrictions or
prohibitions exist, they have been waived by the beneficiaries thereof), (iii)
the anti-dilution protection provided in Paragraph 7 hereof is no less than that
provided under any and all of the option agreements and plans pursuant to which
the Corporation's officers have been granted stock options, (iv) the
capitalization of the Corporation as of the date hereof, on a fully diluted
basis, is as set forth on Exhibit B annexed hereto, (v) this Agreement is
enforceable against the Corporation in accordance with its terms, (vi) the grant
of the Option pursuant to this Agreement is exempt from the registration
requirements of the Securities Act and any applicable state securities laws,
(vii) the issuance of Shares to Consultant upon his exercise of the Option shall
be exempt from the registration requirements of the Securities Act, and (viii)
ninety (90) days after the Corporation becomes subject to the Reporting
Requirements, Consultant shall be able to resell the Shares acquired by him upon
exercise of the Option in accordance with Rule 701(c)(3) promulgated under the
Securities Act.
10. NO FRACTIONAL SHARES.
Upon the exercise of the Option, the Corporation shall not be required to issue any fractional shares or scrip certificates evidencing any fractional interest in shares. In any case where, pursuant to the terms of the Option, Consultant would be entitled, except for the provisions of this Paragraph 10, to receive a fractional share, the number of shares issuable upon such exercise shall be rounded to the next larger whole share if such fractional share interest is a major fraction; if such fractional share interest is not a major fraction, it shall be disregarded.
11. "LOCK-UP" AGREEMENT.
The Consultant, if so requested by the Corporation and an underwriter of Common Stock or other securities of the Corporation, shall not sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Corporation held by him or which he has
the right to acquire during the 180-day period following the effective date of a registration statement of the Corporation filed with the Securities and Exchange Commission in connection with such offering or such shorter period as such underwriter shall have advised the Corporation in writing is adequate to permit the successful and orderly distribution of such Common Stock or other securities; provided, however, that such "lock-up" agreement shall be in writing and in form and substance satisfactory to the Corporation and such underwriter. The Corporation may impose stop-transfer instructions with respect to the shares subject to the foregoing restrictions until the end of said 180-day period. In connection with the preparation and filing of any such registration statement, the Corporation shall use its reasonable best efforts (i) to enforce the obligations of its stockholders (and any person who shall have the right to acquire capital stock of the Corporation) who have agreed with the Corporation to enter into "lock-up" or "market stand-off" agreements and (ii) to obtain a "lock-up" or "market stand-off" agreement from all of its other stockholders and all other such persons.
12. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party except as expressly set forth herein. This Agreement supersedes and cancels all prior agreements between the parties, whether written or oral, with respect to the subject matter hereof. No alteration, amendment or modification of any of the terms and provisions hereof shall be valid unless made pursuant to a written instrument signed by all of the parties hereto.
13. NOTICES.
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, first class, postage prepaid, certified mail, return receipt requested, to the other party at its or his address as set forth at the beginning of this Agreement or as either of the parties may designate in conformity with the foregoing.
14. APPLICABLE LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.
15. PARAGRAPH HEADINGS.
The paragraph headings set forth in this Agreement are for reference purposes only and shall not considered as part of this Agreement in any respect nor shall they in any way affect the substance of any provisions contained in this Agreement.
16. SUCCESSORS AND ASSIGNS.
This Agreement shall not be assignable by Consultant, but the rights hereunder may be transferred as described in Paragraph 6 hereof. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by Consultant, the Corporation, the heirs and personal representatives of Consultant and the successors and assigns of the Corporation.
17. ARBITRATION.
(a) The parties hereto agree that they shall use their best efforts to settle amicably any disputes, differences or controversies arising between the parties out of or in connection with this Agreement. However, subject to the limitations set forth in the final sentence of this subparagraph 17(a) and in subparagraph 17(b) below, any such disputes, differences or controversies, if not so settled within thirty (30) days after the occurrence thereof, shall be finally and exclusively determined by arbitration. Unless the parties otherwise agree, arbitration initiated by the Corporation shall be held in Denver, Colorado, and arbitration initiated by the Consultant shall be held in New York, New York. Any such arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the Commercial Rules of the American Arbitration Association then obtaining. The parties hereby empower such arbitrators to grant equitable relief as necessary to resolve any dispute between the parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, either party may, without recourse to arbitration, assert against the other party a third-party claim or cross-claim in any action brought by a third party to which the subject matter of this Agreement may be relevant.
(b) Notwithstanding subparagraph 17(a) above, Consultant may seek emergency injunctive relief, emergency specific performance or other emergency equitable relief in a state court of the State of New York or the United States District Court for the Southern District of New York with respect to a breach or threatened breach by the Corporation of Paragraphs 3, 4, 7 or 8 hereof. The Corporation hereby consents to the personal jurisdiction of any such court and agrees to be sued in such court
in the circumstances described in the preceding sentence. The Corporation agrees that any and all process directed to it in any such litigation may be served upon its agents outside of the State of New York with the same force and effect as if service had been made within the State of New York.
18. SURVIVAL.
The rights and obligations of the parties arising under Paragraphs 8, 9, 11 and 17 hereof shall survive the termination of the Option.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ Jeremy Levin --------------------------------- Jeremy M. Levin, President /s/ Gary L. Johnson --------------------------------- GARY L. JOHNSON |
EXHIBIT A
[Date of Exercise]
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014
Attention: Corporate Secretary
Re: STOCK OPTION
Dear Sir:
I am the holder of a Stock Option granted to me by Cadus Pharmaceutical Corporation (the "Corporation"), pursuant to a Stock Option Agreement dated as of November 1, 1994, to purchase 500,000 shares of Common Stock of the Corporation ("Shares"). I hereby exercise such option with respect to ________ Shares, the total purchase price for which is $________, and [I enclose a certified or bank cashier's check payable to the order of the Corporation in the amount of $________, representing the total purchase price for the Shares] [I hereby elect to pay the purchase price by delivering to the Corporation ________ shares of Common Stock of the Corporation having a fair market value equal to $________ from the Shares I am purchasing pursuant to the exercise of such option]. The certificate or certificates representing the Shares should be registered in my name and should be forwarded to me at __________________________________________.
Please acknowledge receipt of the exercise of my stock option on the attached copy of this letter.
Very truly yours,
GARY L. JOHNSON
RECEIPT ACKNOWLEDGED:
CADUS PHARMACEUTICAL CORPORATION
By: ____________________________
EXHIBIT B
CAPITALIZATION OF
CADUS PHARMACEUTICAL CORPORATION
AS OF OCTOBER 31, 1994
Common Stock: 4,140,000
Series A Preferred Stock: 14,879,651 shares
Series B Preferred Stock: 3,571,429 shares
Options to acquire Common Stock: 1,620,459
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
CONSULTING AGREEMENT
AGREEMENT dated as of November 1, 1994, by and between Cadus Pharmaceutical Corporation ("Cadus"), a Delaware corporation having its offices at 180 Varick Street, New York, New York 10014 and John C. Cambier, Ph.D. ("Consultant"), having an office at National Jewish Center for Immunology & Respiratory Medicine ("NJC"), 1400 Jackson Street, Denver, Colorado 80206.
W I T N E S S E T H:
WHEREAS, Cadus desires to retain Consultant to perform consulting services on its behalf, and Consultant desires to render such services on behalf of Cadus, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows:
1. RETENTION OF SERVICES.
Cadus hereby retains Consultant to perform consulting services, and Consultant agrees to render such services to Cadus, upon the terms and conditions hereinafter set forth.
2. TERM.
The retention of Consultant by Cadus hereunder shall be effective and shall commence on the date hereof and shall continue thereafter until the fourth anniversary of the date Consultant's Facility (as hereinafter defined in subparagraph 4(b) below) is first occupied by Cadus employees (the "Effective Date"), unless sooner terminated pursuant to Paragraph 25 hereof.
3. ACKNOWLEDGMENT OF CONSULTANT'S OTHER EMPLOYMENT.
Cadus acknowledges that Consultant is employed by NJC, and that such employment imposes certain restrictions on Consultant. Specifically, NJC requires that Consultant devote a minimum of ninety percent (90%) of his professional time to his duties to NJC, and NJC claims certain proprietary rights with respect to Consultant's work on behalf of NJC. In the event of any conflict between NJC and Cadus regarding the respective obligations of Consultant to each such entity, Cadus and Consultant shall use reasonable efforts to resolve such conflict.
4. EXTENT OF SERVICES.
(a) Upon the request of Cadus, and on such dates and at such times during the term hereof as are agreed upon by Cadus and Consultant, Consultant shall render consulting services related to the development and commercialization of the technologies (the "Technologies") described in the Research Program attached hereto as Exhibit A (the "Research Program"). Cadus hereby acknowledges that it has, as of the date of this Agreement,
obtained an exclusive license from NJC to certain proprietary rights as set forth in that certain License Agreement between Cadus and NJC (the "NJC License Agreement"). Consultant hereby acknowledges that he has reviewed the NJC License Agreement.
(b) The Consultant shall direct scientists at a facility (the "Consultant's Facility") that Cadus agrees to establish and fund (in accordance with the budgets described in Paragraph 7 hereof) in or close to Denver or Boulder (other than Consultant's laboratory at NJC). This facility shall be sufficient to support the Consultant, Gary Johnson ("Johnson") and a team of at least one senior scientist, two junior scientists, two Post Docs or technicians, and support staff. Cadus agrees to hire all of the foregoing personnel and work with Consultant to identify the appropriate team. Cadus agrees to pay salary and grant stock options to such personnel in the same range that salary is paid and stock options granted to comparable employees at Cadus's facility in New York.
(c) Within thirty (30) days following the end of each calendar quarter, Consultant shall furnish Cadus with fully-detailed, written reports on all activities, during such quarter, under the Research Program or related to the development and commercialization of the Technologies. Consultant shall meet periodically with Cadus's Scientific Advisory Board at its reasonable request to discuss such activities, the research to be undertaken in the next twelve (12) months and the budgetary requirements for such twelve (12) month period.
(d) Consultant will be granted the title of Director of Immunology at Cadus.
(e) Consultant agrees to make available to Cadus no less than 10% of his professional time and effort.
5. COMPENSATION.
(a) As compensation for the consulting services to be rendered by Consultant, Cadus shall pay to Consultant a consulting fee of [c.i.] per month payable quarterly.
(b) Simultaneous with the execution of this Agreement, Cadus and Consultant are entering into a Stock Option Agreement (the "Stock Option Agreement") pursuant to which Cadus is granting to Consultant an option to purchase from Cadus shares of the Common Stock, $.001 par value, of Cadus.
6. REIMBURSEMENT OF EXPENSES.
Cadus will reimburse Consultant for reasonable out-of-pocket expenses properly incurred by Consultant on behalf of and for the benefit of Cadus in rendering his services hereunder;
provided, however, that Consultant shall submit written vouchers to Cadus evidencing such expenses and the purposes for which the same were incurred; and provided further that Consultant has obtained the prior approval of the Chief Executive Officer of Cadus for any single expenditure in excess of $2,500 and expenditures which when aggregated with other expenditures during a calendar year will exceed $15,000.
7. ANNUAL RESEARCH PLAN AND BUDGET.
Commencing with the first anniversary of the date of this Agreement, Cadus, Consultant and Johnson shall prepare an annual research plan, for each year during the term of this Agreement, which details the specific research to be undertaken during the upcoming year, including a reasonably detailed description of the goals and scope of such research. Each annual research plan shall be prepared with a view to achieving the goals of the Research Program within the timetable set forth in Exhibit A annexed hereto. Cadus, Consultant and Johnson shall also prepare a budget to support the research described in each such annual research plan, which budget shall detail the personnel, equipment, materials and space requirements and the cost thereof. The budget for the first year, commencing as of the Effective Date, is annexed hereto as Exhibit B. Cadus shall fund the budget for the first year and each subsequent budget agreed to by it; PROVIDED, HOWEVER, that such obligation shall cease upon termination of the Research Program. Cadus shall have the right, at any time after 352 days after the Effective Date, to terminate the Research Program for any reason whatsoever. Cadus shall give Consultant prompt written notice of such termination.
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Consultant acknowledges and agrees that his rendering of consulting services to Cadus will necessarily involve his understanding of and access to "trade secrets" (as hereinafter defined) and confidential information pertaining to Cadus, its proprietary technology and its business. Accordingly, Consultant agrees that during the term of this Agreement, and at all times thereafter, he will not disclose to any unauthorized third party or use for his own benefit any of the trade secrets or confidential information pertaining to Cadus, its proprietary technology or its business, including the "Intangible Property" (as hereinafter defined in Paragraph 10 hereof), the "NJC Technical Information" (as defined in and subject to the NJC License Agreement) and all other proprietary rights licensed by Cadus from NJC and other third parties (subject to the terms of such licenses), but excluding other proprietary rights of NJC and other third parties. For the purposes hereof, "trade secrets" is information which is proprietary to or licensed by Cadus, not generally known to the trade and which gives Cadus an advantage over its competitors. Trade secrets include, without limitation, research being planned and developed by Cadus, research methods and processes used by Cadus, materials used in research by Cadus, inventions by Cadus,
information concerning the filing or pendency of patent applications by Cadus,
and Cadus's business and legal plans, finances, competitive position, customers
and vendors. Trade secrets do not include, and this Paragraph 8(a) shall not
apply to, information which: (i) is in the public domain at the time of
disclosure, (ii) is properly in the possession of Consultant prior to the time
of disclosure (except information relating to NJC Technical Information to the
extent of Cadus's rights thereto), (iii) after disclosure enters the public
domain through no act or omission of Consultant, (iv) after disclosure is
received by Consultant from a third party unless Consultant knows the third
party is not entitled to transfer the information, (v) is developed by
Consultant independent of his consulting services rendered pursuant to this
Agreement and which is not then licensed to Cadus, including information
(whether or not pertaining to the Technologies or the Research Program)
developed by Consultant while he is working on behalf of NJC or another
employer, and (vi) constitutes the Intangible Property and related information,
if and only to the extent that Cadus's rights thereto have been terminated or
transferred as described in subparagraph 8(c) of the Stock Option Agreement.
(b) Cadus acknowledges and agrees that: (i) the NJC Technical Information is the proprietary and confidential information of NJC and its use by Cadus is governed by the NJC License Agreement and (ii) the respective rights of Cadus and NJC with respect to Technologies that are developed at NJC are subject to the terms of the NJC License Agreement. The Confidentiality Agreement between the parties, dated April 6, 1994, has been superseded by the terms of the NJC License Agreement.
9. CADUS'S PROPERTY
Consultant further agrees that all memoranda, notes, records, notebooks, letters, instruments, drawings, designs, models, prototypes, specifications, customer lists, proposals, business plans, materials, other documents, databases or copies thereof, containing confidential information of any type or description, made or compiled by Consultant, or made available to Consultant, concerning Cadus, its proprietary technology or its business, shall be Cadus's sole property and shall be delivered to Cadus upon the termination of this Agreement or at any time during the term of this Agreement upon request of Cadus.
10. OWNERSHIP OF INVENTIONS.
Consultant agrees that any inventions, improvements, processes, designs, materials, products, developments or discoveries (whether or not subject to patent, copyright or trademark protection) (all of the foregoing being hereinafter referred to as "Intangible Property") that he may conceive, make, invent, develop, suggest or reduce to practice during the time he is working on behalf of Cadus (whether individually or jointly with
any other person or persons), at the facilities of Cadus or in pursuit of projects undertaken by him on behalf of Cadus, relating in any way to the business of Cadus or the general biotechnology industry of which Cadus is a part (but excluding any such Intangible Property that he may conceive, make, invent, develop, suggest or reduce to practice while working at his laboratory at NJC), shall be the sole, exclusive and absolute property of Cadus (subject to the terms of the NJC License Agreement). Consultant will immediately disclose in writing any such Intangible Property owned by Cadus to Cadus and will, at any time, whether during or following his retention by Cadus, at Cadus's reasonable request and without additional compensation, execute and deliver to Cadus such assignments, certificates or other instruments as Cadus may from time to time reasonably deem necessary or desirable to effect disclosure thereof and/or to evidence, establish, maintain, perfect, protect, enforce or defend Cadus's right, title and interest in and to such Intangible Property. Cadus shall assume and hold Consultant harmless with respect to any and all expenses and liabilities arising from Consultant's execution and delivery of such assignments, certificates and instruments. Consultant further agrees, upon the reasonable request of Cadus, to execute any patent, trademark or copyright documents covering such Intangible Property owned by Cadus, as well as any documents which reasonably may be considered necessary or helpful by Cadus in the prosecution of applications for patent, trademark or copyright protection thereon in the United States and/or any foreign countries, and in the prosecution of applications for the reissue or renewal of such patents, copyrights or trademarks, or which may relate to any litigation or controversy in connection therewith, all expenses and liabilities (including, without limitation, any arising from claims made or threatened against Consultant)incident to the filing of such applications, the prosecution thereof and the conduct of any such litigation to be borne by Cadus. Upon request by and at the expense and risk of Cadus, Consultant shall assist in locating writings and other physical evidence relating to the Intangible Property owned by Cadus and produced by Consultant, shall provide unrecorded information relating to such Intangible Property, and shall give testimony in any proceeding in which any of such Intangible Property, or any application or patent, copyright or trademark relating thereto, may be involved.
11. COPYRIGHTS.
Consultant shall promptly disclose to Cadus any and all publishable and/or copyrightable material which he produces, composes, or writes, individually or in collaboration with others, which arises out of work undertaken by him on behalf of Cadus. Consultant shall assign to Cadus all his interest in such copyrightable materials, and will sign all documents and do all other acts necessary to assist Cadus in obtaining copyrights on such material in any and all countries, all at the expense and risk of Cadus.
12. NON-SOLICITATION OF EMPLOYEES.
During the term of this Agreement and for a period of one (1) year thereafter, Consultant will not directly or indirectly: (i) employ, hire, or cause to be employed or hired, any person who is then employed by Cadus or was so employed within six (6) months prior thereto; or (ii) cause, invite, solicit, entice or induce any such person to terminate his employment with Cadus. Notwithstanding the foregoing, if Consultant terminates this Agreement pursuant to subparagraph 25(a) hereof or if this Agreement automatically terminates pursuant to subparagraph 25(b), the restrictions set forth in this Paragraph 12 automatically shall cease to apply and shall become null and void.
13. NON-COMPETITION.
During the term of this Agreement, Consultant shall not, without the prior written consent of the Board of Directors of Cadus, either directly or indirectly through any other person, firm or corporation engage or participate in, render advisory or other services to or make any financial investment in any firm, corporation or other business enterprise engaged, for profit, in research, development or marketing of pharmaceutical products or biological reagents. Cadus hereby represents that the Board of Directors of Cadus has consented in writing to the Consultant retaining his relationships with Tomohiro Kurosaki, Steve Penner and Pharmingen, Inc. described in Consultant's letter to Dr. Jeremy Levin of Cadus, dated October 27, 1994. Nothing contained herein, however, shall restrict Consultant from (i) acquiring any debt security of any publicly-held company so long as such investment does not give him the right to control or influence the policy or decisions of any such business or enterprise, (ii) acquiring or holding stock in any publicly-held company so long as such ownership does not exceed 5% of the total outstanding stock of such company, (iii) working for NJC as described in paragraph 3 above, or (iv) working for any other non-profit institution or organization, such as another academic institution or organization such as the National Institutes of Health, the American Heart Association, the American Cancer Society or the National Lung Society. If Consultant becomes employed or renders services within the commercial and/or for-profit sector during the term of this Agreement (other than on behalf of Cadus) in breach of this Paragraph 13, then Cadus, in addition to any other remedies it may have under this Agreement or otherwise, shall have the right to terminate this Agreement in accordance with subparagraph 25(a) hereof.
14. INJUNCTIVE AND OTHER EQUITABLE RELIEF.
Each party acknowledges that, in the event of a breach or threatened breach of any of Paragraphs 8, 9, 10, 11, 12 and 13 of this Agreement by such party, the other party would sustain irreparable injury and damage. Therefore, in addition to any other remedies which a party may have under this Agreement or otherwise, each party shall be entitled to the remedies of
injunction, specific performance and other equitable relief for a breach or threatened breach by the other party of any of Paragraphs 8, 9, 10, 11, 12 and 13 of this Agreement. This Paragraph 14 shall not, however, be construed as a waiver of any of the rights which either party may have for damages or otherwise.
15. NO CONFLICTING AGREEMENTS.
(a) Consultant represents and warrants that he is not a party to any agreement, contract or understanding, whether employment or otherwise, which would in any way restrict or prohibit him from performing services in accordance with the terms and conditions of this Agreement.
(b) Cadus represents and warrants that it is not a party to any agreement, contract or understanding, which would in any way restrict or prohibit it from performing its obligations hereunder in accordance with the terms and conditions of this Agreement.
16. RELATIONSHIP OF THE PARTIES.
(a) In all activities hereunder, Consultant shall be an independent contractor and Cadus shall have no liability whatsoever for withholding, collection or payment of income taxes or for taxes of any other nature on behalf of Consultant.
(b) Nothing contained herein shall be deemed to (i) make either party or any employee of such party the agent, employee, joint venturer or partner of the other party or (ii) provide either party or any employee of such party with the power or authority to act on behalf of the other party or to bind the other party to any contract, agreement or arrangement with any other person.
(c) All personnel employed or otherwise engaged by either party shall be the agents, servants and employees of such party only, and the other party shall incur no obligations or liabilities, express or implied, by reason of, or with respect to, the conduct of such personnel. The parties acknowledge and agree that the scientists, Post Docs, technicians, support staff and any other persons to be hired pursuant to Paragraph 4(b) above, shall be the employees or independent contractors of Cadus and not of Consultant.
17. ASSIGNMENT.
This Agreement may not be assigned by either party, and no obligation owed or performable by either party hereunder may be delegated (other than the delegation by Consultant of certain work to the persons described in Paragraph 4(b) above), without the prior written consent of the other party. Any attempted assignment or delegation by either party without any such requisite prior written consent of the other party shall be void and ineffective for all purposes.
18. NON-DISPARAGEMENT.
Each party expressly agrees to refrain from uttering any disparaging remarks concerning the other or making any other statement, oral or written, which portrays the other in an unfavorable light or subjects the other to scorn, obloquy or ridicule.
19. NOTICES.
All notices, requests, consents or other communications given by either party hereto shall be in writing and shall be deemed duly given if personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid (effective upon delivery thereof as evidenced by such return receipt), to the other party at its address set forth below or at such other address as such other party may hereafter designate in the manner herein provided.
If to Cadus, at:
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014-4606
Attn: President
If to Consultant, at:
Dr. John C. Cambier
National Jewish Center for Immunology
& Respiratory Medicine
1400 Jackson Street
Denver, CO 80206
20. FINAL AGREEMENT; AMENDMENTS.
This Agreement supersedes all prior negotiations, representations and agreements made by and between the parties respecting the subject matter hereof. No alteration, amendment or modification of any of the terms or provisions of this Agreement shall be valid unless made pursuant to an instrument in writing signed by each of the parties hereto.
21. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, with giving effect to the choice of law principles thereof.
22. DISPUTE RESOLUTION.
(a) The parties hereto agree that they shall use their best efforts to settle amicably any disputes, differences or controversies arising between the parties out of or in connection with this Agreement. However, subject to the limitations set forth in the final sentence of this subparagraph 22(a) and in subparagraph 22(b) below, any such disputes, differences or
controversies, if not so settled within thirty (30) days after the occurrence thereof, shall be finally and exclusively determined by arbitration. Unless the parties otherwise agree, arbitration initiated by Cadus shall be held in Denver, Colorado, and arbitration initiated by the Consultant shall be held in New York, New York. Any such arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the Commercial Rules of the American Arbitration Association then obtaining. The parties hereby empower such arbitrators to grant the equitable relief described in Paragraph 14 hereof as necessary to resolve any dispute between the parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, either party may, without recourse to arbitration, assert against the other party a third-party claim or cross-claim in any action brought by a third party to which the subject matter of this Agreement may be relevant.
(b) Notwithstanding subparagraph 22(a) above, Cadus may seek emergency injunctive relief, emergency specific performance or other emergency equitable relief in a state court of the State of Colorado or the United States District Court for the District of Colorado with respect to a breach or threatened breach by Consultant of Paragraph 8, 10 or 13 hereof. Consultant hereby consents to the personal jurisdiction of any such court and agrees to be sued in such court in the circumstances described in the preceding sentence. Consultant agrees that any and all process directed to it in any such litigation may be served upon him outside of the State of Colorado with the same force and effect as if service had been made within the State of Colorado.
23. PARAGRAPH HEADINGS.
The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
24. SEVERABILITY; REFORMATION.
If at any time subsequent to the date hereof any provisions of this Agreement shall be held by any court or arbitration panel of competent jurisdiction to be illegal, void, or unenforceable, such provisions shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. Furthermore, if any provision of this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the fullest extent compatible with then existing applicable law.
25. TERMINATION.
(a) Either party shall have the right to terminate this Agreement upon a breach of the Agreement by the other party as described in this Paragraph. The party wishing to terminate this Agreement shall provide the other party with written notice describing the alleged breach, and the recipient shall have 30 days after receipt of such notice in which to cure the alleged breach. If the breach is not cured within such 30-day period, the non-breaching party shall then have the right to terminate this Agreement at any time after the end of such 30-day period by written notice to the other party.
(b) If Cadus terminates the Research Program, this Agreement shall automatically terminate; provided, however, that Cadus agrees not to terminate the Research Program before a date which is at least 352 days after the Effective Date.
26. EFFECTS OF TERMINATION.
Termination of this Agreement shall not release the Consultant or Cadus from any obligation or liability to the other which shall have matured prior to termination, nor shall termination rescind or require repayment of any payment or consideration made or given by either party, except as otherwise provided herein. The rights and obligations of the parties set forth in Paragraphs 7, 8, 9, 10, 11, 12 (subject to the limitations set forth therein), 14, 18 and 22 hereof shall survive termination of this Agreement, except that the rights of Cadus and the obligations of Consultant under Paragraphs 10 and 11 hereof shall not survive termination if this Agreement is terminated pursuant to subparagraph 25(b) hereof prior to the third anniversary of the Effective Date.
27. USE OF TECHNOLOGIES BY CONSULTANT.
Notwithstanding any other provision of this Agreement, as long as the NJC License Agreement is in effect and Consultant is working on behalf of NJC, a university or other not-for-profit entity, Cadus shall permit the Consultant to use the Technologies in his own academic laboratory at such not-for-profit entity solely for academic research purposes.
28. NO THIRD PARTY BENEFICIARIES.
This Agreement is entered into for the sole protection and benefit of Consultant and Cadus, and no other person shall have any rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY LEVIN ----------------------- Jeremy M. Levin, President /s/ JOHN CAMBIER ----------------------- JOHN C. CAMBIER |
Exhibit A
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
Exhibit B
CADUS PHARMACEUTICAL CORPORATION
FIRST YEAR BUDGET FOR COLORADO FACILITY
Personnel Related Costs (Salaries & Benefits) [c.i.]
Laboratory Supplies [c.i.]
Equipment Lease (A) [c.i.]
Other [c.i.]
Rent [c.i.]
[c.i.]
|
(A) Equipment will be leased for a five year term. Lease payments will be in 60 equal monthly installments. [c.i.] is the estimated aggregate first year payments.
The foregoing budget does not include the personnel and other costs which Cadus shall fund prior to the time the Consultant's Facility is first occupied by Cadus employees.
Cadus shall fund the foregoing budget at such times as Consultant shall require in order for Consultant to undertake the Research Program described in the Consulting Agreement. Cadus acknowledges that some of the equipment must be ordered well in advance of the date the Consultant's Facility is expected to be first occupied by Cadus employees, so that there is sufficient time for such equipment to be assembled prior to that date.
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
CONSULTING AGREEMENT
AGREEMENT dated as of November 1, 1994, by and between Cadus Pharmaceutical Corporation ("Cadus"), a Delaware corporation having its offices at 180 Varick Street, New York, New York 10014 and Gary L. Johnson, Ph.D. ("Consultant"), having an office at National Jewish Center for Immunology & Respiratory Medicine ("NJC"), 1400 Jackson Street, Denver, Colorado 80206.
W I T N E S S E T H:
WHEREAS, Cadus desires to retain Consultant to perform consulting services on its behalf, and Consultant desires to render such services on behalf of Cadus, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows:
1. RETENTION OF SERVICES.
Cadus hereby retains Consultant to perform consulting services, and Consultant agrees to render such services to Cadus, upon the terms and conditions hereinafter set forth.
2. TERM.
The retention of Consultant by Cadus hereunder shall be effective and shall commence on the date hereof and shall continue thereafter until the fourth anniversary of the date Consultant's Facility (as hereinafter defined in subparagraph 4(b) below) is first occupied by Cadus employees (the "Effective Date"), unless sooner terminated pursuant to Paragraph 25 hereof.
3. ACKNOWLEDGMENT OF CONSULTANT'S OTHER EMPLOYMENT.
Cadus acknowledges that Consultant is employed by NJC, and that such employment imposes certain restrictions on Consultant. Specifically, NJC requires that Consultant devote a minimum of ninety percent (90%) of his professional time to his duties to NJC, and NJC claims certain proprietary rights with respect to Consultant's work on behalf of NJC. Consultant, however, agrees to take a six-month sabbatical from NJC, in his laboratory at NJC, commencing on or about the Effective Date. During such sabbatical, Consultant will be excused from various administrative duties in connection with his work at NJC and will reduce the amount of time he ordinarily devotes to other non-profit institutions or organizations (e.g., the National Institutes of Health and the American Cancer Society). In the event of any conflict between NJC and Cadus regarding the respective obligations of Consultant to each such entity, Cadus and Consultant shall use reasonable efforts to resolve such conflict.
4. EXTENT OF SERVICES.
(a) Upon the request of Cadus, and on such dates and at such times during the term hereof as are agreed upon by Cadus and Consultant, Consultant shall render consulting services related to the development and commercialization of the technologies (the "Technologies") described in the Research Program attached hereto as Exhibit A (the "Research Program"). Cadus hereby acknowledges that it has, as of the date of this Agreement, obtained an exclusive license from NJC to certain proprietary rights as set forth in that certain License Agreement between Cadus and NJC (the "NJC License Agreement"). Consultant hereby acknowledges that he has reviewed the NJC License Agreement.
(b) The Consultant shall direct scientists at a facility (the "Consultant's Facility") that Cadus agrees to establish and fund (in accordance with the budgets described in Paragraph 7 hereof) in or close to Denver or Boulder (other than Consultant's laboratory at NJC). This facility shall be sufficient to support the Consultant, John Cambier ("Cambier") and a team of at least one senior scientist, two junior scientists, two Post Docs or technicians, and support staff. Cadus agrees to hire all of the foregoing personnel and work with Consultant to identify the appropriate team. Cadus agrees to pay salary and grant stock options to such personnel in the same range that salary is paid and stock options granted to comparable employees at Cadus's facility in New York.
(c) Within thirty (30) days following the end of each calendar quarter, Consultant shall furnish Cadus with fully-detailed, written reports on all activities, during such quarter, under the Research Program or related to the development and commercialization of the Technologies. Consultant shall meet periodically with Cadus's Scientific Advisory Board at its reasonable request to discuss such activities, the research to be undertaken in the next twelve (12) months and the budgetary requirements for such twelve (12) month period.
(d) Consultant will be granted the title of Director of Cell Biology at Cadus.
(e) Consultant agrees to make available to Cadus no less than 10% of his professional time and effort.
5. COMPENSATION.
(a) As compensation for the consulting services to be rendered by Consultant, Cadus shall pay to Consultant a consulting fee of [c.i.] per month payable quarterly.
(b) Simultaneous with the execution of this Agreement, Cadus and Consultant are entering into a Stock Option
Agreement (the "Stock Option Agreement") pursuant to which Cadus is granting to Consultant an option to purchase from Cadus shares of the Common Stock, $.001 par value, of Cadus.
6. REIMBURSEMENT OF EXPENSES.
Cadus will reimburse Consultant for reasonable out-of-pocket expenses properly incurred by Consultant on behalf of and for the benefit of Cadus in rendering his services hereunder; provided, however, that Consultant shall submit written vouchers to Cadus evidencing such expenses and the purposes for which the same were incurred; and provided further that Consultant has obtained the prior approval of the Chief Executive Officer of Cadus for any single expenditure in excess of $2,500 and expenditures which when aggregated with other expenditures during a calendar year will exceed $15,000.
7. ANNUAL RESEARCH PLAN AND BUDGET.
Commencing with the first anniversary of the date of this Agreement, Cadus, Consultant and Cambier shall prepare an annual research plan, for each year during the term of this Agreement, which details the specific research to be undertaken during the upcoming year, including a reasonably detailed description of the goals and scope of such research. Each annual research plan shall be prepared with a view to achieving the goals of the Research Program within the timetable set forth in Exhibit A annexed hereto. Cadus, Consultant and Cambier shall also prepare a budget to support the research described in each such annual research plan, which budget shall detail the personnel, equipment, materials and space requirements and the cost thereof. The budget for the first year, commencing as of the Effective Date, is annexed hereto as Exhibit B. Cadus shall fund the budget for the first year and each subsequent budget agreed to by it; PROVIDED, HOWEVER, that such obligation shall cease upon termination of the Research Program. Cadus shall have the right, at any time after 352 days after the Effective Date, to terminate the Research Program for any reason whatsoever. Cadus shall give Consultant prompt written notice of such termination.
8. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Consultant acknowledges and agrees that his rendering of consulting services to Cadus will necessarily involve his understanding of and access to "trade secrets" (as hereinafter defined) and confidential information pertaining to Cadus, its proprietary technology and its business. Accordingly, Consultant agrees that during the term of this Agreement, and at all times thereafter, he will not disclose to any unauthorized third party or use for his own benefit any of the trade secrets or confidential information pertaining to Cadus, its proprietary technology or its business, including the "Intangible Property" (as hereinafter defined in Paragraph 10 hereof), the "NJC Technical Information" (as defined in and subject to the NJC License Agreement) and all other proprietary rights licensed by Cadus from NJC and other third parties (subject to the terms of such licenses), but excluding other proprietary rights of NJC and other third
parties. For the purposes hereof, "trade secrets" is information which is
proprietary to or licensed by Cadus, not generally known to the trade and which
gives Cadus an advantage over its competitors. Trade secrets include, without
limitation, research being planned and developed by Cadus, research methods and
processes used by Cadus, materials used in research by Cadus, inventions by
Cadus, information concerning the filing or pendency of patent applications by
Cadus, and Cadus's business and legal plans, finances, competitive position,
customers and vendors. Trade secrets do not include, and this Paragraph 8(a)
shall not apply to, information which: (i) is in the public domain at the time
of disclosure, (ii) is properly in the possession of Consultant prior to the
time of disclosure (except information relating to NJC Technical Information to
the extent of Cadus's rights thereto), (iii) after disclosure enters the public
domain through no act or omission of Consultant, (iv) after disclosure is
received by Consultant from a third party unless Consultant knows the third
party is not entitled to transfer the information, (v) is developed by
Consultant independent of his consulting services rendered pursuant to this
Agreement and which is not then licensed to Cadus, including information
(whether or not pertaining to the Technologies or the Research Program)
developed by Consultant while he is working on behalf of NJC or another
employer, and (vi) constitutes the Intangible Property and related information,
if and only to the extent that Cadus's rights thereto have been terminated or
transferred as described in subparagraph 8(c) of the Stock Option Agreement.
(b) Cadus acknowledges and agrees that: (i) the NJC Technical Information is the proprietary and confidential information of NJC and its use by Cadus is governed by the NJC License Agreement and (ii) the respective rights of Cadus and NJC with respect to Technologies that are developed at NJC are subject to the terms of the NJC License Agreement. The Confidentiality Agreement between the parties, dated April 6, 1994, has been superseded by the terms of the NJC License Agreement.
9. CADUS'S PROPERTY
Consultant further agrees that all memoranda, notes, records, notebooks, letters, instruments, drawings, designs, models, prototypes, specifications, customer lists, proposals, business plans, materials, other documents, databases or copies thereof, containing confidential information of any type or description, made or compiled by Consultant, or made available to Consultant, concerning Cadus, its proprietary technology or its business, shall be Cadus's sole property and shall be delivered to Cadus upon the termination of this Agreement or at any time during the term of this Agreement upon request of Cadus.
10. OWNERSHIP OF INVENTIONS.
Consultant agrees that any inventions, improvements, processes, designs, materials, products, developments or discoveries (whether or not subject to patent, copyright or trademark protection) (all of the foregoing being hereinafter referred to as "Intangible Property") that he may conceive, make, invent, develop, suggest or reduce to practice during the time he is working on behalf of Cadus (whether individually or jointly with any other person or persons), at the facilities of Cadus or in pursuit of projects undertaken by him on behalf of Cadus, relating in any way to the business of Cadus or the general biotechnology industry of which Cadus is a part (but excluding any such Intangible Property that he may conceive, make, invent, develop, suggest or reduce to practice while working at his laboratory at NJC), shall be the sole, exclusive and absolute property of Cadus (subject to the terms of the NJC License Agreement). Consultant will immediately disclose in writing any such Intangible Property owned by Cadus to Cadus and will, at any time, whether during or following his retention by Cadus, at Cadus's reasonable request and without additional compensation, execute and deliver to Cadus such assignments, certificates or other instruments as Cadus may from time to time reasonably deem necessary or desirable to effect disclosure thereof and/or to evidence, establish, maintain, perfect, protect, enforce or defend Cadus's right, title and interest in and to such Intangible Property. Cadus shall assume and hold Consultant harmless with respect to any and all expenses and liabilities arising from Consultant's execution and delivery of such assignments, certificates and instruments. Consultant further agrees, upon the reasonable request of Cadus, to execute any patent, trademark or copyright documents covering such Intangible Property owned by Cadus, as well as any documents which reasonably may be considered necessary or helpful by Cadus in the prosecution of applications for patent, trademark or copyright protection thereon in the United States and/or any foreign countries, and in the prosecution of applications for the reissue or renewal of such patents, copyrights or trademarks, or which may relate to any litigation or controversy in connection therewith, all expenses and liabilities (including, without limitation, any arising from claims made or threatened against Consultant)incident to the filing of such applications, the prosecution thereof and the conduct of any such litigation to be borne by Cadus. Upon request by and at the expense and risk of Cadus, Consultant shall assist in locating writings and other physical evidence relating to the Intangible Property owned by Cadus and produced by Consultant, shall provide unrecorded information relating to such Intangible Property, and shall give testimony in any proceeding in which any of such Intangible Property, or any application or patent, copyright or trademark relating thereto, may be involved.
11. COPYRIGHTS.
Consultant shall promptly disclose to Cadus any and all publishable and/or copyrightable material which he produces,
composes, or writes, individually or in collaboration with others, which arises out of work undertaken by him on behalf of Cadus. Consultant shall assign to Cadus all his interest in such copyrightable materials, and will sign all documents and do all other acts necessary to assist Cadus in obtaining copyrights on such material in any and all countries, all at the expense and risk of Cadus.
12. NON-SOLICITATION OF EMPLOYEES.
During the term of this Agreement and for a period of one (1) year thereafter, Consultant will not directly or indirectly: (i) employ, hire, or cause to be employed or hired, any person who is then employed by Cadus or was so employed within six (6) months prior thereto; or (ii) cause, invite, solicit, entice or induce any such person to terminate his employment with Cadus. Notwithstanding the foregoing, if Consultant terminates this Agreement pursuant to subparagraph 25(a) hereof or if this Agreement automatically terminates pursuant to subparagraph 25(b), the restrictions set forth in this Paragraph 12 automatically shall cease to apply and shall become null and void.
13. NON-COMPETITION.
During the term of this Agreement, Consultant shall not, without the prior written consent of the Board of Directors of Cadus, either directly or indirectly through any other person, firm or corporation engage or participate in, render advisory or other services to or make any financial investment in any firm, corporation or other business enterprise engaged, for profit, in research, development or marketing of pharmaceutical products or biological reagents. Nothing contained herein, however, shall restrict Consultant from (i) acquiring any debt security of any publicly-held company so long as such investment does not give him the right to control or influence the policy or decisions of any such business or enterprise, (ii) acquiring or holding stock in any publicly-held company so long as such ownership does not exceed 5% of the total outstanding stock of such company, (iii) working for NJC as described in paragraph 3 above, or (iv) working for any other non-profit institution or organization, such as another academic institution or organization such as the National Institutes of Health, the American Heart Association, the American Cancer Society or the National Lung Society. If Consultant becomes employed or renders services within the commercial and/or for-profit sector during the term of this Agreement (other than on behalf of Cadus) in breach of this Paragraph 13, then Cadus, in addition to any other remedies it may have under this Agreement or otherwise, shall have the right to terminate this Agreement in accordance with subparagraph 25(a) hereof.
14. INJUNCTIVE AND OTHER EQUITABLE RELIEF.
Each party acknowledges that, in the event of a breach or threatened breach of any of Paragraphs 8, 9, 10, 11, 12 and 13 of this Agreement by such party, the other party would
sustain irreparable injury and damage. Therefore, in addition to any other remedies which a party may have under this Agreement or otherwise, each party shall be entitled to the remedies of injunction, specific performance and other equitable relief for a breach or threatened breach by the other party of any of Paragraphs 8, 9, 10, 11, 12 and 13 of this Agreement. This Paragraph 14 shall not, however, be construed as a waiver of any of the rights which either party may have for damages or otherwise.
15. NO CONFLICTING AGREEMENTS.
(a) Consultant represents and warrants that he is not a party to any agreement, contract or understanding, whether employment or otherwise, which would in any way restrict or prohibit him from performing services in accordance with the terms and conditions of this Agreement.
(b) Cadus represents and warrants that it is not a party to any agreement, contract or understanding, which would in any way restrict or prohibit it from performing its obligations hereunder in accordance with the terms and conditions of this Agreement.
16. RELATIONSHIP OF THE PARTIES.
(a) In all activities hereunder, Consultant shall be an independent contractor and Cadus shall have no liability whatsoever for withholding, collection or payment of income taxes or for taxes of any other nature on behalf of Consultant.
(b) Nothing contained herein shall be deemed to (i) make either party or any employee of such party the agent, employee, joint venturer or partner of the other party or (ii) provide either party or any employee of such party with the power or authority to act on behalf of the other party or to bind the other party to any contract, agreement or arrangement with any other person.
(c) All personnel employed or otherwise engaged by either party shall be the agents, servants and employees of such party only, and the other party shall incur no obligations or liabilities, express or implied, by reason of, or with respect to, the conduct of such personnel. The parties acknowledge and agree that the scientists, Post Docs, technicians, support staff and any other persons to be hired pursuant to Paragraph 4(b) above, shall be the employees or independent contractors of Cadus and not of Consultant.
17. ASSIGNMENT.
This Agreement may not be assigned by either party, and no obligation owed or performable by either party hereunder may be delegated (other than the delegation by Consultant of certain work to the persons described in Paragraph 4(b) above), without the prior written consent of the other party. Any attempted assignment
or delegation by either party without any such requisite prior written consent of the other party shall be void and ineffective for all purposes.
18. NON-DISPARAGEMENT.
Each party expressly agrees to refrain from uttering any disparaging remarks concerning the other or making any other statement, oral or written, which portrays the other in an unfavorable light or subjects the other to scorn, obloquy or ridicule.
19. NOTICES.
All notices, requests, consents or other communications given by either party hereto shall be in writing and shall be deemed duly given if personally delivered or mailed by registered or certified mail, return receipt requested, postage prepaid (effective upon delivery thereof as evidenced by such return receipt), to the other party at its address set forth below or at such other address as such other party may hereafter designate in the manner herein provided.
If to Cadus, at:
Cadus Pharmaceutical Corporation
180 Varick Street
New York, New York 10014-4606
Attn: President
If to Consultant, at:
Dr. Gary L. Johnson
National Jewish Center for Immunology
& Respiratory Medicine
1400 Jackson Street
Denver, CO 80206
20. FINAL AGREEMENT; AMENDMENTS.
This Agreement supersedes all prior negotiations, representations and agreements made by and between the parties respecting the subject matter hereof. No alteration, amendment or modification of any of the terms or provisions of this Agreement shall be valid unless made pursuant to an instrument in writing signed by each of the parties hereto.
21. GOVERNING LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, with giving effect to the choice of law principles thereof.
22. DISPUTE RESOLUTION.
(a) The parties hereto agree that they shall use their best efforts to settle amicably any disputes, differences or
controversies arising between the parties out of or in connection with this Agreement. However, subject to the limitations set forth in the final sentence of this subparagraph 22(a) and in subparagraph 22(b) below, any such disputes, differences or controversies, if not so settled within thirty (30) days after the occurrence thereof, shall be finally and exclusively determined by arbitration. Unless the parties otherwise agree, arbitration initiated by Cadus shall be held in Denver, Colorado, and arbitration initiated by the Consultant shall be held in New York, New York. Any such arbitration shall be conducted by three arbitrators who are appointed and who shall conduct such arbitration in accordance with the Commercial Rules of the American Arbitration Association then obtaining. The parties hereby empower such arbitrators to grant the equitable relief described in Paragraph 14 hereof as necessary to resolve any dispute between the parties. Judgment upon the award rendered may be entered in any court having jurisdiction or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Notwithstanding the foregoing, either party may, without recourse to arbitration, assert against the other party a third-party claim or cross-claim in any action brought by a third party to which the subject matter of this Agreement may be relevant.
(b) Notwithstanding subparagraph 22(a) above, Cadus may seek emergency injunctive relief, emergency specific performance or other emergency equitable relief in a state court of the State of Colorado or the United States District Court for the District of Colorado with respect to a breach or threatened breach by Consultant of Paragraph 8, 10 or 13 hereof. Consultant hereby consents to the personal jurisdiction of any such court and agrees to be sued in such court in the circumstances described in the preceding sentence. Consultant agrees that any and all process directed to it in any such litigation may be served upon him outside of the State of Colorado with the same force and effect as if service had been made within the State of Colorado.
23. PARAGRAPH HEADINGS.
The paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
24. SEVERABILITY; REFORMATION.
If at any time subsequent to the date hereof any provisions of this Agreement shall be held by any court or arbitration panel of competent jurisdiction to be illegal, void, or unenforceable, such provisions shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. Furthermore, if any provision of this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to the fullest extent compatible with then existing applicable law.
25. TERMINATION.
(a) Either party shall have the right to terminate this Agreement upon a breach of the Agreement by the other party as described in this Paragraph. The party wishing to terminate this Agreement shall provide the other party with written notice describing the alleged breach, and the recipient shall have 30 days after receipt of such notice in which to cure the alleged breach. If the breach is not cured within such 30-day period, the non-breaching party shall then have the right to terminate this Agreement at any time after the end of such 30-day period by written notice to the other party.
(b) If Cadus terminates the Research Program, this Agreement shall automatically terminate; provided, however, that Cadus agrees not to terminate the Research Program before a date which is at least 352 days after the Effective Date.
26. EFFECTS OF TERMINATION.
Termination of this Agreement shall not release the Consultant or Cadus from any obligation or liability to the other which shall have matured prior to termination, nor shall termination rescind or require repayment of any payment or consideration made or given by either party, except as otherwise provided herein. The rights and obligations of the parties set forth in Paragraphs 7, 8, 9, 10, 11, 12 (subject to the limitations set forth therein), 14, 18 and 22 hereof shall survive termination of this Agreement, except that the rights of Cadus and the obligations of Consultant under Paragraphs 10 and 11 hereof shall not survive termination if this Agreement is terminated pursuant to subparagraph 25(b) hereof prior to the third anniversary of the Effective Date.
27. USE OF TECHNOLOGIES BY CONSULTANT.
Notwithstanding any other provision of this Agreement, as long as the NJC License Agreement is in effect and Consultant is working on behalf of NJC, a university or other not-for-profit entity, Cadus shall permit the Consultant to use the Technologies in his own academic laboratory at such not-for-profit entity solely for academic research purposes.
28. NO THIRD PARTY BENEFICIARIES.
This Agreement is entered into for the sole protection and benefit of Consultant and Cadus, and no other person shall have any rights under this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY LEVIN ----------------------- Jeremy M. Levin, President /s/ GARY L. JOHNSON ----------------------- GARY L. JOHNSON |
Exhibit A
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
[c.i.]
Exhibit B
CADUS PHARMACEUTICAL CORPORATION
FIRST YEAR BUDGET FOR COLORADO FACILITY
Personnel Related Costs (Salaries & Benefits) [c.i.] Laboratory Supplies [c.i.] Equipment Lease (A) [c.i.] Other [c.i.] Rent [c.i.] |
[c.i.]
(A) Equipment will be leased for a five year term. Lease payments will be in 60 equal monthly installments. [c.i.] is the estimated aggregate first year payments.
The foregoing budget does not include the personnel and other costs which Cadus shall fund prior to the time the Consultant's Facility is first occupied by Cadus employees.
Cadus shall fund the foregoing budget at such times as Consultant shall require in order for Consultant to undertake the Research Program described in the Consulting Agreement. Cadus acknowledges that some of the equipment must be ordered well in advance of the date the Consultant's Facility is expected to be first occupied by Cadus employees, so that there is sufficient time for such equipment to be assembled prior to that date.
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
RESEARCH COLLABORATION AGREEMENT
THIS RESEARCH COLLABORATION AGREEMENT (the "Agreement") dated as of January 9th, 1995 (the "Effective Date"), is entered into between HOUGHTEN PHARMACEUTICALS, INC., a Delaware corporation ("HPI"), and CADUS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Cadus").
WITNESSETH:
WHEREAS, HPI has rights to proprietary synthesis and screening technologies which, when applied, may reduce the time and development expense of identifying potentially useful compounds for therapeutic and/or diagnostic purposes.
WHEREAS, Cadus has Assays which have the potential to identify therapeutic and/or diagnostic products.
WHEREAS, both HPI and Cadus desire to enter into a research collaboration agreement with respect to the identification of potential therapeutic and/or diagnostic products therefrom under the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual representations, covenants and warranties herein contained, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "AFFILIATE" shall mean any corporation or other entity which controls, is controlled by, or is under common control with, a party to this Agreement. A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than fifty percent (50%) of the voting stock or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the corporation or other entity.
1.2 "ASSAYS" shall mean the assays described in Exhibit A, as well as those assays which may be added by mutual agreement.
1.3 "[c.i.] AGREEMENT" shall mean the Research Collaboration and License Agreement between Cadus and [c.i.] , dated as of [c.i.] .
1.4 "[c.i.] ASSAYS" shall mean the Assays which are subject to the [c.i.] Agreement and which are identified as such on Exhibit A or amendments thereto.
1.5 "CADUS PROPRIETARY RIGHTS" shall mean all rights owned by or licensed to Cadus regarding rights to the Assays, Joint Compounds and Developing Party Compounds being developed by Cadus, as limited and provided in the Agreement and with respect thereto, all (i) patents, patent applications and patent rights and all divisions, continuations, renewals, reissues and extensions of the foregoing now existing, hereafter filed, issued or acquired, (ii) rights relating to the protection of trade secrets and confidential information; and (iii) any rights analogous to those set forth in this Section 1.5 (including, without limitation, licenses or sublicenses) and any other proprietary rights relating to intangible property.
1.6 "CANDIDATE" shall mean each Lead identified by Cadus and reported to
the Research Committee after completion of an Iteration Process, or each Lead
identified by Cadus and reported to the Research Committee after completion of
the Scanning Process, any of which Leads demonstrate biological activity in an
Assay as may justify further investigation as a Joint Compound or Developing
Party Compound in the Development Phase of the Collaboration Program.
Notwithstanding the foregoing, a Lead which is identified, in whole or in part,
through the use of a [c.i.] Assay shall not be deemed to be a Candidate until
such time as [c.i.] right of first offer with respect to such Lead, under the
[c.i.] Agreement, has been waived by [c.i.].
1.7 "COLLABORATION PROGRAM" shall mean the overall program described in
Section 3.1 hereto consisting of both the Screening Phase and the Development
Phase.
1.8 "COMBINATORIAL LIBRARIES" shall mean the following libraries as well as any other libraries which may hereafter be added to such definition by mutual agreement of the parties:
[c.i.]
1.9 "CONFIRMATORY SAMPLE" shall mean a reasonable quantity of (i) a compound identified from the Initial Screening of the Combinatorial Library subject to the Scanning Process, or (ii) a fully sequenced compound identified from the completion of an Iteration Process.
1.10 "DEVELOPING PARTY COMPOUND" shall mean a Candidate upon which the party that voted in favor of continuing the development after reviewing the Research Committee's recommendation, while the other party voted not to continue such development, decides to conduct further development and research for that Candidate at its own expense.
1.11 "DEVELOPMENT COMMITTEE" shall mean that entity organized and acting pursuant to Section 5.2 of this Agreement
1.12 "DEVELOPMENT PHASE" shall mean that phase of the Collaboration Program described in Sections 3.4 and 3.5 hereof.
1.13 "DEVELOPMENT TERM" shall be the term during which the Development Phase activities shall occur commencing on the date Cadus and HPI decide to enter the Development Phase with respect to a Candidate, and terminating when the parties do not have a Joint Compound under development.
1.14 "FDA" shall mean the United States Food and Drug Administration.
1.15 "HPI PROPRIETARY RIGHTS" shall mean all rights owned by or licensed to HPI regarding the Materials, and rights to Joint Compounds and Developing Party Compounds being developed by HPI as limited and provided herein, and with respect thereto, all (i) compounds derived from the described Materials and Joint Compounds, (ii) methods of making the compounds, Materials and Joint Compounds, (iii) patents, patent applications and patent rights and divisions, continuations, renewals, reissues and extensions of the foregoing now existing, hereafter filed, issued or acquired; (iv) rights relating to the protection of trade secrets and confidential information; and (v) any right analogous to those set forth herein relating to HPI rights to Materials.
1.16 "INITIAL SCREENING" shall mean the first screening of each Combinatorial Library by Cadus.
1.17 "ITERATION MIXTURE" shall mean the mixture of compounds [c.i.] in a Combinatorial Library ordered by Cadus and provided by HPI at the [c.i.] of the Iteration Process between the Initial Screening and identification of a fully sequenced compound.
1.18 "ITERATION PROCESS" shall mean, with respect to all Combinatorial Libraries except the [c.i.] , each stage of the screening and synthesis process after the Initial Screening, pursuant to which each possible [c.i.] Such Combinatorial Library is [c.i.]
1.19 "JOINT COMPOUND" shall mean a Candidate which both of the parties are willing to share and do share the expenses of development.
1.20 "JOINT PROPRIETARY RIGHTS" shall mean all rights to all Candidates and with respect thereto, all (i) compounds derived from Candidates, (ii) methods of making the Candidates, (iii) patents, patent applications and patent rights and all divisions, continuations, renewals, reissues and extensions of the foregoing now existing, hereafter filed, issued or acquired, (iv) rights relating to the protection of trade secrets and confidential information, and (v) any rights analogous to those set forth herein relating to HPI rights to Materials.
1.21 "LEAD" shall mean any compound or mixture contained in the Materials provided to Cadus by HPI which compound demonstrates biological activity in an Assay sufficient to continue the Iteration Process to identify a Candidate.
1.22 "MATERIALS" shall include all of the [c.i.] furnished by HPI to Cadus during the Screening Phase.
1.23 "PRODUCT" shall mean any Candidate, or derivative thereof where the Candidate's [c.i.] which is incorporated in a product, whose use [c.i.]
1.24 "RESEARCH COMMITTEE" shall mean that entity organized and acting pursuant to Section 5.1 of this Agreement.
1.25 "SCREENING" shall mean the use by Cadus of [c.i.] in order to [c.i.] during the [c.i.] this Agreement.
1.26 "SCREENING PHASE" shall mean that phase of the Collaboration Program described in Sections 3.2 and 3.3 hereof.
1.27 "SCREENING TERM" shall mean the period during which the Screening Phase activities shall occur, commencing on the [c.i.] from the [c.i.] unless earlier terminated as provided herein.
1.28 "SCANNING PROCESS" shall mean with respect to the [c.i.] listed at
Section 1.6(g) and described in Exhibit C, the process of [c.i.] by conducting
an Initial Screening and the [c.i.]
1.29 "TARGETS" shall mean the [c.i.] that interact in a specific manner with [c.i.]
1.30 "THIRD PARTY OBLIGATIONS" shall mean obligations to pay milestones, royalties or other fees to a third party by a party hereto under a licensing or other agreement for use of (i) an Assay, (ii) the Screening process used hereunder, (iii) Materials, or (iv) any compounds or Products discovered or whose use was identified as a result of this Agreement.
1.31 "TRANSACTION COSTS" shall mean all reasonable out-of-pocket expenses,
e.g. attorney's fees, incurred which subject to mutual agreement of the parties
may also include a fee to the party responsible for finding the purchaser or
licensee and assuming the lead for negotiating and finalizing the sale or
license of both parties' interests in a Candidate, Joint Compound or Product
incorporating a Joint Compound or derivative thereof pursuant to the provisions
hereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants to the other party as follows:
2.1 Authorization and Enforcement of Obligations. Such party (a) has the requisite power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms.
2.2 No Conflict. The execution and delivery of this Agreement and the performance of such party's obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations or any contractual obligation of such party, and (b) do not conflict with, or constitute a default or require any consent under, any contractual obligation of such party. Notwithstanding the foregoing, HPI acknowledges that the use of [c.i.] Assays is governed by the [c.i.] Agreement. HPI agrees that to the extent that this Agreement conflicts with the [c.i.] Agreement, the [c.i.] Agreement shall govern.
2.3 Third Party Obligations. Such party is not subject to any Third Party Obligations except as set forth on Exhibit F hereto.
ARTICLE 3
SCREENING AND DEVELOPMENT PROGRAMS
3.1 Purpose and Scope. The general purposes of the Collaboration Program are twofold and to be addressed in two phases: (i) to utilize the HPI [c.i.] to conduct Screenings of the compounds in the various Combinatorial Libraries during the Screening Phase with one or more of the Assays to identify Candidates, and (ii) to select Joint Compounds chosen from the Candidates which may be biologically active against one or more of the Targets and during the Development Phase to develop Products incorporating the Joint Compounds (or analogs or derivatives thereof).
3.2 Screening Phase General Responsibilities. Each party shall, at its own expense, have the following responsibilities during the Screening Phase:
3.2.1 HPI shall provide, by mutual agreement, any of its current and future Combinatorial Libraries (when available), and reasonable amounts of other Materials requested by Cadus, including Iteration Mixtures identified at the screening of a stage of the Iteration Process prior to identification of a
Candidate, and Confirmatory Samples to enable Cadus to conduct the Screening.
3.2.2 Cadus shall screen the Materials, identify potential Candidates and recommend to the Research Committee which Candidates should become Joint Compounds.
3.3 Screening Phase Activities.
3.3.1 Initial Screening. Cadus shall screen each Combinatorial Library delivered to Cadus by HPI with the Assays to identify one or more compound mixtures on which to commence the Iteration Process or Scanning Process.
3.3.2 Iteration Process. For Leads identified from an Initial Screening of all Combinatorial Libraries, except the positional scanning libraries, Cadus may place an order with HPI for related Iteration Mixtures with which to conduct the Iteration Process. Upon receipt of such order, HPI shall cause to be synthesized and provide to Cadus such Iteration Mixtures, which Cadus shall screen using the applicable Assays. Cadus and HPI will continue the Iteration Process until a Candidate is identified or until both parties agree to discontinue Screening with respect to a Lead.
3.3.3 Scanning Process. For Leads identified from an Initial Screening of a positional scanning Combinatorial Library, Cadus may place an order with HPI for Confirmatory Samples to continue the Scanning Process. Upon receipt of such order, HPI shall cause to be prepared and shall deliver the Confirmatory Samples to Cadus. Cadus shall screen such Confirmatory Samples using the applicable Assays. If Cadus confirms the findings of the Initial Screening, such Lead shall becomes a Candidate upon Cadus giving notice thereof to the Research Committee.
3.3.4 Noncompetition. [c.i.]
3.3.5 Delivery. HPI shall deliver the Materials as soon as practicable following receipt of a written order, but in no event later than forty-five (45) days from the receipt of such order. HPI shall bear all costs associated with delivery and sales or use tax (if any).
3.4 Development Phase Responsibilities for Joint Compounds. Once a Candidate is, or Candidates are, identified and the parties, after reviewing the Research Committee's
recommendations, have agreed jointly to proceed with respect to such Candidate or Candidates becoming Joint Compounds, then the Development Phase shall commence with respect to those Joint Compounds. Each party shall have, in addition to any other responsibility assigned by the Research Committee or by mutual agreement of the parties, the below specified responsibilities with respect to those Joint Compounds.
3.4.1 HPI shall make reasonable efforts to:
(a) Provide the chemistry necessary to modify Joint Compounds for use in the collaboration hereunder.
(b) Provide reasonable amounts of Joint Compounds or modified Joint Compounds for pharmacological testing.
3.4.2 Cadus shall make reasonable efforts to:
(a) Test Joint Compounds and Modified Joint Compounds for activity in cell cultures or animals.
(b) Proceed under guidance of the Development Committee with pharmacological testing of Joint Compounds and modified Joint Compounds.
(c) Take the lead in filing and prosecution of patent applications as authorized by the Development Committee.
3.5 Development Phase Activities. In addition to the activities described in Section 3.4 above, the Development Phase shall include [c.i.]
Additional provisions concerning the Development Phase are set forth in Exhibit D. [c.i.]
3.6 Developing Party Compounds and License. [c.i.]
3.7 Identification of Applicable Royalty Rate For Developing Party Compounds. Within [c.i.] days of Cadus's written request at such time as Cadus is considering whether to develop a Candidate as a Developing Party Compound, HPI shall notify Cadus whether such Candidate would be deemed to be a Licensed Product under its license with Chiron.
ARTICLE 4
LICENSE OF SCREENING RIGHTS TO CADUS
4.1 License. HPI hereby grants to Cadus, under the HPI Proprietary Rights, during the Screening Term, [c.i.] license to screen the Materials against the Assays in accordance with this Agreement.
4.2 Usage Rights. The Materials are provided to Cadus pursuant to Article 4 solely for the purpose of [c.i.] by Cadus (or a third party contracted to Cadus and bound by the confidentiality provisions of this Agreement) [c.i.] as provided in this Agreement, and any other use or attempted transfer of such Materials will be a material breach of this
Agreement. Cadus understands and acknowledges that the Materials [c.i.] contained therein are for research use only and shall not be administered to humans in any manner or form.
4.3 Limitations. Nothing herein shall be deemed to grant any rights or other interests in favor of Cadus with respect to the HPI Proprietary Rights or in favor of HPI with respect to Cadus Proprietary Rights, other than as expressly set forth in this Agreement. If Cadus and HPI agree to discontinue Screening with respect to a Lead, such Lead shall be deemed "abandoned" for purposes of this Agreement. If the parties do not jointly decide to proceed with the development of a Candidate as a Joint Compound and if neither party gives written notice to the other of its intent to develop such Candidate as a Developing Party Compound pursuant to Section 7.2 hereof, such Candidate shall be deemed "abandoned" for purposes of this Agreement. If a Lead or a Candidate is abandoned, (i) HPI may make such Lead or Candidate available to third parties, and (ii) Cadus shall cease using or developing such Lead or Candidate. If HPI derives any revenues or other benefit from its use, licensing or sale of any such abandoned Lead or Candidate, which is used against Targets similar to those identified by Cadus, then Cadus shall share equally in such revenues or benefit, provided HPI was not required to devote significant additional effort with respect to the development of such abandoned Lead or Candidate after the abandonment. In such instance where HPI devoted significant additional effort, the parties shall agree in good faith how the derived revenues or benefit shall be divided to reflect HPI's additional effort in the development. Except as set forth in this Section 4.3 above, Cadus shall have no interest in any abandoned Lead or Candidate.
ARTICLE 5
RESEARCH COMMITTEE AND DEVELOPMENT COMMITTEE
5.1 Creation of the Research Committee. The parties hereby agree to the creation of a Research Committee of four (4) persons to facilitate the collaboration called for herein. The Research Committee shall consist of two (2) representatives nominated by each party. One (1) representative nominated by each party shall be a senior scientific officer of such party, who shall be the senior representative and chief coordinator for such party. Each party shall be free to change its representatives on notice to the other or to send a substitute representative to any Research Committee meeting. The Chief Scientific Officer of each party, if not otherwise designated as a member of the Research Committee, shall have the right to attend Research Committee meetings.
5.2 Creation of the Development Committee. The parties hereby agree to the creation of a Development Committee at the time that the Development Phase commences for the first Joint Compound. The Development Committee shall consist of two (2) representatives nominated by each party. Each party shall be free to change its representatives on notice to the other or to send a substitute representative to any Development Committee meeting. The Chief Scientific Officer of each party, if not otherwise designated as a member of the Development Committee, shall have the right to attend Development Committee meetings.
5.3 Regular Meetings. During the Screening Phase, the Research Committee shall meet at least once each six (6) months alternating between the offices of the parties, unless otherwise agreed. During the Development Phase, the Development Committee shall meet at least once each six (6) months alternating between the offices of the parties, unless otherwise agreed. If both parties do not agree to participate in the Development Phase with respect to a particular Candidate or one party ceases to participate after commencement of the Development Phase with respect to a Joint Compound while the other party continues development, the Development Committee shall have no further responsibility with respect to that Candidate or Joint Compound. The Research Committee shall be disbanded at the earlier of the times when the Screening Term has expired or all Screening has been completed. The Development Committee will be disbanded when the Development Term has expired. The senior representative of the party hosting the meeting shall chair the meeting. To the extent practicable, each party shall disclose to the other proposed agenda items in advance of each meeting. All decisions by the Committees shall require unanimous agreement of all members present at a meeting at which at least one representative of each party is present, and each party shall act in good faith in attempting to reach agreement on such decisions. Each party shall pay all of its own costs and expenses incurred in connection with such meetings.
5.4 Responsibilities of the Committees. During the duration of the Collaboration Program, the Research and Development Committees shall be the primary vehicle for interaction between the parties. These Committees shall serve at the behest of the parties in order to assist in the management of the Collaboration Program, recommend scientific priorities for both the Screening and Development Phases, and review and advise scientific direction and settlement of operating issues and recommend whether patents should be filed. Without limiting the foregoing, the Research Committee shall be responsible for amending research plans agreed to with respect to the Screening Phase, monitoring the progress of the Screening Phase, and advising which Candidates should become Joint Compounds. The Development Committee shall be responsible during the Development Phase for recommending work plans and budgets for each Joint Compound and Product, subject to both parties' approval, monitoring the progress of the Development Phase, and evaluating the potential of Joint Compounds and pursuing the sale, licensing or other transactions with respect to Joint Compounds. The Development Committee shall be inoperative with respect to Development Party Compounds. Any disputes shall be resolved in accordance with Article 10 of this Agreement.
ARTICLE 6
DEVELOPMENT AND PROGRESS REPORTING
OF JOINT COMPOUNDS
6.1 Conduct of Research and Development. Cadus and HPI shall work diligently and use reasonable good faith efforts to identify and develop Joint Compounds and to commercialize Products pursuant to the following:
6.1.1 The parties shall be entitled to exercise prudent and reasonable business judgement in meeting the obligations of this Section 6.1
6.1.2 The parties shall endeavor to obtain all necessary governmental approvals for the manufacture, use and sale of Products.
6.2 Disclosure.
6.2.1 The parties will make available and, upon request, disclose to each other and the Research Committee or the Development Committee, as the case may be, all information relating to the Leads, Candidates and Joint Compounds discovered or synthesized pursuant to the Collaboration Program; provided, however, that except as otherwise provided herein, the parties' obligations to share information relating to the Collaboration Program shall terminate when both the Research and Development Committees are disbanded. Each party shall keep complete accounts and records (including such lab notebooks, clinical data and other research records as are customarily maintained in connection with drug discovery and development) relating to its research and development activities under the Screening and Development Phases.
6.2.2 Each party will communicate through the Research Committee and Development Committee to inform the other party of research and development performed under the Collaboration Program with respect to Leads, Candidates and Joint Compounds. The parties agree to cooperate with each other to facilitate the understanding and use of information exchanged pursuant to this Section 6.2. All information contained in reports made pursuant to this Agreement or otherwise communicated between the parties will be maintained under obligations of confidentiality under Article 14 of this Agreement.
6.2.3 To ensure compliance with Third Party Obligations of a party hereto, complete and accurate records regarding the use of technology licensed by a third party to a party hereunder shall be maintained, which records shall reflect what third party technology was utilized, if any, in connection with discovery of a Joint Compound, Developing Party Compound, or Product hereunder. Either party shall have access to such records in order to reasonably satisfy the reporting requirements to third parties.
6.3 Progress Reporting. Not later than [c.i.] each calendar year, the Research and Development Committees shall prepare a written progress report covering activities under the Collaboration Program, the development and testing of all Joint Compounds and the obtaining of the governmental approvals necessary for marketing. Such progress reports shall include but not be limited to the following topics:
o Summary of work completed
o Activities related to sublicenses
o Summary of work in progress
o Current schedule of anticipated events or milestones
o Market plans for the introduction of Products, and
o Activities relating to obtaining governmental approvals necessary for marketing Products.
The form of such progress reports shall be determined by the Research and Development Committees and shall be in such form to provide information necessary to satisfy reporting obligations to third parties whose technology is being utilized during this Collaboration Program. The parties shall take precautions to protect confidentiality as intended by Article XIV in meeting the reporting obligations to third parties. With respect to Developing Party Compounds and Products not subject to Development Committee supervision, the developing party shall still be required to prepare the reports for the other party.
ARTICLE 7
COMMERCIALIZATION OF PRODUCTS BY PARTIES
7.1 Joint Commercialization. If the parties jointly decide to proceed with the commercialization of Candidates into Joint Compounds and/or Products incorporating such Joint Compounds entirely or a derivative thereof where the active moiety is preserved, the provisions of this Agreement governing the Development Phase shall be effective with respect thereto and all commercial decisions with respect to such Joint Compounds and Products must be approved by both parties.
7.2 One Party Development. If only one party desires to continue with the
development of a Candidate after completion of the Screening Phase with respect
to that Candidate, then that party must notify the other party in writing of its
intent to develop the Candidate as a Developing Party Compound [c.i.] after the
other party gave notice of its intent not to participate in the Development
Phase with respect to such Candidate. The Candidate then shall become a
Developing Party Compound subject to the applicable provisions of Exhibit D. The
developing party shall be responsible for all commercial decisions with respect
to a Developing Party Compound. If a party does not give such notice within such
[c.i.] , it may not individually decide to develop a Candidate as a Developing
Party Compound without first presenting the opportunity for joint development
through written notice to the other party. If the other party does not agree to
jointly develop such Candidate as a Joint Compound within [c.i.] of its receipt
of notice with respect thereto, the party wishing to do so may develop such
Candidate as a Developing Party Compound.
ARTICLE 8
OWNERSHIP; PATENTS
8.1 Ownership.
8.1.1 HPI Proprietary Rights and Cadus Proprietary Rights. Cadus acknow-ledges and agrees that Cadus has no rights in or to the HPI Proprietary Rights, other than the license rights speci-fi-cally granted herein. HPI acknowledges and agrees that HPI has no rights in or to Cadus Proprietary Rights except as may be granted herein. Except as provided in Section 4.3, notwithstanding the above, the parties agree that Candidates, Joint Compounds and Developing Party Compounds shall be jointly owned.
8.1.2 Ownership of Inventions. Subject to the provisions of this Agreement, the right, title and interest in all inventions made by Cadus, HPI, or their respective agents while performing the obligations hereunder during the Screening Phase related to use of Materials in the Assay and during the Development Phase related to use of Joint Compounds or Products incorporating Joint Compounds or derivatives thereof, whether or not patentable (collectively, the "Inventions"), together with all patent applications or patents based thereon, shall be owned jointly by the parties. Each party shall share equally in the external costs of patent preparation and filing with regard to Candidates or Joint Compounds. The cost of patent preparation and filing for Developing Party Compounds will be borne solely by the developing party. Each party shall promptly disclose to the other the conception or reduction to practice of such Inventions by employees or others acting on behalf of such party. Each party hereby represents and agrees that all employees and other persons acting on its behalf in performing its obligations under this Agreement shall be obligated under a binding written agreement or applicable law to assign to such party or its Affiliate all Inventions made or developed by such employee or other person. With respect to Inventions, Candidates and Joint Compounds, neither party may independently use such Inventions, Candidates or Joint Compounds or make them available to a third party except under Article 4.2 for any purposes outside this Agreement without the prior written consent of the other party.
8.1.3 Ownership of Research Data. Each party shall jointly own all data and information generated or collected by the activities under this Collaboration Program; however, use and reference to such data and information, unless otherwise provided herein, is limited to the purposes of this Agreement unless a party gives its prior written consent to the other party for a different usage.
8.1.4 Rights to Developing Party Compounds. Notwithstanding any other provision under Section 8.1, a developing party, subject to Third Party Obligations and rights existing on the Effective Date, may, without the consent of the other party, (a) make, sell, use, license or sublicense Developing Party Compounds or Products incorporating a Developing Party Compound or derivative thereof; (b) use and make available to third parties research data related to Developing Party Compounds or Products incorporating a Developing Party Compound or derivative thereof; and (c) license or sublicense rights to composition of matter and use patents
directly related to the Developing Party Compound or Products incorporating a Developing Party Compound or derivative thereof.
8.2 Patents. The Research Committee shall recommend upon which Joint Compounds, Products and Inventions the parties should file one or more joint patent applications. The parties shall jointly determine whether or not to file such joint patent applications after receiving the Research Committee recommendation. Cadus may file, at joint expense, patent applications for Joint Compounds and Products incorporating Joint Compounds or derivatives thereof in both parties' names and HPI shall provide reasonable cooperation relative thereto. If Cadus fails to diligently pursue this obligation, then HPI may take the lead in filing and prosecuting the patent at joint expense of the parties. The developing party may file, at its own expense, patent applications for Developing Party Compounds in both parties' names at its sole discretion and the non-developing party shall provide reasonable cooperation relative thereto and shall not file patent applications with respect thereto.
8.3 Enforcement of Patent Rights.
8.3.1 To the extent that infringement of one party's Proprietary Rights may have a significant effect on the other party, each party shall use good faith efforts (i) to enforce its own Proprietary Rights against infringers, and (ii) to consult with the other party both prior to and during said enforcement. Upon learning of significant and continuing infringement of such rights belonging to the other party by a third party in a manner that may have a significant bearing on the collaboration hereunder, HPI or Cadus, as the case may be, promptly shall provide notice to the other party in writing of such fact and shall supply the other party with all evidence possessed by the notifying party pertaining to and establishing said infringement(s). Whenever rights to Joint Compounds or Products hereunder are affected which are not covered under joint patent applications, the party whose Proprietary Rights are allegedly being infringed shall have six (6) months from the date of receipt of notice under this Section 8.3 to abate the infringement, or to file suit against at least one of the infringers in each country, at its sole expense, following consultation with the other party. The party whose Proprietary Rights are allegedly being infringed shall not be obligated to bring or maintain more than one such suit in any country at any time with respect to claims directed to any one method of manufacture or composition of matter.
8.3.2 If the party whose Proprietary Rights are allegedly being infringed does not, within [c.i.] of receipt of notice from the other party, abate the infringement or file suit to enforce the Proprietary Rights against at least one infringing party in a country, the other party shall have the right to take whatever action it deems appropriate in its own name, or, if required by law, in the first party's name, to enforce the Proprietary Rights in such country as those relate to rights under this Agreement whenever rights to Joint Compounds or Products hereunder are affected which are not covered under joint patent applications.
8.3.3 If a joint patent application or a patent based thereon allegedly is being infringed, HPI and Cadus shall cooperate in seeking to abate the infringement or in bringing suit against the alleged infringing party. Expenses shall be apportioned based on each party's percentage contributions per Exhibit D to the Development Phase of the Joint Compound or
Product whose patent is allegedly being infringed. All monies recovered upon final judgment or settlement of any such suit shall be shared after reimbursement of expenses, by HPI and Cadus pro rata according to the respective percentages of costs borne by each in such suit. Notwithstanding the foregoing, HPI and Cadus shall fully cooperate with each other in the planning and execution of any action to enforce the Proprietary Rights affected hereunder. The party with the greater percentage contribution to the Development Phase of the Joint Compound or Product shall make the litigation decisions.
8.4 Assignments. Each party to which any portion of the Inventions vests other than as intended and set forth in this Article 8 shall, to the extent required by the intent or provisions herein, promptly assign to the other party such portion of the right, title, and interest therein to carry out the intentions herein. Each party agrees to cooperate with the other and take all reasonable additional actions and execute such agreements, instruments, and documents as may be reasonably required to perfect the other's ownership interest in accordance with the intent of this Article 8 including, without limitation, the execution of necessary and appropriate instruments of assignment.
ARTICLE 9
SALE OR LICENSE OF INTEREST
9.1 Screening Phase.
9.1.1 If both parties decide to sell their interests in particular compounds which are still in the Screening Phase, the parties agree that the proceeds from all distributions of any sale shall be divided equally without consideration of Third Party Obligations. [c.i.]
9.1.2 If the parties license their interests in any Candidates or partially sequenced compounds which Candidates or compounds are still in the Screening Phase, [c.i.]
9.2 Development Phase. During the Development Phase for a particular Joint Compound or Product incorporating such Joint Compound or derivatives thereof, either party may initiate discussions to buy out the other party's interest or sell its own rights to the other party or a Third Party in any one or more Joint Compound or Product. However, neither party shall be obligated to sell or buy the other's interest either partially or in total. The parties agree that a sale of a party's interest in, or the sale or license of, any Joint Compound or Product
incorporating such Joint Compound or derivatives thereof shall be governed by the terms described in Exhibit D hereto.
9.3 Developing Party Compound. The sale of a Developing Party Compound or any Product incorporating a Developing Party Compound shall be governed by Sections C.1 and C.4 of Exhibit D.
9.4 Disclosure Obligation. Each party will be obligated to promptly advise the other party when either party becomes aware of, or is approached by, a prospective third party buyer of a Joint Compound or Product, and the proposed terms of any offer tendered by such third party. The parties shall jointly consider any proposal.
9.5 Milestone and Royalty Obligations. [c.i.]
9.6 Provisions to Incorporate. Any sale or license envisioned under this Article 9 shall require the incorporation of certain reporting, due diligence, indemnification and other provisions in order for each party to comply with its Third Party Obligations. The parties agree that such provisions shall be included in any sale or license.
ARTICLE 10
DISPUTE RESOLUTION; VENUE AND CHOICE OF LAW
10.1 Dispute Resolution. In the event that at any time during the term of this Agreement a disagreement, dispute, contro-versy or claim should arise out of or relating to the inter-pretation of or performance under, this Agreement, or the breach, or invalidity thereof, the parties will attempt in good faith to resolve their differences before resorting to the termi-nation procedures provided in Article 11 of this Agreement by submitting such dispute to the Chief Executive Officers of the parties (or their designees) for consideration for a period of thirty (30) days, following which either party shall be free to initiate binding arbitration. Any arbitration hereunder shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association. Each such arbitration shall be conducted by a single, neutral arbitrator appointed in accordance with such rules. Any such arbitration, if initiated by Cadus, shall be held in San Diego, California, and if initiated by HPI, shall be held in New York, New York. The arbitrator shall have the authority to grant specific performance, and to allocate between the parties the costs of arbitration in such equitable manner as he/she determines. Judgment upon the
award so rendered may be entered in any court having jurisdiction or application may be made to any court having jurisdiction or application may be made so 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 upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, each party shall be entitled to institute judicial proceedings against the other party outside arbitration to enforce the instituting party's rights hereunder through specific performance, injunction, declaratory judgment or similar equitable relief.
10.2 Governing Law, Jurisdiction and Venue. This Agreement is made in accordance with and shall be governed and construed under the laws of the State of California, without regard to the principles of conflicts of laws rules. In any legal action relating to this Agreement, each party consents to the exercise of jurisdiction over it by a state or federal court in San Diego, California or New York, New York, and that if a party brings an action it shall be instituted in New York if first instituted by HPI and in San Diego if first instituted by Cadus. In any action or proceeding outside of binding arbitration to enforce rights under this Agreement, the prevailing party shall be entitled to recover reasonable costs and expenses, including without limitation, attorney's fees.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement, unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, or unless extended by mutual agree-ment of the parties, shall remain in full force and effect from the Effective Date until the expiration of the latest of (a) the Screening Term, (b) the Development Term, or (c) a party's obligations to make payments required pursuant to this Agreement. This Section does not extend the Screening Term.
11.2 Early Termination. If one party fails to comply with any material obligation of this Agreement, including failure to make any payment when due and payable hereunder, and such party fails to cure such breach within [c.i.] days of written notice concerning untimely payments provided for herein or [c.i.] days after receipt of written notice concerning any other failure, the nonbreaching party may terminate this Agreement by written notice to the breaching party. Additionally, either party may terminate this Agreement upon the insolvency of, or filing of either a voluntary petition by, or an involuntary petition against (if not dismissed within sixty (60) days after filing), the other party.
11.3 Effect of Termination. Upon termination of this Agreement prior to its term set forth in Section 11.1 above, the screening activities set forth in Article 3 shall cease. Notwithstanding any termination, the provisions of Articles 2, 3.4, 3.5, 3.6, 4, 6.2, 6.3, 8, 9, 10, and 12 through 15 shall survive. Each party shall have the right to continue to pursue any
Developing Party Compound that it is funding, even in the event of termination of this Agreement.
ARTICLE 12
INDEMNIFICATION, LIABILITY, INFRINGEMENT
12.1 Indemnification. Each party agrees to indemnify and hold the other party and its respective licensors, Affiliates, officers, directors, employees, agents and shareholders harmless against any and all losses, liabilities, damages, claims, judgments, demands, and expenses (including reasonable attorneys' fees) and costs (together or individually, a "Loss") arising out of or in connection with (i) the breach by the indemnifying party of any of its representations or warranties contained in this Agreement or (ii) the nonperformance, partial or total, of any covenants of the indemnifying party contained in this Agreement.
12.2 Indemnification of Third Party Licensors. Each party agrees to indemnify and hold the other party's third party licensors of any technology utilized hereunder and each of such licensor's Affiliates, officers, directors, trustees, employees, agents and shareholders harmless against any Loss (including without limitation Loss arising out of any death or injury to any person or persons or out of damage to any property) which results from the production, manufacture, use, consumption, sale or advertisement of the Materials, Candidates, Joint Compounds, Developing Party Compound or Product hereunder which utilized such third party licensor's technology. If a party makes an indemnification payment pursuant to this Section 12.2, it shall be entitled to contribution from the other party pro rata based on their respective percentage interests in the relevant Materials, Candidates, Joint Compounds, Developing Party Compounds or Products as the case may be.
12.3 Procedure. A party (the "Indemnitee") that intends to claim indemnification under this Article 12 shall promptly notify the indemnifying party (the "Indemnitor") of any Loss or action in respect to which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have the right to control the defense of any such action, and, to the extent the Indemnitor so desires, jointly with any other indemnitor; provided, however, that an Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by it, if representation of such Indemnitee by the counsel retained by the Indemnitor would be inappropriate due to actual or potential differing interests between such Indemnitee and any other party represented by such counsel in such proceedings. The indemnity obligations under this Article 12 shall not apply to amounts paid in settlement if effected without the consent of the Indemnitor, which consent shall not be withheld unreasonably. The Indemnitee, its employees and agents, shall cooperate fully with the Indemnitor and its legal representatives in the investigation of any action, claim or liability covered by this indemnification.
12.4 Insurance. Effective as of such time as any Product enters human clinical trials, the parties or their sublicensee(s) shall insure their activities with respect to such Product as provided in Exhibit D.
ARTICLE 13
DISCLAIMER OF WARRANTIES; FURTHER ACTION
13.1 Disclaimer. THE LICENSED COMBINATORIAL LIBRARIES, ITERATION MIXTURES AND CONFIRMATORY SAMPLES ARE PROVIDED BY HPI "AS IS" AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGE-MENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES. IN NO EVENT WILL HPI OR ANY OF ITS LICENSORS OF TECHNOLOGY UTILIZED HEREUNDER BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THE LICENSE RIGHTS BY CADUS HEREUNDER.
13.2 Compliance with Law. Each party and its respective authorized sublicensees shall comply with all applicable laws, regulations, and governmental orders in connection with their activities hereunder, including without limitation all research and development activities and the manufacture, use and sale of Products. Without limiting the foregoing, each party and its respective authorized employees shall observe all applicable United States and foreign laws with respect to the transfer of Products and related technical data to foreign countries, including without limitation, the International Traffic in Arms Regulation and Export Administration Regulations.
13.3 Additional Documents. Each party agrees to execute such further papers or agreements as may be necessary to effect the purposes of this Agreement.
ARTICLE 14
CONFIDENTIALITY
Cadus and HPI acknowledge that they have executed a separate Mutual Nondisclosure Agreement, a copy of which is attached as Exhibit E, and the parties intend that such Mutual Nondisclosure Agreement shall be effective with respect to all disclosures and discoveries under this Agreement. Notwithstanding the above, the parties shall be permitted to disclose confidential information to [c.i.] their respective attorneys, investment bankers and other professional advisors, (iii) potential third party purchasers of Cadus or HPI stock and their advisors, and (iv) potential licensees of Candidates, Joint Compounds or Developing Party Compounds or Products, provided they are bound by a nondisclosure agreement substantially equivalent to that in Exhibit E.
ARTICLE 15
MISCELLANEOUS
15.1 Waiver. No waiver by either party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent or simi-lar breach or default.
15.2 Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns; provided, however, that, without the prior written consent of the other party, neither party shall assign any of its rights and obligations hereunder except incident to the merger, consolidation, reorganization, or acquisition of stock or assets affecting a majority of the assets or voting control of the assigning party. HPI or Cadus may assign their respective rights and/or obligations to any of their respective Affiliates.
15.3 Notices. Any notice or other communication required or permitted to be given to either party hereto shall be in writing and shall be deemed to have been properly given and to be effective on the date of delivery if delivered in person or by facsimile or five (5) days after mailing by registered or certified mail, postage paid, to the other party at the following address:
In the case of HPI: Houghten Pharmaceuticals, Inc.
3550 General Atomics Court
San Diego, CA 92121
Attention: President
Phone: 619/455-2597
Fax: 619/455-2544
In the case of Cadus: Cadus Pharmaceutical Corporation
777 Old Saw Mill River Road
Tarrytown, NY 10591-6705
Attention: President
Phone: 914/345-3344
Fax: 914/345-3565
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Either party may change its address for communications by a notice to the other party in accordance with this Section.
15.4 Amendment. No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed by both parties.
15.5 Public Announcement. In consideration of the terms hereof, HPI and Cadus agree to make a public announcement of the collaboration. The content shall be agreed upon by both parties. No other announcement, public release or notice of any kind may be issued without the written consent of both parties, which consent shall not be unreasonably withheld.
Notwithstanding the above, either party may publicly disclose previously disclosed non- confidential information without the consent of the other. A party shall not disclose the names of the other party's licensors of technology utilized hereunder without the express written consent of the other party.
15.6 Force Majeure. Any delays in performance by any party under this Agreement (other than a party's failure to pay money to the other party) shall not be considered a breach of this Agreement if and to the extent caused by occurrences beyond the reasonable control of the party affected, including but not limited to acts of God, embargoes, governmental restrictions, strikes or other concerted acts of workers, fire, flood, explosion, riots, wars, civil dis-order, rebellion or sabotage. The party suffering such occur-rence shall immediately notify the other party and any time for performance hereunder shall be extended by the actual time of delay caused by the occurrence.
15.7 Independent Contractors. In making and performing this Agreement, Cadus and HPI are and shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied to create an agency, partnership or employer and employee relationship between HPI and Cadus. Although the parties are to pay expenses as provided in Sections 3.2 and 3.5, at no time shall one party make commitments or incur any charges or expenses for, or in the name of, the other party, unless pursuant to a separate agreement.
15.8 Severability. If any term, condition or provision of this Agreement is held to be unenforceable for any reason, it shall, if possible, be interpreted rather than voided, in order to achieve the intent of the parties to this Agreement to the extent possible. In any event, all other terms, conditions and provisions of this Agreement shall be deemed valid and enforce-able to the full extent.
15.9 Cumulative Rights. The rights, powers and remedies hereunder shall be in addition to, and not in limitation of, all rights, powers and remedies provided at law or in equity, or under any other agreement between the parties. All of such rights, powers and remedies shall be cumulative, and may be exercised successively or cumulatively.
15.10 Entire Agreement. This Agreement and any and all Exhibits referred to herein embody the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous communications, repre-sen-tations or understandings, either oral or written, between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, both Cadus and HPI have executed this Agreement, in duplicate originals, by their respective officers, hereunto duly authorized, as of the day and year hereinabove written.
HOUGHTEN PHARMACEUTICALS, INC. CADUS PHARMACEUTICAL
CORPORATION
By: /s/ Robert S. Whitehead By: /s/ Jeremy Levin
---------------------------- ----------------------------
Robert S. Whitehead, Jeremy M. Levin, M.D., Ph.D.
President and CEO President and CEO
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EXHIBIT A
ASSAYS TO BE PERFORMED BY CADUS
[c.i.]
EXHIBIT B
COMBINATORIAL LIBRARIES SUBJECT TO ITERATION PROCESS
[c.i.]
EXHIBIT C
COMBINATORIAL LIBRARIES SUBJECT TO SCANNING PROCESS
[c.i.]
EXHIBIT D
DEVELOPMENT PHASE AND
DEVELOPING PARTY COMPOUND PROVISIONS
The following provisions, in addition to applicable provisions of the Research Collaboration Agreement to which this Exhibit D is attached, shall govern the Development Phase with respect to Joint Compounds and applicable provision shall govern the development of Developing Party Compounds.
A. Funding.
[c.i.]
B. Calculation of Contribution.
[c.i.]
[c.i.]
C. Sale of Interest.
If at any time during the Development Phase or thereafter either party desires to sell its Interest in a Joint Compound or Product incorporating such Joint Compound entirely or a derivative thereof, the following provisions shall be applicable with respect to such sale:
[c.i.]
2. If the Selling Party wants to sell and the Non-selling Party (i) does not desire to purchase the Selling Party's Interest, (ii) does not desire to sell its own Interest to a third party, or (iii) even if it desires to purchase does not enter into either good faith negotiations within sixty (60) days of receipt of the Written Notice or does not execute a binding agreement to purchase Selling Party's Interest within six (6) months of receipt of the Written Notice, the Selling Party may sell its then Interest to a third party. [c.i.]
3. If both parties determine at any time during the Development Phase that they jointly wish to sell or license their joint Interests in all or selected Joint Compounds
or Products incorporating such Joint Compound, or a derivative thereof, then the following shall apply with respect to a sale or license:
a. If the sale or license occurs prior to actual commencement of and expenditure of funds for the Development Phase, then the provisions of Section 9.1 of the Research Collaboration Agreement as applied to Candidates shall be applicable.
b. If the sale or license occurs after the actual commencement of the Development Phase, [c.i.] For purposes of this subparagraph, the Interests with respect to each Joint Compound and/or Product shall be valued immediately prior to the sale.
c. Any agreement with a third party purchaser or licensor must take into account the disclosure and Third Party Obligations set forth in Section 9.4 and 9.5 of the Research Collaboration Agreement.
4. [c.i.]
D. Insurance.
Effective as of such time as any Product enters human clinical trials, the parties with respect to that Product (with the costs to be shared based on each party's participation in cost sharing as set forth in Section A), or through their sublicensee(s), shall insure their activities under the Research Collaboration Agreement and obtain, keep in force and maintain insurance, including without limitation product liability insurance, in amounts sufficient to cover its obligations under this Agreement and consistent with reasonable business practice in the industry. Without limiting the foregoing, coverage shall in no event be less than the following:
[c.i.]
It should be expressly understood, however, that the coverages and limits referred to under the above shall not in any way limit each party's liability. Certificates of insurance evidencing compliance with all requirements shall be requested. Such certificates shall:
1. Provide for thirty (30) day advance written notice to the other party of any modification or termination;
2. Indicate that both parties have been endorsed as insureds under the coverages referred to under the above; and
3. Include a provision that the coverages will be primary and will not participate with nor will be excess over any valid and collectable insurance or program of self-insurance carried or maintained by either party.
EXHIBIT E
MUTUAL NONDISCLOSURE AGREEMENT
This MUTUAL NONDISCLOSURE AGREEMENT ("Agreement") is made effective as of the 6th day of September, 1994, by and between HOUGHTEN PHARMACEUTICALS, INC., and CADUS PHARMACEUTICAL CORP. to assure the protection and preservation of the confidential and/or proprietary nature of information to be disclosed or made available between the parties in connection with certain negotiations or discussions.
WHEREAS, in order to pursue these discussions, the parties have agreed to mutual disclosures of certain data and other information which are of a proprietary and confidential nature (as defined in paragraph 2 below and referred to herein as "Confidential Information").
NOW, THEREFORE, in reliance upon and in consideration of the following undertakings, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Subject to the limitations set forth in Paragraph 2, Confidential Information shall mean any information, process, technique, compound, library, method of synthesis, program, design, drawing, formula or test data relating to any research project, work in process, development, engineering, manufacturing, marketing, servicing, financing or personnel matter relating to the disclosing party, its present or future products, sales, suppliers, customers, employees, investors, or business, whether in oral, written, graphic or electronic forms, that is identified by the disclosing party as being confidential and that is disclosed to the receiving party. Orally disclosed information must be confirmed in writing within thirty (30) days of its initial disclosure to be considered Confidential Information.
2. The term "Confidential Information" shall not be deemed to include information which, to the extent that the recipient of Confidential Information can establish by competent written proof:
a. at the time of disclosure is in the public domain;
b. after disclosure, becomes part of the public domain by publication or otherwise, except by (i) breach of this Agreement by the recipient or (ii) disclosure by any person or affiliate company to whom Confidential Information was disclosed under this Agreement;
c. was (i) in recipient's possession in documentary form at the time of disclosure by the disclosing party or (ii) subsequently and independently developed by recipient's employees who had no knowledge of or access to the Confidential Information;
d. recipient shall receive from a third party who to the knowledge of the recipient, was not constrained from disclosing the Confidential Information; or
e. disclosure is required by law or regulation.
In the event that Confidential Information is required to be disclosed pursuant to subsection (e), the party required to make disclosure shall notify the other to allow that party to assert whatever exclusions or exemptions may be available to it under such law or regulation.
3. Each party shall maintain in trust and confidence and not disclose to any third party or use for any unauthorized purpose any Confidential Information received from the other party Each party may use such Confidential Information only to the extent required to perform the evaluation Confidential Information shall not be used for any purpose or in any manner that would constitute a violation of any laws or regulations, including, without limitation, the export control laws of the United States. No other rights or licenses to trademarks, inventions, copyrights, or patents are implied or granted under this Agreement.
4. Confidential Information supplied shall not be reproduced in any form except as required to perform evaluation.
5. The responsibilities of the parties are limited to using their reasonable and best efforts to protect the Confidential Information from unauthorized use or disclosure. Each authorized employee or agent to whom any Confidential Information is communicated or given shall be informed that the information is confidential and proprietary and shall have assumed an obligation to maintain such Confidential Information in confidence and not use it except as permitted hereunder No Confidential Information shall be disclosed to any officer, employee or agent of either party who does not have a need to know such information to perform the evaluation.
6. All Confidential Information (including copies thereof) shall remain the property of the disclosing party, and shall be returned to the disclosing party after the receiving party's need for it has expired, or upon request of the disclosing party, and in any event, upon completion or termination of this Agreement, provided that the receiving party may.retain a single copy of Confidential Information in its legal files so that continuing obligations to the disclosing party may be determined.
7. This Agreement shall continue in full force and effect for so long as the parties continue to exchange Confidential Information This Agreement may be terminated at any time upon ten (10) days' written notice to the other party The termination of this Agreement shall not relieve either party of the obligations imposed by this Agreement with respect to Confidential Information disclosed prior to the effective date of such termination and the provisions hereof shall survive the termination of this Agreement for a period of three (3) years from the date of such termination.
8. This Agreement shall be governed by the laws of the State of New York as those laws are applied to contracts entered into and to be performed in New York.
9. Neither party shall reveal the &ct that Confidential Information has been disclosed pursuant to this Agreement or that either party is making an evaluation It is understood that disclosure pursuant to this Agreement is not a public disclosure or sale or offer for sale of any product, but is made for the limited purpose of evaluation.
10. This agreement contains the entire agreement of the parties and may not be changed, modified, amended or supplemented except by a written instrument signed by both parties The unenforceability of any provision on this Agreement shall not affect the enforceability of any other provision of this Agreement. Neither this Agreement nor the disclosure of any Confidential Information pursuant to this Agreement by any party shall restrict such party from disclosing any of its Confidential Information to any third party.
11. Each party hereby acknowledges and agrees that in the event of any breach of this Agreement by the other party, including, without limitation, the actual or threatened disclosure of a disclosing party's Confidential Information without the prior express written consent of the disclosing party, the disclosing party will suffer an irreparable injury, such that no remedy at law will afford it adequate protection against, or appropriate compensation for, such injury Accordingly, each party hereby agrees that the other party shall be entitled to specific performance of a receiving party's obligations under this Agreement, as well as such further injunctive relief as may be granted by a court of competent jurisdiction. This Paragraph 11 shall not, however, be construed as a waiver of any of the rights which either party may have for damages or otherwise.
AGREED TO AS OF THE FIRST DATE ABOVE:
HOUGHTEN PHARMACEUTICALS, INC. CADUS PHARMACEUTICAL CORP.
3550 General Atomics Court 180 Varick Street
San Diego, CA 92121 New York, NY 10014
By: /S/ GILBERT R. MINTZ, PH.D. By: /S/ PHILIP N. SUSSMAN
--------------------------- ---------------------
Gilbert R. Mintz, Ph.D. Name: Philip N. Sussman
Director, Licensing & Title: Vice President,
Business Development Corporate Development
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EXHIBIT F
THIRD PARTY OBLIGATIONS
A. Cadus
[c.i.]
B. HPI
[c.i.]
[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
AMENDMENT TO RESEARCH COLLABORATION AGREEMENT
THIS AGREEMENT TO RESEARCH COLLABORATION AGREEMENT dated as of March ___, 1996 (the "Amendment"), is entered into between HOUGHTEN PHARMACEUTICALS, INC. a Delaware corporation ("HPI"), and CADUS PHARMACEUTICALS CORPORATION, a Delaware corporation ("Cadus"), with respect to the following facts:
WHEREAS, HPI and Cadus are parties to that certain Research Collaboration Agreement dated as of January 6, 1995 (the "Agreement");
WHEREAS, HPI and Cadus desire to amend the Agreement in certain respects as set fourth below.
NOW, THEREFORE, in consideration of the above recitals, and for other good and valuable consideration, the parties hereby amend the Agreement and agrees as follows:
1. Section 1.27 of the Agreement hereby is amended by deleting [c.i.] from the second line thereof and inserting [c.i.] in lieu thereof.
2. Section 3.3.4 of the Agreement hereby is amended and restated in its entirety to read as follows:
[c.i.]
[c.i.]
3. Section 3.3 of the Agreement hereby is amended by adding the following new Section 3.3.6 immediately following Section 3.3.5:
3.3.5 INVENTION DISCLOSURE. Upon successful completion of IN VITRO secondary screening of a Land, Cadus and HPI shall prepare an initial written disclosure (as modified from time to time with the prior express written consent of HPI, which shall not be unreasonably withhold, the "Invention Disclosure"), in reasonably specific detail, identifying such Lead and those analogs of such Lead which have substantially similar chemical structure and biological activity as such Lead.
4. Section 3.5 of the Agreement hereby is amended by deleting the fifth sentence thereof.
5. Section 3.6 of the Agreement hereby is amended (a) by deleting the third sentence thereof and inserting the following sentence in lieu thereof:
[c.i.]
and (b) by deleting the seventh sentence thereof.
6. EXHIBIT A to the Agreement hereby is amended to add the following two additional essays: [c.i.] .
7. The Amendment shall be effective for all purposes as of the date first set forth above. Except as otherwise expressly modified by the Amendment, the Agreement shall remain in full force and effect in accordance with its terms.
8. All terms need, but not defined, in the Amendment shall have the respective meanings set forth in the Agreement.
9. The Amendment 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 the Amendment as of the date first set forth above.
HOUGHTEN PHARMACEUTICALS, INC.
By: /s/ Terence E. McMorrow
------------------------------------
Terence E. McMorrow
Vice President, Finance and
Corporate Development
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CADUS PHARMACEUTICAL CORPORATION
By: /s/ Jeremy Levin
------------------------------------
Title: President & CEO
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[Note: Certain portions of this document have been marked [c.i.] to indicate that confidentiality has been requested for this confidential information. The confidential portions have been omitted and filed separately with the Securities and Exchange Commission.]
STOCK OPTION AGREEMENT
AGREEMENT made as of December 18, 1995 by and between CADUS PHARMACEUTICAL CORPORATION (the "Corporation"), a Delaware corporation having offices at 777 Old Saw Mill River Road, Tarrytown, New York 10591-8705, and JAMES R. BROACH ("Broach"), residing at 6 Andrews Lane, Princeton, New Jersey 08540.
W I T N E S S E T H:
WHEREAS, in order to induce Broach to continue providing scientific advisory services to the Corporation, the Corporation is willing to grant to Broach the right and option, subject to certain conditions, to purchase shares of the common stock, $.001 par value, of the Corporation (the "Common Stock");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows:
1. GRANT OF STOCK OPTION.
As an additional inducement to Broach to continue providing scientific advisory services to the Corporation, the Corporation hereby grants to Broach the right and option (the "Option") to purchase from the Corporation Four Hundred Twenty-Five Thousand (425,000) shares of Common Stock (the "Shares"), subject to adjustment as provided in Paragraph 7 hereof, on the terms and subject to the conditions hereinafter set forth.
2. PURCHASE PRICE.
Subject to adjustment as provided in Paragraph 7 hereof, the purchase price (the "Option Purchase Price") to be paid upon exercise of the Option shall be [c.i.] per share.
3. EXERCISABILITY OF OPTION.
(a) The Option shall be exercisable by Broach during a period of five years commencing from the "Vesting Date" (as hereinafter defined) and terminating at the close of business on the fifth anniversary of the Vesting Date.
(b) "Vesting Date" shall mean the earliest date on which any of the following events shall occur:
(i) the closing of an underwritten public offering on a firm commitment basis pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended (the "Securities Act"), covering the offer and sale of Common Stock for the account of the Corporation;
(ii) the merger or consolidation of the Corporation with or into another corporation or other entity or person, or any other transaction or series of related transactions by the Corporation, in which in excess of fifty percent (50%) of the voting power held by the holders of the Corporation's issued and outstanding capital stock is transferred; or
(iii) the sale of all or substantially all of the Corporation's properties and assets to any other person.
(c) The unexercised portion of the Option will automatically and without notice terminate and become null and void at the close of business on the fifth anniversary of the Vesting Date. If, however, Broach voluntarily ceases providing scientific advisory services to the Corporation at any time prior to the fifth anniversary of the Vesting Date, the unexercised portion of the Option will terminate at the close of business on the date on which Broach voluntarily ceases providing scientific advisory services to the Corporation.
4. EXERCISE OF OPTION.
(a) The Option may be exercised by Broach as to all or a portion of the Shares (but not as to a fractional share of Common Stock) at any time within the applicable period specified in Paragraph 3 hereof by the giving of written notice of the exercise thereof to the Corporation in the manner provided in Paragraph 15 hereof and substantially in the form annexed hereto as Exhibit A, which notice shall be accompanied by payment in full of the purchase price therefor by certified or bank cashier's or other acceptable check. Such exercise shall be effective upon receipt by the Corporation of such written notice and payment; and Broach, to the extent permitted by law, shall be deemed the owner of the Shares being purchased as of the close of business on the date of such exercise and payment. The Corporation shall cause a certificate or certificates representing the Shares purchased to be delivered to Broach within ten (10) days after the effective date of such exercise. Broach agrees that such certificate or certificates shall bear such legend or legends as the Board of Directors of the Corporation, in its sole discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act.
(b) In lieu of the check provided for in subparagraph 4(a) above, Broach may, at his sole option and to the
extent permitted by applicable law, pay for the purchase price of the Shares being purchased by the exercise of the Option, by delivering to the Corporation shares of Common Stock (in proper form for transfer and accompanied by all requisite stock transfer tax stamps or cash in lieu thereof) owned by Broach having a Fair Market Value (as hereinafter defined in subparagraph 4(c) hereof) equal to such purchase price. Broach may elect to make such delivery to the Corporation of shares of Common Stock from Shares he is purchasing pursuant to his exercise of the Option by including such election in his notice of exercise.
(c) The Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean:
(i) If the Corporation's Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National Market System, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.
(ii) If the Corporation's Common Stock is not traded on an exchange or on the NASDAQ National Market System but is traded in the over-the-counter market, then the mean of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.
(iii) Except as provided in subparagraph 4(c)(iv) and 4(c)(v) below, if the Corporation's Common Stock is not publicly traded, then as determined in good faith by the Corporation's Board of Directors upon a review of relevant factors.
(iv) If the Determination Date is the date on which the Corporation's Common Stock is first sold to the public by the Corporation in a firm commitment public offering under the Securities Act, then the initial public offering price (before deducting commissions, discounts or expenses) at which the Common Stock is sold in such offering.
(v) If the Determination Date is the date of a liquidation, dissolution or winding up of the Corporation, then all amounts to be payable per share to holders of the Common Stock in the event of such liquidation, dissolution or winding up.
5. PURCHASE FOR INVESTMENT.
Broach agrees that at the request of the Corporation and upon exercise of the Option, he shall execute and deliver to the Corporation a written statement, in form satisfactory to the Corporation, representing and warranting that he is purchasing the Shares for his own account, for investment only and not with a view
to the resale or distribution thereof and that any subsequent offer for sale or sale of any of such Shares shall be made either pursuant to (a) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with respect to the shares being offered and sold, or (b) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption Broach shall, prior to any offer for sale or sale of such shares, obtain a favorable written opinion from counsel for or approved by the Corporation as to the availability of such exemption.
6. NON-TRANSFERABILITY OF OPTION.
The Option shall not be transferable by Broach other than by will or the laws of descent and distribution.
7. ADJUSTMENT OF SHARES.
If any change is made in the Shares deliverable upon exercise of the Option (through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, spin-off, split-off, subdivision or combination of shares, exchange of shares, issuance of rights to subscribe, change in capital structure or similar event), such adjustments or substitutions shall be made by the Board of Directors of the Corporation in or for the Shares (including adjustments in the number of Shares and in the per share price of Shares subject to the Option) as the Board of Directors of the Corporation reasonably shall determine to be appropriate and equitable to prevent dilution or enlargement of Broach's rights hereunder.
8. COVENANTS OF THE CORPORATION.
The Corporation hereby covenants and agrees that:
(a) During the period within which the Option may be exercised, the Corporation shall at all times reserve and keep available by all necessary corporate action out of its shares of Common Stock for the purpose of issuance or transfer upon exercise of the Option the number of shares of Common Stock included in the Shares and such additional securities as may from time to time be deliverable hereunder. Such shares may be authorized but unissued shares, or may be shares held in the treasury of the Corporation or a combination thereof, at the option of the Corporation.
(b) All shares which may be issued upon exercise of the Option or delivered pursuant to this Agreement will, upon issuance and payment therefor as provided herein, be validly issued, fully paid, nonassessable and free from all liens and charges with respect to the issue thereof.
9. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.
The Corporation represents and warrants to Broach as follows:
(a) The Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.
(b) The Corporation has all requisite legal and corporate power to execute this Agreement. The execution, delivery and performance by the Corporation of this Agreement and the consummation of the transactions contemplated hereby have been authorized by all necessary corporate action on the part of the Corporation.
(c) This Agreement has been duly executed by the Corporation and, assuming due and valid execution and delivery of the same by Broach, constitutes the valid and legally binding obligation of the Corporation enforceable in accordance with its terms.
10. NO FRACTIONAL SHARES.
Upon the exercise of the Option, the Corporation shall not be required to issue any fractional shares or scrip certificates evidencing any fractional interest in shares. In any case where, pursuant to the terms of the Option, Broach would be entitled, except for the provisions of this Paragraph 10, to receive a fractional share, the number of shares issuable upon such exercise shall be rounded to the next larger whole share if such fractional share interest is a major fraction; if such fractional share interest is not a major fraction, it shall be disregarded.
11. "LOCK-UP" AGREEMENT.
Broach, if so requested by the Corporation and an underwriter of Common Stock or other securities of the Corporation, shall not sell, grant any option or right to buy or sell, or otherwise transfer or dispose of in any manner, whether in privately-negotiated or open-market transactions, any Common Stock or other securities of the Corporation held by him or which he has the right to acquire during the 180-day period following the effective date of a registration statement of the Corporation filed with the Securities and Exchange Commission in connection with such offering or such shorter period as such underwriter shall have advised the Corporation in writing is adequate to permit the successful and orderly distribution of such Common Stock or other securities; provided, however, that such "lock-up" agreement shall be in writing and in form and substance satisfactory to the Corporation and such underwriter. The Corporation may impose stop-
transfer instructions with respect to the shares subject to the foregoing restrictions until the end of said 180-day period. In connection with the preparation and filing of any such registration statement, the Corporation shall use its reasonable best efforts (i) to enforce the obligations of its stockholders (and any person who shall have the right to acquire capital stock of the Corporation) who have agreed with the Corporation to enter into "lock-up" or "market stand-off" agreements and (ii) to obtain a "lock-up" or "market stand-off" agreement from all of its other stockholders and all other such persons. This Paragraph 11 shall survive the termination or exercise of the Option.
12. SCIENTIFIC ADVISORY SERVICES.
(a) In consideration of the grant of the Option, Broach hereby
agrees to provide to the Corporation scientific advisory services, from the date
hereof until the earliest of (i) his death, (ii) his "disability" (as
hereinafter defined in subparagraph 12(b) hereof), (iii) the fifth anniversary
of the Vesting Date or (iv) the third anniversary of the full exercise of the
Option, to the same extent and on the same basis as he is currently providing
such services to the Corporation. Notwithstanding the foregoing, Broach shall
not be obligated to provide scientific advisory services to the Corporation if
(i) [c.i.] or an affiliate thereof becomes the holder of more than fifty percent
(50%) of the voting power of the Corporation's issued and outstanding capital
stock or (ii) [c.i.] becomes the President or Chief Executive Officer of the
Corporation.
(b) For the purposes hereof, the "disability" of Broach shall mean such physical or mental disability as shall prevent Broach from performing his scientific advisory services in the manner previously performed for a period of 120 consecutive days or an aggregate of 180 days in any 365 day period.
13. ENTIRE AGREEMENT AMENDMENTS.
This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party except as expressly set forth herein. This Agreement supersedes and cancels all prior agreements between the parties, whether written or oral, with respect to the subject matter hereof. No alteration, amendment or modification of any of the terms and provisions hereof shall be valid unless made pursuant to a written instrument signed by all of the parties hereto.
14. APPLICABLE LAW.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware.
15. NOTICES.
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally or mailed, first class, postage prepaid, certified mail, return receipt requested, to the other party at its address as set forth at the beginning of this Agreement or as either of the parties may designate in conformity with the foregoing.
16. PARAGRAPH HEADINGS.
The paragraph headings set forth in this Agreement are for reference purposes only and shall not be considered as part of this Agreement in any respect nor shall they in any way affect the substance of any provisions contained in this Agreement.
17. SUCCESSORS AND ASSIGNS.
This Agreement shall not be assignable by Broach, but the rights hereunder may be transferred as described in Paragraph 6 hereof. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by Broach, the Corporation, the heirs and personal representatives of Broach and the successors and assigns of the Corporation.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
CADUS PHARMACEUTICAL CORPORATION
By:/s/ JEREMY M. LEVIN ----------------------- Jeremy M. Levin, President /s/ JAMES R. BROACH ----------------------- JAMES R. BROACH |
EXHIBIT A
[Date of Exercise]
Cadus Pharmaceutical Corporation
777 Old Saw Mill River Road
Tarrytown, NY 10591-6705
Attention: Corporate Secretary
Re: STOCK OPTION
Dear Sir:
I am the holder of a Stock Option granted to me by Cadus Pharmaceutical Corporation (the "Corporation"), pursuant to a Stock Option Agreement dated as of December __, 1995, to purchase 425,000 shares of Common Stock of the Corporation ("Shares"). I hereby exercise such option with respect to _________ Shares, the total purchase price for which is $________, and [I enclose a certified or bank cashier's or other acceptable check payable to the order of the Corporation in the amount of $________, representing the total purchase price for the Shares] [I hereby elect to pay the purchase price by delivering to the Corporation _____ shares of Common Stock of the Corporation having a fair market value equal to $________ from the Shares I am purchasing pursuant to the exercise of such option]. The certificate or certificates representing the Shares should be registered in my name and should be forwarded to me at ______________________________.
Please acknowledge receipt of the exercise of my stock option on the attached copy of this letter.
Very truly yours,
JAMES R. BROACH
RECEIPT ACKNOWLEDGED:
CADUS PHARMACEUTICAL CORPORATION
By:_____________________________
LOGO
CADUS
PHARMACEUTICAL
CORPORATION
MAY 17, 1996
VIA FAX (609-252-4232) AND MAIL
Bristol-Myers Squibb Company
P.O. Box 4000
Route 206 and Province Line Road
Princeton, NJ 08543-4000
Attention: Vice President and Senior Counsel, Pharmaceutical Research Institute and Worldwide Strategic Business Development
Ladies and Gentlemen:
Reference is made to the Preferred Stock Purchase Agreement (the "Agreement") dated as of July 26, 1994 between Cadus Pharmaceutical Corporation ("Cadus") and Bristol-Myers Squibb Company ("BMS"), as amended by the First Amendment thereto dated as of October 31, 1995.
Cadus hereby irrevocably waives its right, set forth in Section 1.05 of the Agreement, to require BMS to purchase shares of common stock of Cadus in any "Initial Public Offering" (as defined in the Agreement), the registration statement for which is first filed with the Securities and Exchange Commission prior to June 30, 1996.
Very truly yours,
CADUS PHARMACEUTICAL CORPORATION
JML/law
777 Old Saw Mill River Road, Tarrytown, NY 10591-6705 Tel. 914.345.3344/Fax 914.345.3565
LOGO
CADUS
PHARMACEUTICAL
CORPORATION
MAY 17, 1996
VIA FAX (011-31-2940-80253) AND AIR MAIL
Physica B.V.
C.J. van Houtenlaan 36
1381 CP Weesp
The Netherlands
Attention: The President
and
VIA FAX (713-525-7887) AND MAIL
Solvay America, Inc.
3333 Richmond Avenue
Houston, TX 77098
Attention: General Counsel
Ladies and Gentlemen:
Reference is made to the Preferred Stock Purchase Agreement (the "Agreement") dated as of November 1, 1995 between Cadus Pharmaceutical Corporation ("Cadus") and Physica B.V.
Cadus hereby irrevocably waives its right, set forth in Section 1.04 of the Agreement, to require Physica B.V. to purchase shares of common stock of Cadus in any "Initial Public Offering" (as defined in the Agreement), the registration statement for which is first filed with the Securities and Exchange Commission prior to June 30, 1996.
Very truly yours,
CADUS PHARMACEUTICAL CORPORATION
JML/law
777 Old Saw Mill River Road, Tarrytown, NY 10591-6705 Tel. 914.345.3344/Fax 914.345.3565
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cadus Pharmaceutical Corporation:
We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
May 24, 1996
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ JEREMY M. LEVIN
------------------------
JEREMY M. LEVIN
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ SAMUEL D. WAKSAL
------------------------
SAMUEL D. WAKSAL
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ HAROLD FIRST
------------------------
HAROLD FIRST
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ PETER S. LIEBERT
------------------------
PETER S. LIEBERT
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ LAWRENCE D. MUSCHEK
------------------------
LAWRENCE D. MUSCHEK
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ WILLIAM A. SCOTT
------------------------
WILLIAM A. SCOTT
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ THOMAS E. SHENK
------------------------
THOMAS E. SHENK
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ JACK GUMPERT WASSERMAN
--------------------------
JACK GUMPERT WASSERMAN
|
POWER OF ATTORNEY
The undersigned Director of Cadus Pharmaceutical Corporation, a Delaware corporation (the "Corporation"), hereby appoints Jeremy M. Levin, Philip N. Sussman and James S. Rielly and each of them, his true and lawful attorneys and agents, with full power of substitution, to sign on his behalf and in his name, place and stead, in any and all capacities, a Registration Statement of the Corporation on Form S-1, relating to an initial public offering of the Corporation's common stock, par value $.001, and any and all amendments or post-effective amendments thereto, with all exhibits thereto and other documents in connection therewith, for filing with the United States Securities and Exchange Commission under the Securities Act of 1933 (the "Act"), and to do or cause to be done such other acts and to execute such other documents which said attorneys and agents may deem necessary or advisable to enable the Corporation to comply with the Act and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof.
Dated as of May 13, 1996
/S/ ROBERT MITCHELL
--------------------------
ROBERT MITCHELL
|
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS | YEAR |
| FISCAL YEAR END | DEC 31 1996 | DEC 31 1995 |
| PERIOD END | MAR 31 1996 | DEC 31 1995 |
| CASH | 25,086 | 25,682 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 0 | 0 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 0 | 0 |
| CURRENT ASSETS | 27,872 | 28,140 |
| PP&E | 3,067 | 2,869 |
| DEPRECIATION | 826 | 649 |
| TOTAL ASSETS | 30,585 | 30,725 |
| CURRENT LIABILITIES | 2,869 | 2,973 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 22 | 22 |
| COMMON | 15 | 15 |
| OTHER SE | 27,654 | 27,686 |
| TOTAL LIABILITY AND EQUITY | 30,585 | 30,725 |
| SALES | 0 | 0 |
| TOTAL REVENUES | 1,625 | 4,418 |
| CGS | 0 | 0 |
| TOTAL COSTS | 1,972 | 6,759 |
| OTHER EXPENSES | 0 | 0 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 38 | 78 |
| INCOME PRETAX | (26) | (1,439) |
| INCOME TAX | 18 | 44 |
| INCOME CONTINUING | (43) | (1,482) |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (43) | (1,482) |
| EPS PRIMARY | (0.00) | (0.16) |
| EPS DILUTED | (0.00) | 0 |